ICICI Bank 2008 Annual Report Download - page 142

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16. Fixed assets and depreciation
Premises and other fixed assets are carried at cost less accumulated depreciation. Cost includes freight, duties, taxes and
incidental expenses related to the acquisition and installation of the asset. Depreciation is charged over the estimated useful
life of a fixed asset on a straight-line basis, except for those relating to venture capital subsidiary where depreciation is
charged on a written down value method. The rates of depreciation for fixed assets are not lower than the rates prescribed
in Schedule XIV of the Companies Act, 1956.
Depreciation on leased assets and leasehold improvements is recognised on a straight-line basis using rates determined
with reference to the primary period of lease or rates specified in Schedule XIV of the Companies Act, 1956, whichever is
higher.
Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been
put to use.
Items costing up to Rs. 5,000 are depreciated fully over a period of 12 months from the date of purchase.
In case of the Bank’s life insurance subsidiary, intangible assets comprising software are stated at cost less amortisation.
Significant improvements to software are capitalised while the insignificant improvements are charged off as software
expenses. Software expenses, that are capitalised, are amortised on straight-line method over a period of four years from
the date they are put to use, being management’s estimate of the useful life of such intangibles. Depreciation on furniture
and fixtures is charged @ 15% per annum.
In case of the Bank’s general insurance and housing finance subsidiary, computer software are stated at cost less amortisation.
Computer software including improvements is amortised over a period of five years, being management’s estimate of the
useful life of such intangibles.
17. Accounting for derivative contracts
The Group enters into derivative contracts such as foreign currency options, interest rate and currency swaps, credit default
swaps and cross currency interest rate swaps for hedging or for trading purposes.
The swap contracts entered to hedge on-balance sheet assets and liabilities are structured such that they bear an opposite
and offsetting impact with the underlying on-balance sheet items. The impact of such derivative instruments is correlated
with the movement of underlying assets and accounted pursuant to the principles of hedge accounting. Hedged swaps/
options are accounted for on an accrual basis except in the case of the Bank’s United Kingdom and Canadian subsidiaries,
where the hedging transactions and the hedged items (for the risks being hedged) are measured at fair value with changes
recognised in the profit and loss account.
Foreign currency and rupee derivative contracts entered into for trading purposes are marked to market and the resulting
gain/loss, (net of provisions, if any) is accounted for in the profit and loss account.
18. Impairment of assets
Fixed assets and certain intangible 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 with 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 as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
19. 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 earnings per share reflect the potential dilution that could occur if contracts to issue equity shares were exercised
or converted during the period. Diluted earnings per equity share is computed using the weighted average number of equity
shares and dilutive potential equity shares outstanding during the period, except where the results are anti-dilutive.
20. 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.
forming part of the Consolidated Accounts (Contd.)
schedules
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