Accounting Policies of KIFS Financial Services Ltd. Company

Mar 31, 2025

Note 1 Significant accounting policies

1. Corporate information

KIFS Financial Services Limited (KFSL) incorporated under the provisions of the Companies Act, 1956 on
March 29, 1995 [CIN: L67990GJ1995PLC025234] is a non banking financial company registered with the
Reserve Bank of India (RBI) under the provisions of section 45-IA of the RBI Act, 1934 as a loan company
(RBI registration no. 01.00007 dated 18.02.1998). KFSL is a public limited company and is listed on Bombay
Stock Exchange Ltd. It offers capital market products like margin trading, loan against shares (las) and
funding primary market issues for the retail investors.

The Company''s registered office is at 4th Floor, KIFS Corporate House, Nr. Land Mark Hotel, Nr. Neptune
House, Iskon - Ambli Road, Bodakdev, Ahmedabad - 380054, Gujarat, India.

2. Basis of preparation

2.1 Statement of compliance

The standalone financial statements of the Company have been prepared in accordance with the Indian
Accounting Standards (the "Ind AS") prescribed under section 133 of the Companies Act, 2013 (the "Act").

For all periods up to and including the year ended 31 March 2019, the Company prepared its standalone financial
statements in accordance with accounting standards notified under section 133 of the Companies Act, 2013, read
together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP). These
standalone financial statements for the year ended 31 March 2025 was the Company''s sixth financial statements
prepared in accordance with Ind AS.

2.2 Basis of measurement

The standalone financial statements have been prepared on historical cost basis except as stated otherwise.

2.3 Functional and presentation currency

The standalone financial statements are presented in Indian Rupees (?) which is the currency of the primary
economic environment in which the Company operates (the "functional currency").

2.4 Use of estimates and judgments

The preparation of the standalone financial statements in conformity with Ind AS requires management to make
estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent
liabilities) and the reported income and expenses during the year.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised prospectively.

The areas involving the use of estimates or judgements are:

i) Business model assessment

Classification and measurement of financial assets depends on the results of business model and the
solely payments of principal and interest ("SPPI") test. The Company determines the business model at a
level that reflects how groups of financial assets are managed together to achieve a particular business
objective. This assessment includes judgement reflecting all relevant evidence including how the
performance of the assets is evaluated and their performance measured, the risks that affect the
performance of the assets and how these are managed and how the managers of the assets are
compensated. The Company monitors the financial assets measured at amortised cost and this
monitoring is part of the Company''s continuous assessment of whether the business model for which the
financial assets are held continues to be appropriate and if it is not appropriate whether there has been a
change in business model and so a prospective change to the classification of those assets.

ii) Effective Interest Rate ("EIR") method

The Company''s EIR methodology, as explained in Note 3.1(A), recognises interest income / expense using
a rate of return that represents the best estimate of a constant rate of return over the expected
behavioural life of loans given / taken and recognises the effect of potentially different interest rates at

various stages and other characteristics of the product life cycle (including prepayments and penalty
interest and charges).

This estimation, by nature, requires an element of judgement regarding the expected behaviour and life¬
cycle of the instruments, as well as expected changes to interest rates and other fee income/ expense
that are integral parts of the instrument.

iii) Impairment of financial asset

The measurement of impairment losses across all categories of financial assets requires judgement, in
particular, the estimation of the amount and timing of future cash flows and collateral values when
determining impairment losses and the assessment of a significant increase in credit risk. These estimates
are driven by a number of factors, changes in which can result in different levels of allowances.

There is no need to provide such impairment of financial assets as the company only provide short term
loans which are mostly payable on demand there is no significant effect on impairment of financial asset.

iv) Provisions and other contingent liabilities

When the Company can reliably measure the outflow of economic benefits in relation to a specific case
and considers such outflows to be probable, the Company records a provision against the case. Where
the probability of outflow is considered to be probable, but a reliable estimate cannot be made, a
contingent liability is disclosed.

Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company
takes into account a number of factors including legal advice, the stage of the matter and historical
evidence from similar incidents. Significant judgement is required to conclude on these estimates.

These estimates and judgements are based on historical experience and other factors, including expectations of
future events that may have a financial impact on the Company and that are believed to be reasonable under the
circumstances. The Management believes that the estimates used in preparation of the standalone financial
statements are prudent and reasonable.

2.5 Presentation of the standalone financial statements

The Company presents its balance sheet in order of liquidity. An analysis regarding recovery or settlement within
12 months after the reporting date (current) and more than 12 months after the reporting date (non -current) is
presented in Note 38.

Financial assets and financial liability are generally reported gross in the balance sheet. They are only offset and
reported net when, in addition to having an unconditional legally enforceable right to offset the recognised
amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the
following circumstances:

i) The normal course of business

ii) The event of default

3. Summary of significant accounting policies

3.1 Recognition of Interest Income

A. EIR method

Under Ind AS 109, interest income is recorded using the effective interest rate method for all financial
instruments measured at amortised cost, financial instrument measured at FVOCI and financial
instruments designated at FVTPL. The EIR is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial instrument or, when appropriate, a shorter period, to the net
carrying amount of the financial asset.

The EIR (and therefore, the amortised cost of the asset) is calculated by taking into account any discount
or premium on acquisition, fees and costs that are an integral part of the EIR. The Company recognises
interest income using a rate of return that represents the best estimate of a constant rate of return over
the expected life of the financial instrument.

If expectations regarding the cash flows on the financial asset are revised for reasons other than credit
risk, the adjustment is booked as a positive or negative adjustment to the carrying amount of the asset in

the balance sheet with an increase or reduction in interest income. The adjustment is subsequently
amortised through Interest income in the statement of profit and loss.

B. Interest income

The Company calculates interest income by applying the EIR to the gross carrying amount of financial
assets.

3.2 Financial Instrument - Initial Recognition

A. Date of recognition

Financial assets and liabilities, with the exception of loans, debt securities, deposits and borrowings are
initially recognised on the trade date, i.e. the date that the Company becomes a party to the contractual
provisions of the instrument.

B. Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on their contractual terms and the
business model for managing the instruments (Refer note 3.3(A)). All financial assets and liabilities are
initially recognized at amortised cost. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities, are adjusted to the cost on initial recognition.

C. Measurement categories of financial assets and liabilities

The Company classifies all of its financial assets based on the business model for managing the assets and
the asset''s contractual terms, measured at Amortised cost.

