Accounting Policies of First Leasing Company of India Ltd. Company

Mar 31, 2013

A. REVENUE RECOGNITION:

(i) Income from Hire Purchase transactions is accounted, based on the Internal Rate of Return.

(ii) In respect of lease transactions, income is recognised on the basis of constant periodic return accruing, on the net investment in lease, as required by the Accounting Standard AS 19.

(iii) Interest income on loans is recognised on accrual basis, as stipulated in the contract.

(iv) The Company follows prudential norms for income recognition and provisioning for non-performing assets, as prescribed by Reserve Bank of India for Non-Banking Financial Companies from time to time and accordingly the income from Non Performing Assets are recognized as and when received.

(v) Dividend income is accounted when the right to receive the income is established.

b. FIXED ASSETS:

Fixed assets are carried at historical cost with accumulated depreciation stated separately. Cost includes purchase price and attributable cost of bringing the asset to its working condition for the intended purpose. Assets are eliminated from the books of account either when of no utility value and discarded or on its disposals.

c. DEPRECIATION & AMORTISATION:

Depreciation on all tangible assets has been provided on the written down value method, at the rates prescribed under Schedule XIV to the Companies Act, 1956. Assets costing Rs.5,000/- or less, have been fully depreciated in the year of purchase.

The cost incurred on Lease hold assets are amortised over the lease period.

Intangible assets are depreciated at 40% on the Written down value method.

Depreciation on additions is calculated on pro-rata for the number of days for which the respective asset is put into use during the year.

d. INVESTMENTS:

Both Current and Non Current investments are stated at cost, with provision wherever necessary for diminution, if permanent, in the value of investments. On the disposal of any specified investment, the difference between the carrying amount and the net sale proceeds is charged / credited to the Profit and Loss statement. This is also in tune with the directions of Reserve Bank of India for Non Banking Financial Companies.

e. STOCK ON HIRE:

Stock on Hire under Hire Purchase Agreements are stated at Agreement Values less amounts received and net of unmatured finance charges.

f. NET INVESTMENT IN LEASE:

The assets under Leases are shown as receivables at values equal to net investment in such Leases.

g. FOREIGN CURRENCY TRANSACTIONS:

Foreign currency transactions are recorded at the rate of exchange prevailing on the date / at the forward contract rate on the date of the transaction. Liabilities which are payable in foreign currencies are translated at exchange rates prevailing on the date of the Balance Sheet and the loss or gain arising on such transactions is recorded in the Statement of Profit and Loss. In the case of forward contracts, the exchange difference, arising between the rate on the transaction date and the forward contract rate is recognised over the period of the contract. The Company has not used the forward contracts for speculation or trading purposes.

h. EMPLOYEE BENEFITS:

The Employer''s contribution towards Provident Fund is paid to the Organisation (EPFO) in accordance with the provisions of Employees'' Provident Funds & Miscellaneous Provisions Act, 1952 and the Schemes framed thereunder. The leave accrued has to be encashed within the calendar year and hence there is no accrued leave to be provided for, except in the case of the Managing Director who is entitled to encash the accrued leave only at the end of the tenure. The Company contributes to a Gratuity Fund, which has taken a group policy with Life Insurance Corporation of India for future payments of gratuity as determined on actuarial basis, using the ''Projected Unit Credit Method'', subject to ceiling prescribed under the Income tax Act, 1961. The Premium thereon has been determined to cover the liability under the scheme in respect of the employees of the company, as at the end of their anticipated future service with the Company. Difference, if any, is provided for in the books.

i. TAXES ON INCOME:

Current Tax:

Current Tax on income for the current financial period is determined on the basis and at the rates prevailing for the assessment year 2013 - 2014 as per the provisions of the Income Tax Act, 1961.

Deferred tax:

Both deferred tax liability and asset are recognized on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. In the case of deferred tax asset, the same will be recognized and carried forward to the extent that there is a reasonable certainty that there is sufficient future taxable income available against which such deferred tax assets can be realised.

Income tax of earlier years:

Any liability arising on account of retrospective amendments to the statute is recognised as current year tax expense.

j. PROVISIONS AND CONTINGENT LIABILITIES:

a) The Provisions for expenditure and other obligations are made based on best estimate and provided for.

b) Provision on Non Performing Assets and on Standard Assets are made as per the Directions of Reserve Bank of India for Non Banking Financial Companies (NBFC) issued from time to time.

c) No provision is made for Contingent Liabilities but the same are disclosed.

d) Provisions and Contingent Liabilities are reviewed at each Balance Sheet date.

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Mar 31, 2012

A. REVENUE RECOGNITION:

(i) Income from Hire Purchase transactions is accounted, based on the Internal Rate of Return.

