ICICI Bank 2007 Annual Report Download - page 86

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As per the transition provision of AS 15 (Revised) on “Accounting for retirement benefits in financial statements of employer”,
the difference in the liability on account of leave encashment benefits created by the Bank at March 31, 2006 due to the
revised standard have been included in Schedule 2 (“Reserves and Surplus”).
10. Income Taxes
Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. The annual income
tax provision is based on the tax liability determined in accordance with the Income Tax Act, 1961. Deferred tax adjustments
comprise of changes in the deferred tax assets or liabilities during the year.
Deferred tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences
arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses. Deferred
tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at
the balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss
account.
Deferred tax assets are recognised and reassessed at each reporting date, based upon management’s judgement as to
whether realisation is considered as reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed
depreciation, tax losses and carry forward capital losses, only if there is virtual certainty supported by convincing evidence
that such deferred tax asset can be realised against future profits.
11. Impairment of Assets
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment is recognised by debiting the profit and loss account and is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the assets.
12. Provisions, contingent liabilities and contingent assets
The Bank estimates the probability of any loss that might be incurred on outcome of contingencies on the basis of information
available up to the date on which the financial statements are prepared. A provision is recognised when an enterprise has
a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the
obligation, in respect of which a reliable estimate can be made. Provisions are determined based on management estimate
required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are
reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available
information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably
estimated, a disclosure is made in the financial statements. In case of remote possibility neither provision nor disclosure
is made in the financial statements. The Bank does not account for or disclose contingent assets, if any.
13. Earnings Per Share (“EPS”)
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by
the weighted average number of equity shares outstanding during the year.
Diluted earning per share reflects the potential dilution that could occur if contracts to issue equity shares were exercised
or converted during the year. Diluted earnings per equity share is computed using the weighted average number of equity
shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive.
14. Lease Transactions
Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account over the
lease term.
15. Cash and cash equivalents
Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short
notice.
B. NOTES FORMING PART OF THE ACCOUNTS
The following additional disclosures have been made taking into account the requirements of accounting standards and
RBI guidelines in this regard.
1. Merger of The Sangli Bank Limited
On December 9, 2006, the Board of Directors of ICICI Bank and the Board of Directors of The Sangli Bank Limited (‘Sangli
Bank’) at their respective meetings, approved an all-stock amalgamation of Sangli Bank with ICICI Bank at a share exchange
ratio of 100 shares of ICICI Bank for 925 shares of Sangli Bank. Shareholders of Sangli Bank have approved the scheme in
their extra-ordinary general meeting held on January 15, 2007 and shareholders of ICICI Bank have approved the scheme
of amalgamation in their extra-ordinary general meeting held on January 20, 2007.
RBI has sanctioned the scheme of amalgamation with effect from April 19, 2007 vide its order DBOD No. PSBD 10268 /
16.01.128/2006-07 dated April 18, 2007 under sub-section (4) of Section 44A of Banking Regulation Act, 1949.
As on March 31, 2006, Sangli Bank had total assets of Rs. 21,508.5 million, deposits of Rs. 20,043.3 million, loans of
Rs. 8,882.8 million and capital adequacy of 1.6%. During the year ended March 31, 2006, it incurred a loss of Rs. 292.7
million.
forming part of the Accounts (Contd.)
schedules