3.3 Financial assets and liabilities

A. Financial Assets

Business model assessment

The Company determines its business model at the level that best reflects how it manages groups of
financial assets to achieve its business objective.

The Company''s business model is not assessed on an instrument-by-instrument basis, but at a higher level
of aggregated portfolios and is based on observable factors such as:

a) How the performance of the business model and the financial assets held within that business
model are evaluated and reported to the Company''s key management personnel.

b) The risks that affect the performance of the business model (and the financial assets held within
that business model) and, in particular, the way those risks are managed.

c) How managers of the business are compensated (for example, whether the compensation is
based on the fair value of the assets managed or on the contractual cash flows collected).

d) The expected frequency, value and timing of sales are also important aspects of the Company''s
assessment.

The business model assessment is based on reasonably expected scenarios without taking ''worst case'' or
''stress case'' scenarios into account. If cash flows after initial recognition are realised in a way that is
different from the Company''s original expectations, the Company does not change the classification of
the remaining financial assets held in that business model, but incorporates such information when
assessing newly originated or newly purchased financial assets going forward.

SPPI test

As a second step of its classification process, the Company assesses the contractual terms of financial to
identify whether they meet the SPPI test.

‘Principal'' for the purpose of this test is defined as the fair value of the financial asset at initial recognition
and may change over the life of the financial asset (for example, if there are repayments of principal or
amortisation of the premium/ discount).

The most significant elements of interest within a lending arrangement are typically the consideration for
the time value of money and credit risk. To make the SPPI assessment, the Company applies judgement
and considers relevant factors such as the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de minimise exposure to risks or volatility in the
contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual

cash flows that are solely payments of principal and interest on the amount outstanding. In such cases,
the financial asset is required to be measured at FVTPL.

Accordingly, the financial assets are measured as follows:

i) Financial assets carried at amortised cost ("AC")

A financial asset is measured at amortised cost if it is held within a business model whose
objective is to hold the asset in order to collect contractual cash flows and the contractual terms
of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.

ii) Financial assets measured at fair value through other comprehensive income ("FVOCI")

A financial asset is measured at FVTOCI if it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets and the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.

iii) Financial assets at fair value through profit or loss ("FVTPL")

A financial asset which is not classified in any of the above categories are measured at FVTPL.

B. Financial Liability

i) Initial recognition and measurement

All financial liability are initially recognized at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial liability, which are not at fair value through
profit or loss, are adjusted to the fair value on initial recognition.

ii) Subsequent measurement

Financial liabilities are carried at amortized cost using the effective interest method.

3.4 Reclassification of financial assets and liabilities

The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the
exceptional circumstances in which the Company acquires, disposes of, or terminates a business line.
Financial liabilities are never reclassified. The Company did not reclassify any of its financial assets or
liabilities in the year 2021-22, 2020-21, 2019-20, 2018-19 and 2017-18.

3.5 Derecognition of financial assets and liabilities

i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognised when the contractual rights to the cash flows from the financial asset expires or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred or in which the Company neither
transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control
of the financial asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount
(measured at the date of derecognition) and the consideration received (including any new asset
obtained less any new liability assumed) is recognised in the statement of profit and loss.

Accordingly, gain on sale or derecognition of assigned portfolio are recorded upfront in the statement of
profit and loss as per Ind AS 109. Also, the Company recognises servicing income as a percentage of
interest spread over tenure of loan in cases where it retains the obligation to service the transferred
financial asset.

As per the guidelines of RBI, the company is required to retain certain portion of the loan assigned to
parties in its books as Minimum Retention Requirement (MRR). Therefore, it continue to recognise the
portion retained by it as MRR.

ii) Financial liability

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expires. Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new liability. The

difference between the carrying value of the original financial liability and the consideration paid is
recognised in the statement of profit and loss.

3.6 Impairment of financial assets

A. Overview of the ECL principles

In accordance with Ind AS 109, the Company uses ECL model, for evaluating impairment of financial assets
other than those measured at fair value through profit and loss (FVTPL).

Expected credit losses are measured through a loss allowance at an amount equal to:

i. ) The 12-months expected credit losses (expected credit losses that result from those default

events on the financial instrument that are possible within 12 months after the reporting date); or

ii. ) Full lifetime expected credit losses (expected credit losses that result from all possible default

events over the life of the financial instrument)

Based on the above, the Company categorises its loans into Stage 1, Stage 2 and Stage 3, as described
below:

Stage 1: When loans are first recognised, the Company recognises an allowance based on 12 months ECL.
Stage 1 loans includes those loans where there is no significant credit risk observed and also includes
facilities where the credit risk has been improved and the loan has been reclassified from stage 2 or stage
3.

Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records
an allowance for the life time ECL. Stage 2 loans also includes facilities where the credit risk has improved
and the loan has been reclassified from stage 3.

Stage 3: Loans considered credit impaired. The Company records an allowance for life time ECL.

B. The calculation of ECLs

The mechanics of the ECL calculations are outlined below and the key elements are, as follows:

PD The Probability of Default is an estimate of the likelihood of default over a given time horizon. A
default may only happen at a certain time over the assessed period, if the facility has not been
previously derecognised and is still in the portfolio.

EAD The Exposure at Default is an estimate of the exposure at a future default date, taking into
account expected changes in the exposure after the reporting date, including repayments
of principal and interest

LGD The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a
given time. It is based on the difference between the contractual cash flows due and those that
the lender would expect to receive, including from the realisation of any collateral. It is usually
expressed as a percentage of the EAD.

The Company has calculated Probability of Default (PDs), Exposure at Default (EAD) and Loss Given Default (LGDs)
to determine impairment loss on the portfolio of loans and discounted at an approximation to the EIR. At every
reporting date, the above calculated PDs, EAD and LGDs are reviewed and changes in the forward looking
estimates are analysed.

C. Forward looking information

In its ECL models, the Company relies on a broad range of forward looking macro parameters and
estimated the impact on the default at a given point of time.

3.7 Write-offs

Financial assets are written off either partially or in their entirety after reasonable efforts for recovery
have been made and when the Company has stopped pursuing the recovery. Any subsequent recoveries
are credited to impairment on financial instrument on the statement of profit and loss.