(ii) In respect of lease transactions, income is recognised on the basis of constant periodic return accruing, on the net investment in lease, as required by the Accounting Standard AS 19.

(iii) Interest income on loans is recognised on accrual basis, as stipulated in the contract.

(iv)The Company follows prudential norms for income recognition and provisioning for non-performing assets, as prescribed by Reserve Bank of India for Non-Banking Finance Companies from time to time and accordingly the income from Non Performing Assets are recognized as and when received.

(v) Dividend income is accounted when the right to receive the income is established.

(vi) Income from sale of electricity generated by Wind Mills and Rental Income from immovable properties are recognised on accrual basis.

b. FIXED ASSETS:

Fixed assets are carried at historical cost with accumulated depreciation stated separately. Cost includes purchase price and attributable cost of bringing the asset to its working condition for the intended purpose. Assets which are of no utility value are eliminated from the books of account on disposal or when discarded.

c. DEPRECIATION & AMORTISATION:

Depreciation on all tangible assets has been provided on the written down value method, at the rates prescribed under Schedule XIV to the Companies Act, 1956. Assets costing Rs.5,000/- or less, have been fully depreciated in the year of purchase.

The cost incurred on Lease hold assets are amortised over the lease period.

Intangible assets are depreciated at 40% on the Written down value method.

Depreciation on additions is calculated on pro-rata for the number of days for which the respective asset is put into use during the year.

d. INVESTMENTS:

Both Current & Non Current investments are stated at cost, with provision wherever necessary for diminution, if permanent, in the value of investments. On the disposal of any specified investment, the difference between the carrying amount and the net sale proceeds is charged / credited to the Profit and Loss statement. This is in tune with the Reserve Bank of India directions for Non Banking Finance Companies.

e. STOCK ON HIRE:

Stock on Hire under Hire Purchase Agreements are stated at Agreement Values less amounts received and net of unmatured finance charges.

f. NET INVESTMENT IN LEASE:

The assets under Leases are shown as receivables at values equal to net investment in such Leases.

g. FOREIGN CURRENCY TRANSACTIONS:

Foreign currency transactions are recorded at the rate of exchange prevailing on the date / at the forward contract rate on the date of the transaction. Liabilities which are payable in foreign currencies are translated at exchange rates prevailing on the date of the Balance Sheet and the loss or gain arising on such transactions is recorded in the Statement of Profit and Loss. In the case of forward contracts, the exchange difference, arising between the rate on the transaction date and the forward contract rate is recognised over the period of the contract. The Company has not used the forward contracts for speculation or trading purposes.

h. EMPLOYEE BENEFITS:

From April 2011, the Employer's contribution towards Provident Fund is paid to the Organisation (EPFO) in accordance with the provisions of Employees' Provident Funds & Miscellaneous Provisions Act, 1952 and the Schemes framed there under, The leave accrued has to be encashed within the calendar year and hence there is no accrued leave to be provided for, except in the case of the Managing Director who is entitled to encash the accrued leave only at the end of the tenure. The Company contributes to a Gratuity Fund, which has taken a group policy with Life Insurance Corporation of India for future payments of gratuity as determined on actuarial basis, using the "Projected Unit Credit Method", subject to ceiling prescribed under the Income tax Act 1961. The Premium thereon has been determined to cover the liability under the scheme in respect of the employees of the company, as at the end of their anticipated future service with the Company. Difference, if any, is provided for in the books.

i. TAXES ON INCOME:

Current Tax:

Current Tax on income for the current financial period is determined on the basis and at the rates prevailing for the relevant assessment year as per the provisions of the Income Tax Act, 1961.

Deferred tax:

Both deferred tax liability and asset are recognized on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. In the case of deferred tax asset, the same will be recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income available against which such deferred tax assets can be realised.

Income tax of earlier years:

Any liability arising on account of retrospective amendments to the statute is recognised as current year tax expense.

j. PROVISIONS AND CONTINGENT LIABILITIES:

a) The Provisions for expenditure and other obligations are made based on best estimate and provided for.

b) Provision on Non Performing Assets and on Standard Assets are made as per the Directions of Reserve Bank of India for Non Banking Finance Companies (NBFC) issued from time to time.

c) No provision is made for Contingent Liabilities but the same are disclosed.

d) Provisions and Contingent Liabilities are reviewed at each Balance Sheet date.

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Mar 31, 2011

(a) ACCOUNTING CONVENTION:

The financial statements are prepared under historical cost convention and in accordance with the generally accepted accounting principles in India.

The Company follows prudential norms for income recognition and provisioning for non-performing assets as prescribed by Reserve Bank of India for Non-Banking Financial Companies from time to time.

(b) REVENUE RECOGNITION:

(i) Income from Hire Purchase transactions is accounted, based on the Internal Rate of Return.

