ICICI Bank 2012 Annual Report Download - page 151

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securitisation is amortised over the life of the securities issued or to be issued by the special purpose vehicle to which
the assets are sold. In the case of loans sold to an asset reconstruction company, the excess provision is not reversed
but is utilised to meet the shortfall/loss on account of sale of other financial assets to securitisation company (SC)/
reconstruction company (RC).
The Canadian subsidiary has entered into securitisation arrangements in respect of its originated mortgages. ICICI
Bank Canada either retains substantially all the risk and rewards or retains control over these mortgages, hence these
arrangements do not qualify for de-recognition accounting under their local accounting standards. It continues to
recognise the mortgages securitised in the book of accounts and the amounts received through securitisation are
recognised as “Other borrowings”.
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. The rates of depreciation for fixed assets, which 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 period are depreciated on a pro-rata basis for the actual number of days the asset has been put
to use.
In case of the Bank, items costing up to ` 5,000 are depreciated fully over a period of 12 months from the date of
purchase.
In case of revalued/impaired assets, depreciation is provided over the remaining useful life of the assets with reference
to revised values of the assets.
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.
The swap contracts entered into 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. Hedge swaps are
accounted for on an accrual basis except in the case of the Bank’s United Kingdom and Canadian banking 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. Pursuant to RBI guidelines, any
receivables under derivative contracts which remain overdue for more than 90 days and mark-to-market gains on other
derivative contracts with the same counter-parties are reversed through the profit and loss account.
18. 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 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. 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.
20. Earnings per share
Basic and diluted earnings per share are computed in accordance with AS 20 on ‘earnings per share’ issued by ICAI.
Basic EPS is calculated by dividing the net profit or loss after tax 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 year. Diluted earnings per equity share is computed using the weighted average number of
equity shares and dilutive potential equity shares issued by the group outstanding during the year, except where the
results are anti-dilutive.
forming part of the Consolidated Accounts (Contd.)
schedules