3.8 Determination of fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is
directly observable or estimated using another valuation technique.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3
based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
Company can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

3.9 Recognition of other income and expenses

Revenue (other than for those items to which Ind AS 109 - Financial Instruments are applicable) is
measured at fair value of the consideration received or receivable. Ind AS 115 - Revenue from contracts
with customers outlines a single comprehensive model of accounting for revenue arising from contracts
with customers and supersedes current revenue recognition guidance found within Ind ASs.

The Company recognises revenue from contracts with customers based on a five step model as set out in
Ind AS 115:

Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more
parties that creates enforceable rights and obligations and sets out the criteria for every contract that
must be met.

Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a
contract with a customer to transfer a good or service to the customer.

Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the
Company expects to be entitled in exchange for transferring promised goods or services to a customer,
excluding amounts collected on behalf of third parties.

Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that
has more than one performance obligation, the Company allocates the transaction price to each
performance obligation in an amount that depicts the amount of consideration to which the Company
expects to be entitled in exchange for satisfying each performance obligation.

Step 5: Recognise revenue when (or as) the Company satisfies a performance obligation.

A. Interest income on Bank deposits & Other Income

Interest income on Bank deposits is accounted on accrual basis. Other Operating Income such as Service
Charges, Stamp and Document Charges etc. are recognised on accrual basis.

B. Fees and commission income

Fees and commission income such as stamp and document charges, guarantee commission, service
income etc. are recognised on point in time basis.

C. Borrowing costs

Borrowing Costs are the interest and other costs that the Company incurs in connection with the
borrowing of funds. Borrowing costs that are directly attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale.

All other borrowing costs are charged to the statement of profit and loss for the period for which they are
incurred.

3.10 Cash and cash equivalents

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances
(with an original maturity of three months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are subject to insignificant risk of
changes in value.

3.11 Property, plant and Equipment

Property, Plant and Equipments are carried at cost, less accumulated depreciation and impairment losses,
if any. The cost of Property, Plant and Equipments comprises its purchase price net of any trade discounts
and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax
authorities), any directly attributable expenditure on making the asset ready for its intended use and
other incidental expenses. Subsequent expenditure on Property, Plant and Equipments after its purchase
is capitalized only if it is probable that the future economic benefits will flow to the enterprise and the
cost of the item can be measured reliably.

Depreciation is calculated using the straight line method to write down the cost of property and
equipment to their residual values over their estimated useful lives as specified under Schedule II of the
Act.

In respect of property, plant and Equipments purchased during the period, depreciation is provided on a
pro-rata basis from the date on which such asset is purchased or ready for its intended use.

The residual values, useful lives and methods of depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted prospectively, if appropriate.

Property plant and equipment is derecognised on disposal or when no future economic benefits are
expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is recognised in other income /
expense in the statement of profit and loss in the year the asset is derecognised.

3.12 Intangible Assets

The Company''s other intangible assets include the value of software and trademark. An intangible asset is
recognised only when its cost can be measured reliably and it is probable that the expected future
economic benefits that are attributable to it will flow to the Company.

Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses.

Amortisation is calculated using the straight-line method to write down the cost of intangible assets to
their residual values over their estimated useful lives.

3.13 Impairment of non-financial assets - property, plant and equipment and intangible assets

The carrying values of assets / cash generating units at the each Balance Sheet date are reviewed for
impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated
and if the carrying amount of these assets exceeds their recoverable amount, impairment loss is
recognised in the Statement of Profit and Loss as an expense, for such excess amount. The recoverable
amount is the greater of the net selling price and value in use. Value in use is arrived at by discounting the
future cash flows to their present value based on an appropriate discount factor. When there is indication
that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have
decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss.

3.14 Leasing

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of
the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent
on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.

Company as a lessee

Leases that do not transfer to the Company substantially all of the risks and benefits incidental to
ownership of the leased items are operating leases. Operating lease payments are recognised as an
expense in the statement of profit and loss on a straight-line basis over the lease term, unless the increase
is in line with expected general inflation, in which case lease payments are recognised based on
contractual terms. Contingent rental payable is recognised as an expense in the period in which they are
incurred.

Company as a lessor

Leases where the Company does not transfer substantially all of the risk and benefits of ownership of the
asset are classified as operating leases. Rental income arising from operating leases is accounted for on a
straight-line basis over the lease terms and is included in rental income in the statement of profit and loss,
unless the increase is in line with expected general inflation, in which case lease income is recognised
based on contractual terms. Initial direct costs incurred in negotiating operating leases are added to the
carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue in the period in which they are earned.

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Mar 31, 2023

Note 1 Significant accounting policies

1. Corporate information

KIFS Financial Services Limited (KFSL) incorporated under the provisions of the Companies Act, 1956 on March 29, 1995 [CIN: L67990GJ1995PLC025234] is a non banking financial company registered with the Reserve Bank of India (RBI) under the provisions of section 45-IA of the RBI Act, 1934 as a loan company (RBI registration no. 01.00007 dated 18.02.1998). KFSL is a public limited company and is listed on Bombay Stock Exchange Ltd. It offers capital market products like margin trading, loan against shares (las) and funding primary market issues for the retail investors.

The Company''s registered office is at 4th Floor, KIFS Corporate House (Khandwala House), Nr. Land Mark Hotel, Nr. Neptune House, Iskon-Ambli Road, Bodakdev, Ahmedabad - 380054, Gujarat, India..

2. Basis of preparation

2.1 Statement of compliance

The standalone financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (the "Ind AS") prescribed under section 133 of the Companies Act, 2013 (the "Act").

For all periods up to and including the year ended 31 March 2019, the Company prepared its standalone financial statements in accordance with accounting standards notified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP). These standalone financial statements for the year ended 31 March 2023 was the Company''s third financial statements prepared in accordance with Ind AS.

2.2 Basis of measurement

The standalone financial statements have been prepared on historical cost basis except as stated otherwise.

2.3 Functional and presentation currency

The standalone financial statements are presented in Indian Rupees ('') which is the currency of the primary economic environment in which the Company operates (the "functional currency").

2.4 Use of estimates and judgments

The preparation of the standalone financial statements in conformity with Ind AS requires management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

The areas involving the use of estimates or judgements are:

i) Business model assessment

Classification and measurement of financial assets depends on the results of business model and the solely payments of principal and interest ("SPPI") test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors the financial assets measured at amortised cost and this monitoring is part of the Company''s continuous assessment of whether the business model for which the financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.

ii) Effective Interest Rate ("EIR") method

The Company''s EIR methodology, as explained in Note 3.1(A), recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of loans given / taken and recognises the effect of potentially different interest rates at

various stages and other characteristics of the product life cycle (including prepayments and penalty interest and charges).