(ii) In respect of lease transactions, income is recognised on the basis of constant periodic return accruing, on the net investment in lease, as required by the Accounting Standard AS 19.

(iii) Interest income on loans is recognised on accrual basis, as stipulated in the contract.

(iv) The Company follows prudential norms for income recognition and provisioning for non-performing assets, as prescribed by Reserve Bank of India for Non-Banking Finance Companies from time to time and accordingly the income from Non Performing Assets are recognized as and when received.

(v) Dividend income is accounted when the right to receive the income is established.

(vi) Income from electricity generated by Wind Mills and Rental Income from immovable properties are recognised on accrual basis.

(c) (i) FIXED ASSETS:

Fixed assets are carried at historical cost with accumulated depreciation stated separately. Cost includes purchase price and attributable cost of bringing the asset to its working condition for the intended purpose. Assets which are of no utility value are eliminated from the books of account on disposal or when discarded.

(ii) DEPRECIATION:

Depreciation on assets has been provided on the written down value method, at the rates prescribed under Schedule XIV to the Companies Act, 1956. Assets costing Rs.5,000/- or less, have been fully depreciated in the year of Purchase.

(d) INVESTMENTS:

Investments which are long term in nature are stated at cost, with provision where necessary for diminution, in the value of investments. On the disposal of specified investment, the difference between the carrying amount and the net sale proceeds is charged / credited to the Profit and Loss Account. This is in tune with the Reserve Bank of India directions for Non Banking Finance Companies.

(e) STOCK ON HIRE:

Stock on Hire under Hire Purchase Agreements are stated at Agreement Values less amounts received and net of unmatured finance charges.

(f) NET INVESTMENT IN LEASE :

The assets under Leases are shown as receivables at values equal to net investment in such Leases.

(g) RETIREMENT BENEFITS:

The Employers contribution towards P.F. accounts of the Employees are made as per the Fund rules through an independent Trust. The leave accrued has to be encashed within the calendar year and hence there is no accrued leave to be provided for, except in the case of the Managing Director who is entitled to encash the accrued leave only at the end of the tenure.

The Company contributes to a Gratuity Fund, which has taken a group policy with Life Insurance Corporation of India (the LIC) for future payments of gratuity as determined on actuarial basis, using the 'Projected Unit Credit Method', by the LIC. The Premium thereon has been determined to cover the liability under the scheme in respect of the employees of the company, as at the end of their anticipated future service with the Company.

(h) FOREIGN CURRENCY TRANSACTIONS:

Foreign currency transactions are recorded at the rate of exchange prevailing on the date / at the forward contract rate on the date of the transaction. Liabilities which are payable in foreign currencies are translated at exchange rates prevailing on the date of the Balance Sheet and the loss or gain arising on such transactions is recorded in the Profit and Loss Account. In the case of forward contracts, the exchange difference, arising between the rate on the transaction date and the forward contract rate is recognised over the period of the contract. There are no outstanding position as at 31st March 2011. The Company has not used the forward contracts for speculation or trading purposes. 2) ACCOUNTING STANDARDS:

(a) AS-17 - Segment Reporting:

The Company is primarily engaged in Hire Purchase/Lease Finance. There is no reportable segment other than primary segment, in terms of the above accounting standard.

(b) AS-18 - Related Party Disclosures:

(i) List of Related party where control exists:

Key Management Personnel: Mr. Farouk Irani – Managing Director

(ii) Related Party Transactions

Remuneration - Rs. 177.95 Lacs (Rs. 90.48 Lacs)

Interest paid on Fixed Deposits - Rs. 54.77 Lacs (Rs. Nil)

(c) AS-19 - Leases:

(1) Leases:

(i) Aggregate of Minimum lease payments - Rs. 26,089.71 Lacs (Rs. 24,855.26 Lacs)

(ii) Net carrying amount - Rs. 19,991.96 Lacs (Rs. 16,787.44 Lacs)

(iii) Maturity pattern of Gross / Net receivable:

(iv) Unearned Finance income - Rs. 6,097.75 Lacs (Rs. 5,702.46 Lacs)

(v) All initial direct costs are recognised as expenses in the Profit and Loss account at the inception of the lease.

(vi) Accumulated provision for uncollectible minimum lease payments receivable - Rs. 181.88 Lacs (Rs. 45.80 Lacs).

