ICICI Bank 2006 Annual Report Download - page 136

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F77
impact of such derivative instruments is correlated with the movement of underlying assets and accounted for
at fair value or on accrual basis, in accordance with RBI guidelines.
Under US GAAP, the Company accounts for its derivative transactions in accordance with the provisions of SFAS
No. 133 on “Accounting for Derivative Instruments and Hedging Activities”. Accordingly certain derivative contracts
classified as hedges under Indian GAAP may not qualify as hedges under US GAAP and accordingly are accounted
for as trading derivatives.
Under US GAAP the Company has designated certain derivatives as fair value hedges of certain interest bearing
assets and liabilities under SFASNo. 133. There are no cash flow hedges or hedges of net investments in
foreign operations. At the inception of a hedge transaction, the Company formally documents the hedge
relationship and the risk management objective and strategy for undertaking the hedge. This process includes
identification of the hedging instrument, hedged item, risk being hedged and the methodology for assessing
effectiveness and measuring ineffectiveness of the hedge. In addition, the Company assesses both at the inception
of the hedge and on an ongoing basis, whether the derivative used in the hedging transaction is effective in
offsetting changes in fair value or cash flows of the hedged item, and whether the derivative is expected to
continue to be highly effective. The Company assesses the effectiveness of the hedge instrument at inception
and continually on a quarterly basis.
g) Deferred Taxes
The differences in the accounting for deferred taxes are primarily on account of:
i) Tax impact of all US GAAP adjustments.
ii) Deferred taxes created on undistributed earnings of subsidiaries and affiliates under US GAAP. Deferred
taxes are not required to be created on undistributed earnings of subsidiaries and affiliates under Indian
GAAP.
iii) Deferred taxes created on carry forward capital losses based on more likely than not criterion under US
GAAP as against virtual certainty under Indian GAAP. As per the more likely than not criterion, a valuation
allowance on the deferred tax asset is created where the probability of realisation of the deferred tax asset
is not more likely than not. However under the virtual certainty criterion a deferred tax asset is recognised
on unabsorbed depreciation or carry forward losses under tax laws only to the extent there is convincing
evidence that sufficient future taxable income will be available against which such deferred tax assets can
be realized.
h) Dividend
Under US GAAP, dividends on common stock and the related dividend tax are recognised in the year of approval
by the Board of Directors. Under Indian GAAP, dividends on common stock and the related dividend tax are
recognised in the year to which it relates to.
reconciliation to US GAAP and related notes
for the year ended March 31, 2006