This estimation, by nature, requires an element of judgement regarding the expected behaviour and lifecycle of the instruments, as well as expected changes to interest rates and other fee income/ expense that are integral parts of the instrument.

iii) Impairment of financial asset

The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.

There is no need to provide such impairment of financial assets as the company only provide short term loans which are mostly payable on demand there is no significant effect on impairment of financial asset.

iv) Provisions and other contingent liabilities

When the Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, the Company records a provision against the case. Where the probability of outflow is considered to be probable, but a reliable estimate cannot be made, a contingent liability is disclosed.

Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents. Significant judgement is required to conclude on these estimates.

These estimates and judgements are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances. The Management believes that the estimates used in preparation of the standalone financial statements are prudent and reasonable.

2.5 Presentation of the standalone financial statements

The Company presents its balance sheet in order of liquidity. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (non-current) is presented in Note 38.

Financial assets and financial liability are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:

i) The normal course of business

ii) The event of default

3. Summary of significant accounting policies

3.1 Recognition of Interest Income

A. EIR method

Under Ind AS 109, interest income is recorded using the effective interest rate method for all financial instruments measured at amortised cost, financial instrument measured at FVOCI and financial instruments designated at FVTPL. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset.

The EIR (and therefore, the amortised cost of the asset) is calculated by taking into account any discount or premium on acquisition, fees and costs that are an integral part of the EIR. The Company recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected life of the financial instrument.

If expectations regarding the cash flows on the financial asset are revised for reasons other than credit risk, the adjustment is booked as a positive or negative adjustment to the carrying amount of the asset in the balance sheet with an increase or reduction in interest income. The adjustment is subsequently amortised through Interest income in the statement of profit and loss.

B. Interest income

The Company calculates interest income by applying the EIR to the gross carrying amount of financial assets.

3.2 Financial Instrument - Initial Recognition

A. Date of recognition

Financial assets and liabilities, with the exception of loans, debt securities, deposits and borrowings are initially recognised on the trade date, i.e. the date that the Company becomes a party to the contractual provisions of the instrument.

B. Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on their contractual terms and the business model for managing the instruments (Refer note 3.3(A)). All financial assets and liabilities are initially recognized at amortised cost. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, are adjusted to the cost on initial recognition.

C. Measurement categories of financial assets and liabilities

The Company classifies all of its financial assets based on the business model for managing the assets and the asset''s contractual terms, measured at Amortised cost.

3.3 Financial assets and liabilities

A. Financial Assets

Business model assessment

The Company determines its business model at the level that best reflects how it manages groups of financial assets to achieve its business objective.

The Company''s business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:

a) How the performance of the business model and the financial assets held within that business model are evaluated and reported to the Company''s key management personnel.

b) The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way those risks are managed.

c) How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets managed or on the contractual cash flows collected).

d) The expected frequency, value and timing of sales are also important aspects of the Company''s assessment.

The business model assessment is based on reasonably expected scenarios without taking ''worst case'' or ''stress case'' scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Company''s original expectations, the Company does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.

SPPI test

As a second step of its classification process, the Company assesses the contractual terms of financial to identify whether they meet the SPPI test.

‘Principal'' for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/ discount).

The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Company applies judgement and considers relevant factors such as the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de minimise exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVTPL.

Accordingly, the financial assets are measured as follows:

i) Financial assets carried at amortised cost ("AC")

A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

ii) Financial assets measured at fair value through other comprehensive income ("FVOCI")

A financial asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

iii) Financial assets at fair value through profit or loss ("FVTPL")

A financial asset which is not classified in any of the above categories are measured at FVTPL.

B. Financial Liability

i) Initial recognition and measurement

All financial liability are initially recognized at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liability, which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition.

ii) Subsequent measurement

Financial liabilities are carried at amortized cost using the effective interest method.

3.4 Reclassification of financial assets and liabilities

The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified. The Company did not reclassify any of its financial assets or liabilities in the year 2021-22, 2020-21, 2019-20, 2018-19 and 2017-18.

3.5 Derecognition of financial assets and liabilities

i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the contractual rights to the cash flows from the financial asset expires or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount (measured at the date of derecognition) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in the statement of profit and loss.

Accordingly, gain on sale or derecognition of assigned portfolio are recorded upfront in the statement of profit and loss as per Ind AS 109. Also, the Company recognises servicing income as a percentage of interest spread over tenure of loan in cases where it retains the obligation to service the transferred financial asset.

As per the guidelines of RBI, the company is required to retain certain portion of the loan assigned to parties in its books as Minimum Retention Requirement (MRR). Therefore, it continue to recognise the portion retained by it as MRR.

ii) Financial liability

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially

different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in the statement of profit and loss.

3.6 Impairment of financial assets

A. Overview of the ECL principles

In accordance with Ind AS 109, the Company uses ECL model, for evaluating impairment of financial assets other than those measured at fair value through profit and loss (FVTPL).

Expected credit losses are measured through a loss allowance at an amount equal to:

i. ) The 12-months expected credit losses (expected credit losses that result from those default

events on the financial instrument that are possible within 12 months after the reporting date); or

ii. ) Full lifetime expected credit losses (expected credit losses that result from all possible default

events over the life of the financial instrument)

Based on the above, the Company categorises its loans into Stage 1, Stage 2 and Stage 3, as described below:

Stage 1: When loans are first recognised, the Company recognises an allowance based on 12 months ECL. Stage 1 loans includes those loans where there is no significant credit risk observed and also includes facilities where the credit risk has been improved and the loan has been reclassified from stage 2 or stage 3.

Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the life time ECL. Stage 2 loans also includes facilities where the credit risk has improved and the loan has been reclassified from stage 3.

Stage 3: Loans considered credit impaired. The Company records an allowance for life time ECL.

B. The calculation of ECLs

The mechanics of the ECL calculations are outlined below and the key elements are, as follows:

PD The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.

EAD The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest

LGD The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.

