ICICI Bank 2011 Annual Report Download - page 148

F70
by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association
(FIMMDA), periodically.
The market/fair value of unquoted government securities which are in the nature of Statutory Liquidity Ratio (SLR)
securities included in the ‘Available for Sale’ and ‘Held for Trading’ categories is as per the rates published by
FIMMDA. The valuation of other unquoted fixed income securities 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 FIMMDA.
Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available or at ` 1 as per RBI
guidelines.
Securities are valued scrip-wise and depreciation/appreciation is aggregated for each category. Net appreciation in
each category, if any, 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) Market repurchase and reverse repurchase transactions are accounted for as borrowing and lending transactions
in accordance with the extant RBI guidelines. Transactions with RBI under Liquidity Adjustment Facility (LAF) are
accounted for as sale and purchase transactions by the Bank.
g) Broken period interest (the amount of interest from the previous interest payment date till the date of purchase/sale
of instruments) on debt instruments is treated as a revenue item.
h) At the end of each reporting period, security receipts issued by asset reconstruction companies are valued in
accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time. Accordingly,
in cases where the cash flows from security receipts issued by asset reconstruction companies are limited to the
actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the
NAV, obtained from the asset reconstruction company from time to time, for valuation of such investments at each
reporting period end.
i) The Bank follows trade date method of accounting for purchase and sale of investments, except government securities
where settlement date method of accounting is followed from January 1, 2011 in accordance with RBI guidelines.
ii) The Bank’s consolidating 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.
iii) The Bank’s primary dealership and securities broking subsidiaries classify their 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 are valued at lower of cost arrived at on weighted average basis or market value. The securities
acquired with the intention of holding till maturity or for a longer period are classified as long-term investments and 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.
iv) The Bank’s housing finance subsidiary classifies its investments as current investments and long-term investments.
Investments that are readily realisable and intended to be held for not more than a year are classified as current
investments, which are carried at the lower of cost and net realisable value. All other investments are classified as long-
term investments, which are carried at cost. However, a provision for diminution in value is made to recognise any other
than temporary decline in the value of such long-term investments. Costs such as brokerage, commission etc. paid at the
time of acquisition of investments are included in the investment cost.
v) The Bank’s United Kingdom and Canadian banking subsidiaries account for unrealised gain/loss, net of tax, on investment
in ‘Available for Sale’ category directly in their reserves. Further, in the case of the Bank’s United Kingdom and Canadian
banking subsidiaries, unrealised gain/loss on investment in ‘Held for Trading’ category is accounted directly in the profit
and loss account.
vi) In the case of life and general insurance businesses, investments are made in accordance with the Insurance Act, 1938,
the IRDA (Investment) Regulations, 2000, and various other circulars/notifications issued by the IRDA in this context from
time to time.
forming part of the Consolidated Accounts (Contd.)
schedules