ICICI Bank 2008 Annual Report Download - page 86

F12
SCHEDULE 18
Significant accounting policies
OVERVIEW
ICICI Bank Limited (“ICICI Bank” or “the Bank”), incorporated in Vadodara, India is a publicly held banking company engaged in
providing a wide range of banking and financial services including commercial banking and treasury operations. ICICI Bank is a
banking company governed by the Banking Regulation Act, 1949.
Basis of preparation
The financial statements have been prepared in accordance with statutory requirements prescribed under the Banking Regulation
Act, 1949. The accounting and reporting policies of ICICI Bank used in the preparation of these financial statements conform
to Generally Accepted Accounting Principles in India (“Indian GAAP”), the guidelines issued by Reserve Bank of India (“RBI”)
from time to time and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of
accounting, except where otherwise stated, and the historical cost convention.
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported
amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income
and expenses during the reporting period. Management believes that the estimates used in the preparation of the financial
statements are prudent and reasonable. Future results could differ from these estimates.
SIGNIFICANT ACCOUNTING POLICIES
1. Revenue recognition
a) Interest income is recognised in the profit and loss account as it accrues except in the case of non-performing assets
(“NPAs”) where it is recognised, upon realisation, as per the income recognition and asset classification norms of
RBI.
b) Income from hire purchase operations is accrued by applying the implicit interest rate on outstanding balances.
c) Income from leases is calculated by applying the interest rate implicit in the lease to the net investment outstanding on
the lease over the primary lease period. Leases entered into till March 31, 2001 have been accounted for as operating
leases.
d) Income on discounted instruments is recognised over the tenure of the instrument on a constant yield basis.
e) Dividend is accounted on an accrual basis when the right to receive the dividend is established.
f) Loan processing fee is accounted for upfront when it becomes due.
g) Project appraisal/structuring fee is accounted for at the completion of the agreed service.
h) Arranger fee is accounted for as income when a significant portion of the arrangement/syndication is completed.
i) Commission received on guarantees issued is amortised on a straight-line basis over the period of the guarantee.
j) All other fees are accounted for as and when they become due.
k) Net income arising from sell-down/securitisation of loan assets prior to February 1, 2006 has been recognised upfront
as interest income. With effect from February 1, 2006, net income arising from securitisation of loan assets is amortised
over the life of securities issued or to be issued by the special purpose vehicle/special purpose entity to which the
assets are sold. Net income arising from sale of loan assets through direct assignment with recourse obligation is
amortised over the life of underlying assets sold and net income from sale of loan assets through direct assignment,
without any recourse obligation, is recognised at the time of sale.
2. Investments
Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation as
given below.
a) All investments are classified into ‘Held to Maturity’, ‘Available for Sale’ and ‘Held for Trading’. Reclassifications, if
any, in any category are accounted for as per RBI guidelines. Under each classification, the investments are further
categorised as (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 fixed rate and floating rate securities acquired is amortised over
the remaining period to maturity on a constant yield basis and straight line basis respectively.
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 constant yield basis. 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, periodically.
The market/fair value of unquoted government securities which are in the nature of “SLR” securities included in the
‘Available for Sale’ and ‘Held for Trading’ categories is as per the rates published by Fixed Income Money Market
schedules
forming part of the Accounts (Contd.)
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