The Company has calculated Probability of Default (PDs), Exposure at Default (EAD) and Loss Given Default (LGDs) to determine impairment loss on the portfolio of loans and discounted at an approximation to the EIR. At every reporting date, the above calculated PDs, EAD and LGDs are reviewed and changes in the forward looking estimates are analysed.

C. Forward looking information

In its ECL models, the Company relies on a broad range of forward looking macro parameters and estimated the impact on the default at a given point of time.

3.7 Write-offs

Financial assets are written off either partially or in their entirety after reasonable efforts for recovery have been made and when the Company has stopped pursuing the recovery. Any subsequent recoveries are credited to impairment on financial instrument on the statement of profit and loss.

3.8 Determination of fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

3.9 Recognition of other income and expenses

Revenue (other than for those items to which Ind AS 109 - Financial Instruments are applicable) is measured at fair value of the consideration received or receivable. Ind AS 115 - Revenue from contracts with customers outlines a single comprehensive model of accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance found within Ind ASs.

The Company recognises revenue from contracts with customers based on a five step model as set out in Ind AS 115:

Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria for every contract that must be met.

Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.

Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one performance obligation, the Company allocates the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for satisfying each performance obligation.

Step 5: Recognise revenue when (or as) the Company satisfies a performance obligation.

A. Interest income on Bank deposits & Other Income

Interest income on Bank deposits is accounted on accrual basis. Other Operating Income such as Service Charges, Stamp and Document Charges etc. are recognised on accrual basis.

B. Fees and commission income

Fees and commission income such as stamp and document charges, guarantee commission, service income etc. are recognised on point in time basis.

C. Borrowing costs

Borrowing Costs are the interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

All other borrowing costs are charged to the statement of profit and loss for the period for which they are incurred.

3.10 Cash and cash equivalents

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments

that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

3.11 Property, plant and Equipment

Property, Plant and Equipments are carried at cost, less accumulated depreciation and impairment losses, if any. The cost of Property, Plant and Equipments comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use and other incidental expenses. Subsequent expenditure on Property, Plant and Equipments after its purchase is capitalized only if it is probable that the future economic benefits will flow to the enterprise and the cost of the item can be measured reliably.

Depreciation is calculated using the straight line method to write down the cost of property and equipment to their residual values over their estimated useful lives as specified under Schedule II of the Act.

In respect of property, plant and Equipments purchased during the period, depreciation is provided on a pro-rata basis from the date on which such asset is purchased or ready for its intended use.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Property plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in other income / expense in the statement of profit and loss in the year the asset is derecognised.

3.12 Intangible Assets

The Company''s other intangible assets include the value of software and trademark. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Company.

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Amortisation is calculated using the straight-line method to write down the cost of intangible assets to their residual values over their estimated useful lives.

3.13 Impairment of non-financial assets - property, plant and equipment and intangible assets

The carrying values of assets / cash generating units at the each Balance Sheet date are reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and if the carrying amount of these assets exceeds their recoverable amount, impairment loss is recognised in the Statement of Profit and Loss as an expense, for such excess amount. The recoverable amount is the greater of the net selling price and value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss.

3.14 Leasing

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.

Company as a lessee

Leases that do not transfer to the Company substantially all of the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term, unless the increase is in line with expected general inflation, in which case lease payments are recognised based on

contractual terms. Contingent rental payable is recognised as an expense in the period in which they are incurred.

Company as a lessor

Leases where the Company does not transfer substantially all of the risk and benefits of ownership of the asset are classified as operating leases. Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is included in rental income in the statement of profit and loss, unless the increase is in line with expected general inflation, in which case lease income is recognised based on contractual terms. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

3.15 Provisions, contingent liabilities and contingent assets

A. Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. When the effect of the time value of money is material, the Company determines the level of provision by discounting the expected cash flows at a pre-tax rate reflecting the current rates specific to the liability. The expense relating to any provision is presented in the statement of profit and loss net of any reimbursement.

B. Contingent liability

A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or; present obligation that arises from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability are disclosed as contingent liability and not provided for.

C. Contingent Asset

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

Contingent assets are not recognised and disclosed only when an inflow of economic benefits is probable.

3.16 Taxes

A. Current tax

Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from, or paid to, the taxation authorities. Current tax is the amount of tax payable on the taxable income for the period as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961.

Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or equity.

B. Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or equity.

Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off.

C. Goods and services tax / value added taxes paid on acquisition of assets or on incurring expenses

Expenses and assets are recognised net of the goods and services tax paid, except when the tax incurred on a purchase of assets or availing of services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable.

The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

3.17 Earnings Per Share

Basic earnings per share is computed by dividing the profit after tax (i.e. profit attributable to ordinary equity holders) by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing the profit after tax (i.e. profit attributable to ordinary equity holders) as adjusted for after-tax amount of dividends and interest recognised in the period in respect of the dilutive potential ordinary shares and is adjusted for any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares, by the weighted average number of equity shares considered for deriving basic earnings per share as increased by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares

Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits, right issue and bonus shares, as appropriate.

3.18 Dividends on ordinary shares

The Company recognises a liability to make cash to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.

3.19 Cash flow statement

Cash flows are reported using the indirect method as prescribed under Ind AS 7, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

3.20 Operating cycle

Based on the nature of products/activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

3.21 Use of estimates

The preparation of the financial statements in conformity with Ind AS requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year.

4. Adoption of Ind AS

The Company has adopted Ind AS with effect from 1st April 2019 with comparatives being restated. Accordingly the impact of transition has been provided in the Opening Reserves as at 1st April 2018. The

figures for the previous period have been restated, regrouped and reclassified wherever required to comply with the requirement of Ind AS and Schedule III.

i) Fair value as deemed cost exemption

The Company has elected to measure items of property, plant and equipment and intangible assets at its carrying value at the transition date.

ii) Derecognition of financial assets and financial liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after April 1, 2018 (the transition date).

iii) Impairment of financial assets

The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognised in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.

