ICICI Bank 2008 Annual Report Download - page 140

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12. 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.
13. Investments
Investments of the Bank are accounted for in accordance with the extant RBI guidelines on investment classification and
valuation as given below.
a) All investments are categorised into ‘Held to Maturity’, ‘Available for Sale’ and ‘Held for Trading’ categories. Re-
classifications, if any, in any category are accounted for as per the RBI guidelines.
Under each category, the investments are further classified under (a) government securities, (b) other approved
securities, (c) shares, (d) bonds and debentures, (e) subsidiaries and joint ventures and (f) others.
b) ‘Held to Maturity’ securities are carried at their acquisition cost or at amortised cost, if acquired at a premium over
the face value. Any premium over the face value of the securities acquired is amortised over the remaining period to
maturity on the basis of constant effective yield. A provision is made for other than temporary diminution in the profit
and loss account.
c) ‘Available for Sale’ and ‘Held for Trading’ securities are valued periodically as per RBI guidelines. Any premium over
the face value of the investments in government securities classified as ‘Available for Sale’ is amortised over the
remaining period to maturity on the basis of constant effective yield. Quoted investments are valued based on the
trades/quotes on the recognised stock exchanges, subsidiary general ledger account transactions, price list of RBI
or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives
Association (“FIMMDA”), periodically.
The market/fair value of unquoted government and other approved securities (“SLR” securities) included in the ‘Available
for Sale’ and ‘Held for Trading’ categories is as per the rates published by Fixed Income Money Market and Derivatives
Association. The valuation of other than government and other approved securities (“Non-SLR securities”), other than
those quoted on the stock exchanges, wherever linked to the Yield-to-Maturity (“YTM”) rates, is computed with a mark-
up (reflecting associated credit risk) over the YTM rates for government securities published by Fixed Income Money
Market and Derivatives Association.
Unquoted equity shares are valued at the book value, if the latest balance sheet is available or at Re. 1 as per RBI
guidelines.
Securities are valued scrip-wise and depreciation/appreciation aggregated for each category. Net appreciation, if any,
in each basket, being unrealised, is ignored, while net depreciation is provided for.
d) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to
the profit and loss account.
e) Profit on sale of investments in the ‘Held to Maturity’ category is credited to the profit and loss account and is thereafter
appropriated (net of applicable taxes and statutory reserve requirements) to capital reserve. Profit on sale of investments
in ‘Available for Sale’ and ‘Held for Trading’ categories is credited to profit and loss account.
f) Repurchase and reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.
g) Broken period interest on debt instruments is treated as a revenue item.
h) At the end of each reporting period, security receipts issued by the asset reconstruction company are valued in
accordance with the guidelines applicable to such investments, prescribed by RBI from time to time. Accordingly, in
cases where the cash flows from security receipts issued by the asset reconstruction company are limited to the actual
realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank uses the Net Asset
Value (“NAV”), obtained from the asset reconstruction company from time to time, for valuation of such investments
at each reporting year end.
i) The Bank follows trade date method for accounting of its investments.
The Bank’s venture capital funds carry investments at fair values, with unrealised gains and temporary losses on
investments recognised as components of investors’ equity and accounted for in the unrealised investment reserve
account. The realised gains and losses on investments and units in mutual funds and unrealised gains or losses on
revaluation of units in mutual funds are accounted for in the profit and loss account. Provisions are made in respect
of accrued income considered doubtful. Such provisions as well as any subsequent recoveries are recorded through
the profit and loss account. Subscription to/purchase of investments are accounted at the cost of acquisition inclusive
of brokerage, commission and stamp duty. Bonus shares and right entitlements are recorded when such benefits are
known. Quoted investments are valued on the valuation date at the closing market price. Quoted investments that
are not traded on the valuation date but are traded during the two months prior to the valuation date are valued at
the latest known closing price. An appropriate discount is applied where the asset management company considers
it necessary to reflect restrictions on disposal. Quoted investments not traded during the two months prior to the
valuation date are treated as unquoted. Unquoted investments are valued at their estimated fair values by applying
appropriate valuation methods. Where there is a decline, other than temporary in the carrying amounts of investments,
the resultant reduction in the carrying amount is charged to the profit and loss account during the period in which such
decline is identified.
The Bank’s investment banking subsidiary classifies its investments as short-term and trading or as long-term
investments. The securities held with the intention of holding for short-term and trading are classified as stock-in-trade
and the securities acquired with the intention of holding till maturity or for a longer period are classified as long-term
investments. Investments are carried at cost arrived at on weighted average basis. Appropriate provision is made for
other than temporary diminution in the value of investments. Commission earned in respect of securities acquired
upon devolvement is reduced from the cost of acquisition.
forming part of the Consolidated Accounts (Contd.)
schedules
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