(2) Stock on Hire:

(i) Aggregate of Minimum Hire Rentals - Rs 1,37,192.38 Lacs (Rs. 1,20,041.75 Lacs)

(ii) Net carrying amount - Rs. 1,23,145.02 Lacs (Rs. 1,09,420.66 Lacs)

(iii) Maturity pattern of Gross / Net receivable:

(iv) Unearned Finance income - Rs. 14,047.36 Lacs (Rs. 10,621.09 Lacs)

(v) Accumulated provision for uncollectible hire payments receivable is Rs. 167.39 Lacs (Rs. 193.20 Lacs)

(e) AS-22 - Accounting for Taxes on Income:

Rs. 1,111.97 Lacs (Rs. 872.75 Lacs) is recognised towards the current year provision, arising out of timing differences, as per the Accounting Standard - 22.

(f) AS-28 - Impairment of Assets

Assets have been reviewed at Balance Sheet date for impairment, as per the above Accounting Standard.

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Mar 31, 2010

(a) ACCOUNTING CONVENTION:

The financial statements are prepared under historical cost convention and in accordance with the generally accepted accounting principles in India.

The Company follows prudential norms for income recognition and provisioning for non-performing assets as prescribed by Reserve Bank of India for Non-Banking Financial Companies from time to time.

(b) REVENUE RECOGNITION:

(i) Income from Hire Purchase transactions is accounted, based on the Internal Rate of Return.

(ii) Lease income is recognised in respect of lease agreements entered into before 1st April 2001, as per the terms of agreement entered into with the Lessees from time to time, which is recognised on accrual basis. In respect of lease agreements entered into on or after 1st April 2001, income is recognised on the basis of constant periodic return accruing, as required by the Accounting Standard AS-19. (iii) Interest income on loans is recognised on accrual basis, as stipulated in the contract. (iv) The Company follows prudential norms for income recognition and provisioning for non-performing assets, valuation of investments as prescribed by Reserve Bank of India for Non-Banking Finance Companies from time to time and accordingly the income from Non Performing Assets are recognised on cash basis.

(v) Dividend income is accounted when the right to receive the income is established. (vi) Income from electricity generated by Wind Mills and Rental Income from immovable properties are recognised on accrual basis.

(c) (i) FIXED ASSETS:

Fixed assets are carried at historical cost net of value added taxes wherever applicable and accumulated depreciation. Cost includes purchase price and attributable cost of bringing the asset to its working condition for the intended purpose. Assets which are of no utility value are eliminated from the books of account on disposal or when discarded.

(ii) DEPRECIATION:

(a) Assets-Leased

Assets in respect of Lease transactions entered prior to 1st April 2001 are fully depreciated over the primary lease period by a method under which the interest rate implicit in the lease is calculated and applied on the outstanding investment on lease to calculate the finance earnings for the period and the difference between the lease rentals and finance earnings is charged as depreciation. The depreciation charged under this method is adequate to cover the requirement of statutory depreciation under Section 205(2)(b) of the Companies Act, 1956.

Assets in respect of which Lease agreements were entered on or after 1st April 2001, are treated in the manner prescribed under the Accounting Standard AS-19.

(b) Assets-Own

Depreciation on owned assets have been provided on the written down value method, at the rates prescribed under Schedule XIV to the Companies Act, 1956. Assets costing Rs. 5,000/- or less, have been fully depreciated in the year of Purchase.

(d) INVESTMENTS:

Investments which are long term in nature are stated at cost, with provision where necessary for diminution, in the value of investments. On the disposal of specified investment, the difference between the carrying amount and the net sale proceeds is charged / credited to the Profit and Loss account.

(e) STOCK ON HIRE:

Stock on Hire under Hire Purchase Agreements are stated at Agreement Values less amounts received and net of unmatured finance charges.

(f) NET INVESTMENT IN LEASE :

The assets under Leases are shown as receivables at values equal to net investment in such Leases.

(g) RETIREMENT BENEFITS:

The Employers contribution towards P.F. accounts of the Employees are made as per the Fund rules through an independent Trust. The leave accrued has to be encashed within the calendar year and hence there is no accrued leave to be provided for, except in the case of the Managing Director who is entitled to encash the accrued leave only at the end of the tenure.

The Company contributes to a Gratuity Fund, which has taken a group policy with Life Insurance Corporation of India (the LIC) for future payments of gratuity as determined on actuarial basis, using the Projected Unit Credit Method, by the LIC. The Premium thereon has been determined to cover the liability under the scheme in respect of the employees of the company, as at the end of their anticipated future service with the Company.

(h) FOREIGN CURRENCY TRANSACTIONS:

Foreign currency transactions are recorded at the rate of exchange prevailing on the date / at the forward contract rate on the date of the transaction. Liabilities which are payable in foreign currencies are translated at exchange rates prevailing on the date of the Balance Sheet and the loss or gain arising on such transactions is recorded in the Profit and Loss Account. In the case of forward contracts, the exchange difference, arising between the rate on the transaction date and the forward contract rate is recognised over the period of the contract. The Company has not used the forward contracts for speculation or trading purposes.