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Mar 31, 2018

a) Corporate information

KIFS Financial Services Limited (“KFSL”) incorporated under the provisions of the Companies Act, 1956 on March 29, 1995 [CIN: L67990GJ1995PLC025234] is a non banking financial company registered with the Reserve Bank of India (RBI) under the provisions of section 45-IA of the RBI Act, 1934 as a loan company (RBI registration no. 01.00007 dated February 18, 1998). KFSL is a public limited company and is listed on Bombay Stock Exchange Limited. It offers capital market products like margin trading, loan against shares (LAS) and funding primary market issues for the retail investors. It is proposing to enter into the business of investment adviser and has obtained registration with SEBI as “investment adviser” under the SEBI (Investment Advisers) Regulations, 2013 vide registration no. INA000001852 dated June 13, 2014.

b) Basis of preparation of financial statements

These financial statements are prepared in accordance with Indian generally accepted accounting principles (GAAP) under the historical cost convention on the accrual basis. The financial statements are prepared in accordance with the accounting standards notified by the central government, in terms of section 133 of the Companies Act, 2013 read with rule 7 and guidelines issued by the Securities and Exchange Board of India (SEBI) and the guidelines issued by the Reserve Bank of India (‘RBI’) as applicable to a non banking finance company (NBFC). The accounting policies have been consistently applied by the company and are consistent with those used in the previous year.

c) Use of estimates

The preparation of financial statements in conformity with the Indian GAAP requires the management of the company to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and reported income and expenses during the year. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the difference between the actual result and estimates are recognized in the period in which the results are known / materialized.

d) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and revenue can be reliably measured.

Income from operations which comprises interest income, advisory fees and other income are all accounted for on accrual basis.

e) Expenses

The company provides for all expenses comprising of employee benefits expenses, financial cost and other expenses on accrual basis.

f) Cash & cash equivalents (for the purpose of cash flow statement)

Cash comprises cash in hand. Cash equivalents are cash at bank that are readily available for convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

g) Cash flow statement

Cash flow are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flow from operation, investing and financing activities of the company are segregated based on the available information.

h) Fixed assets & depreciation

Fixed assets are stated at cost of acquisition. Cost includes attributable cost incurred for bringing the assets to its working condition for its intended use. They are stated at historical cost less accumulated depreciation.

Capital assets under erection / installation are reflected in the balance sheet as “capital work in progress”.

Depreciation on assets is provided on written down value basis (WDV) on the basis of useful lives of assets as specified in schedule II of the Companies Act, 2013.

Depreciation on fix assets purchased / acquired during the year is provided on pro-rata basis according to the period each asset was put to use during the year.

i) Investment

The investments made by the company are categorized as long term investment and are stated at cost.

j) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognized whenever the carrying amount of assets exceeds its recoverable amount. After impairment depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

During the year, there was no impairment of assets of the company.

k) Borrowing cost

All borrowing costs are expensed in the period they occur. Borrowing cost consists of interest and other cost that an entity incur in the connection with the borrowing of the funds. Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. All other borrowing costs are charged to revenue.

l) Taxes on income

Tax on income for the current period is determined on the basis of the Income Tax Act, 1961.

Deferred tax is recognized on timing differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

m) Contingent liabilities and contingent assets

Provision is made for all known liabilities. Contingent liabilities, if any are disclosed in the account by way of a note. Contingent assets are neither recognized nor disclosed in the financial statements.

n) Retirement and other employee benefits

Gratuity liability is a defined obligation. But it has not been provided for on the basis of an actuarial valuation of projected unit credit method. The same shall be accounted for on cash basis as and when the need so arise.

o) Earning per shares

The company reports basic and diluted earnings per share (EPS) in accordance with accounting standard -20 on earning per share. Basic EPS is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year.

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Mar 31, 2016

Note 1: Significant Accounting Policies a) Corporate Information

Khandwala Financial Services Limited (KFSL) incorporated under the provisions of the Companies Act, 1956 on March 29, 1995 (CIN: L67990GJ1995PLC025234) is a Non Banking Financial Company registered with the Reserve bank of India (RBI) under the provisions of section 45-IA of the RBI Act, 1934 as a Loan Company (RBI Registration No. 01.00007 dated February 18, 1998). KFSL is a Public Limited Company and is listed on the Bombay Stock Exchange Ltd. It offers capital market products like Margin Trading, Loan against shares (LAS) and Funding Primary Market issues for the retail investors. It is proposing to enter into the business of Investment Adviser and has obtained Registration with SEBI as "Investment Adviser" under SEBI (Investment Advisers) Regulations, 2013 vide registration no. INA000001852 dated June 13, 2014.

b) Basis of Preparation of Financial Statements

These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. The financial statements are prepared in accordance with the accounting standards notified by the Central Government, in terms of Section 133 of the Companies Act, 2013 read with Rule

7 and guidelines issued by the Securities and Exchange Board of India (SEBI) and the guidelines issued by the Reserve Bank of India (''RBI'') as applicable to a Non Banking Finance Company (NBFC). The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

c) Use of Estimates

The preparation of financial statements in conformity with the India GAAP requires the management of the Company to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and reported income and expenses during the year. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the difference between the actual result and estimates are recognized in the period in which the results are known / materialized.

d) Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and revenue can be reliably measured.

Income from operations which comprises interest income, advisory fees and other income are all accounted for on accrual basis.

e) Expenses

The Company provides for all expenses comprising of Employee Benefits Expenses, Financial Cost and Other Expenses on accrual basis.

f) Cash & Cash Equivalents (for the purpose of Cash Flow Statement)

Cash comprises cash in hand. Cash equivalents are cash at bank that are readily available for convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

g) Cash Flow Statement

Cash flow are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects for the effects of transactions of noncash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flow from operation, investing and financing activities of the Company are segregated based on the available information.

h) Fixed Assets & Depreciation

Fixed assets are stated at cost of acquisition. Cost includes attributable cost incurred for bringing the assets to its working condition for its intended use. They are stated at historical cost less accumulated depreciation.

Capital Assets under erection / installation are reflected in the Balance Sheet as "Capital Work in Progress".

Depreciation on assets is provided on written down value basis (WDV) on the basis of useful lives of assets as specified in schedule II of the Companies Act, 2013.

Depreciation on fix assets purchased / acquired during the year is provided on pro-rata basis according to the period each asset was put to use during the year.

i) Investment

The investments made by the Company are categorized as long term investment and are stated at cost.

j) Impairment of Assets

The Carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of Impairment based on internal / external factors. An impairment loss is recognized whenever the carrying amount of assets exceeds its recoverable amount. After impairment depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

During the year there was no impairment of assets of the Company.

k) Borrowing Cost

All Borrowing costs are expensed in the period they occur. Borrowing cost consists of interest and other cost that an entity incur in the connection with the borrowing of the funds. Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. All other borrowing costs are charged to revenue.

l) Taxes on Income

Tax on income for the current period is determined on the basis of the Income Tax Act, 1961.

Deferred tax is recognized on timing differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

m) Contingent Liabilities and Contingent Assets

Provision is made for all known liabilities. Contingent Liabilities, if any are disclosed in the account by way of a note. Contingent assets are neither recognized nor disclosed in the financial statements.

n) Retirement and Other Employee Benefits

Gratuity liability is a defined obligation. But it has not been provided for on the basis of an actuarial valuation of projected unit credit method. The same shall be accounted for on cash basis as and when the need so arise.

o) Earning Per Shares

The Company reports basic and diluted earnings per share (EPS) in accordance with Accounting Standard - 20 on Earnings Per Share. Basic EPS is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year.

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Mar 31, 2015

A) Corporate Information :

KFSL incorporated under the provisions of the Companies Act, 1956 on 29th March, 1995 [CIN: L67990GJ1995PLC025234] is a Non Banking Financial Company registered with the Reserve bank of India (RBI) under the provisions of section 45-IA of the RBI Act, 1934 as a Loan Company (RBI registration no. 01.00007 dated 18.02.1998). KFSL is a public limited company and is listed on Bombay Stock Exchange Ltd. It offers capital market products like Margin Trading, Loan against shares (LAS) and Funding Primary Market issues for the retail investors. It is proposing to enter into the business of Investment Adviser and has obtained registration with SEBI as "Investment Adviser" under SEBI (Investment Advisers) Regulations, 2013 vide registration no. INA000001852 dated 13th June, 2014.

b) Basis of Preparation of Financial Statements:

These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. The financial statements are prepared in accordance with the accounting standards notified by the Central Government, in terms of section 133 of the companies act, 2013 read with Rule 7 and guidelines issued by the Securities and Exchange Board of India (SEBI) and the guidelines issued by the Reserve Bank of India ('RBI') as applicable to a Non Banking Finance Company (NBFC). The accounting policies have been consistently applied by the company and are consistent with those used in the previous year.

c) Use of Estimates:

The preparation of financial statements in conformity with the India GAAP requires the management of the company to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and reported income and expenses during the year. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the difference between the actual result and estimates are recognized in the period in which the results are known/materialized.

d) Revenue Recognition :

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and revenue can be reliably measured.

Income from operations which comprises interest income, advisory fees and other income are all accounted for on accrual basis.

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Mar 31, 2014

A) Basis of Preparation of Financial Statements:

The financial statements have been prepared on an accrual basis, on a historical cost convention and are materially in compliance with the requirements of the Companies Act, 1956 as well as the mandatory accounting standards issued by the Institute of Chartered Accountants of India.

b) Use of Estimates:

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the data of the financial statements and the reported amount revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known/materialised.

c) Income from Operations:

Income from operations which comprises interest income, brokerage income, dividend income and other income are all accounted for on accrual basis.

d) Expenses:

The Company provides for all expenses comprising of Salary to Employees, Financial Expenses and Administrative Expenses on accrual basis.

e) Fixed Assets:

Fixed assets are stated at cost of acquisition. Cost includes attributable cost incurred for bringing the assets to its working condition for its intended use. They are stated at historical cost less accumulated depreciation.

Depreciation on assets is provided on written down value basis (WDV) at the rates and in the manner prescribed in schedule XIV of the Companies Act, 1956.

f) Investment:

The investments made by the Company are catagorised as long term investment and are stated at cost.

g) Borrowing Cost:

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. All other borrowing costs are charged to revenue.

h) Taxes on Income:

Tax on income for the current period is determined on the basis of the Income Tax Act,1961.

h) Taxes on Income:

Tax on income for the current period is determined on the basis of the Income Tax Act, 1961.

Deferred tax is recognised on timing differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

i) Contingent Liabilities and Contingent Assets:

Provision is made for all known liabilities. Contingent Liabilities, if any are disclosed in the account by way of a note. Contingent assets are neither recognized nor disclosed in the financial statements.

j) Impairment of Assets:

Impairment of assets is recognized when there is an indication of impairment. On such indication the recoverable amount of assets is estimated and if such estimation is less then its carrying amount, the carrying amount is adjusted to its recoverable amount.

k) Retirement Benefits:

No provision for gratuity has been made as no employees has put the qualifying period of service for the entitlement of this benefit

l) Earning Per Shares:

The Company reports basic and diluted earnings per share (EPS) in accordance with accounting standard - 20 on earning per share. Basic EPS is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year.

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Mar 31, 2013

A) Basis of Preparation of Financial Statements:

The Financial statements have been prepared on an accrual basis, on a historical cost convention and are materially in compliance with the requirements of the Companies Act 1956 as well as the mandatory accounting standards issued by the Institute of Chartered Accountants of India.

b) Use of Estimates:

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the data of the financial statements and the reported amount of revenues and expenses during the reporting period, Difference between the actual result and estimates are recognized in the period in which the results are known/materialised.

c) Income form Operations:

Income form operations which comprises interest income, brokerage income, dividend income and other income are all accounted for on accrual basis.

d) Expenses:

The Company provides for all expenses comprising of Salary to Employees, Financial Expenses and Administrative Expenses on accrual basis.

e) Fixed Assets:

Fixed assets are stated at cost of acquisition. Cost includes attributable cost incurred for bringing the assets to its working condition for its intended use. They are stated at historical cost less accumulated depreciation.

Depreciation on assets Is provided on written down value basis (WDV) at the rates and in the manner prescribed in schedule XIV of the Companies Act, 1956.

f) Investment:

The investments made by the Company are catagorised as long term investment and are stated at cost.

g) Borrowing Cost:

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. All other borrowing costs are charged to revenue.

h) Taxes on Income:

Tax on income forthe current period is determined on the basis of the IncomeTax Act 1961. Deferred tax assets are recognised on timing differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

i) Contingent Liabilities and Contingent Assets:

Provision is made for all known liabilities. Contingent Liabilities, if any are disclosed in the account by way of a note. Contingent assets are neither recognized nor disclosed in the financial statements.

j) Impairment of Assets:

Impairment of assets is recognized when there is an indication of impairment. On such indication the recoverable amount of assets is estimated and if such estimation is less then its carrying amount, the carrying amount is adjusted to its recoverable amount.

k) Retirement Benefits:

No provision for gratuity has been made as no employees has put the qualifying period of service forthe entitlement of this benefit.

I) Earning per Shares :

The Company reports basic and diluted earnings per share (EPS) in accordance with accounting standard - 20 on earning per share. Basic EPS is computed by dividing the net profit or loss forthe year by the weighted average number of equity shares outstanding duringtheyear.

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Mar 31, 2012

A) Basis of Preparation of Financial Statements:

The financial statements have been prepared on an accrual basis, on a historical cost convention and are materially in compliance with the requirements of the Companies Act, 1956 as well as the mandatory accounting standards issued by the Institute of Chartered Accountants of India.

b) Use of Estimates:

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the data of the financial statements and the reported amount f revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known/materialised.

c) Income from Operations:

Income from operations which comprises interest income, brokerage income, dividend income and other income are all accounted for on accrual basis.

d) Expenses:

The Company provides for all expenses comprising of Salary to Employees, Financial Expenses and Administrative Expenses on accrual basis.

e) Fixed Assets:

Fixed assets are stated at cost of acquisition. Cost includes attributable cost incurred for bringing the assets to its working condition for its intended use. They are stated at historical cost less accumulated depreciation.

Depreciation on assets is provided on written down value basis (WDV) at the rates and in the manner prescribed in schedule XIV of the Companies Act, 1956.

f) Investment:

The investments made by the Company are catagorised as long term investment and are stated at cost.

g) Borrowing Cost:

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. All other borrowing costs are charged to revenue.

h) Taxes on Income:

Tax on income for the current period is determined on the basis of the Income Tax Act 1961.

Deferred tax is recognised on timing differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

i) Contingent Liabilities and Contingent Assets:

Provision is made for all known liabilities. Contingent Liabilities, if any are disclosed in the account by way of a note. Contingent assets are neither recognized nor disclosed in the financial statements.

j) Impairment of Assets:

Impairment of assets is recognized when there is an indication of impairment. On such indication the recoverable amount of assets is estimated and if such estimation is less then its carrying amount, the carrying amount is adjusted to its recoverable amount.

k) Retirement Benefits:

No provision for gratuity has been made as no employees has put the qualifying period of service for the entitlement of this benefit.

1) Earning Per Shares:

The Company reports basic and diluted earnings per share (EPS) in accordance with accounting standard - 20 on earning per share. Basic EPS is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year.

(iii) The Company has issued only one class of shares referred to as Equity Shares having a par value of Rs 10/-. All Equity Shares carry one vote per share wthout restrictions and are entitled to Dividend, as and when declared. All shares rank equally with regard to the Company''s residual assets.

Notes:-

(m) Over Draft is primarily secured by way of first charge over the Fixed Deposit in the name of the company.

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Mar 31, 2011

A) Basis of Accounting:

The financial statements have been prepared on an accrual basis, on a historical cost convention and are materially in compliance with the requirements of the Companies Act, 1956 as well as the mandatory accounting standards issued by the Institute of Chartered Accountants of India.

b) Income from Operations:

Income from operations which comprises interest income, brokerage income, dividend income and other income are all accounted for on accrual basis.

c) Expenses:

The Company provides for all expenses comprising of Salary to Employees, Financial Expenses and Administrative Expenses on accrual basis.

d) Fixed Assets:

Fixed assets are stated at cost of acquisition including attributable cost incurred for bringing the assets to its working condition for its intended use.

Depreciation on assets is provided on written down value basis (WDV) at the rates and in the manner prescribed in schedule XIV of the Companies Act, 1956.

e) Investment:

The investments made by the Company are catagorised as long term investment and arc stated at cost.

f) Amortization of preliminary & public issue expenses:

Preliminary and public issue expenses are deferred to be amortised over a period of 10 years by charging one tenth of such expenses to revenue every year.

g) Taxes on Income:

Tax on income for the current period is determined on the basis of the Income Tax Act 1956.

Deferred tax is recognised on liming differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

h) Contingent Liabilities:

Provision is made for all known liabilities. Contingent Liabilities, if any are disclosed in the account by way of a note.

i) Impairment of Assets:

Impairment of assets is recognized when there Is an indication of impairment. On such indication the recoverable amount of assets is estimated and if such estimation is less than its carrying amount, the carrying amount is adjusted to its recoverable amount,

j) Retirement Benefits:

No provision for gratuity has been made as no employees has put the qualifying period of service for the entitlement of this benefit.

k) Earning Per Shares:

The Company reports basic and diluted earnings per share (EPS) in accordance with accounting standard - 20 on earning per share. Basic EPS is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year.

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Mar 31, 2010

(a) Basis of accounting :

The financial statements have been prepared on an accrual basis, on a historical cost convention and are materially in compliance with the requirements of the Companies Act, 1956 as well as the mandatory accounting standards issued by the Institute of Chartered Accountants of India.

(b) Income from operations :

Income from operations which comprises interest, brokerage and other income are all accounted for on accrual basis.

(c) Expenses:

The Company provides for all expenses comprising of administrative and others on accrual basis.

(d) Fixed assets :

Fixed assets are stated at cost of acquisition including attributable cost incurred for bringing the assets to its working condition for its intended use.

Depreciation on assets is provided on written down value basis(WDV) at the rates and in the manner prescribed in schedule XIV of the Companies Act, 1956.

(e) Investment:

The investments made by the Company are catagorised as long term investment and are stated at cost.

(f) Amortisation of preliminary & public issue expenses:

Preliminary and public issue expenses are deferred to be amortised over a period of 10 years by charging one tenth of such expenses to revenue every year.

(g) Taxes on Income :

Tax on income for the current period is determined on the basis of the Income Tax Act 1961.

Deferred tax is recognised on timing differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

(h) Contingent Liabilities:

Provision is made for all known liabilities. Contingent Liabilities, if any are disclosed in the account by way of a note.

(i) Impairment of Assets:

Impairment of assets is recognized when there is an indication of impairment. On such indication the recoverable amount of assets is estimated and if such estimation is less then its carrying amount, the carrying amount is adjusted to its recoverable amount.

(j) Retirement Benefits:

No provision for gratuity has been made as no employees has put the qualifying period of service for the entitlement of this benefit.

(k) Earning Per Shares: The Company reports basic and diluted earning per share in accordance with accounting standard - 20 on earning per share. Basic EPS is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year.