ICICI Bank 2014 Annual Report Download - page 159

F71
policies are reinstated. Top-up premiums paid by unit linked policyholders’ are considered as single premium and
recognised as income when the associated units are created. Income from unit linked policies, which includes fund
management charges, policy administration charges, mortality charges and other charges, if any, are recovered
from the linked funds in accordance with the terms and conditions of the policy and are recognised when due.
zIn the case of general insurance business, premium is recorded for the policy period at the commencement of risk
and for instalment cases, it is recorded on instalment due dates. Premium earned is recognised as income over
the period of the risk or the contract period based on 1/365 method, whichever is appropriate, on a gross basis,
net of service tax. Any subsequent revision to premium is recognised over the remaining period of risk or contract
period. Adjustments to premium income arising on cancellation of policies are recognised in the period in which
the policies are cancelled. Commission on re-insurance ceded is recognised as income in the period of ceding the
risk. Profit commission under re-insurance treaties, wherever applicable, is recognised as income in the period of
final determination of profits and combined with commission on reinsurance ceded.
zIn the case of general insurance business, insurance premium on ceding of the risk is recognised in the period in
which the risk commences. Any subsequent revision to premium ceded is recognised in the period of such revision.
Adjustment to re-insurance premium arising on cancellation of policies is recognised in the period in which they
are cancelled. In case of life insurance business, reinsurance premium ceded is accounted in accordance with the
terms and conditions of the relevant treaties with the reinsurer. Profit commission on reinsurance ceded is netted
off against premium ceded on reinsurance.
zIn the case of general insurance business, premium deficiency is recognised when the sum of expected claim costs
and related expenses and maintenance costs exceed the reserve for unexpired risks and is computed at a company
level. The expected claim cost is calculated and duly certified by the Appointed Actuary.
3. Stock based compensation
The following entities within the group have granted stock options to their employees:
•ICICI Bank Limited
•ICICI Prudential Life Insurance Company Limited
•ICICI Lombard General Insurance Company Limited
The Employees Stock Option Scheme (the Scheme) of the Bank provides for grant of options on the Bank’s equity shares
to wholetime directors and employees of the Bank and its subsidiaries. The Scheme provides that employees are granted
an option to subscribe to equity shares of the Bank that vest in a graded manner. The options may be exercised within
a specified period. ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company have also
formulated similar stock option schemes for their employees for grant of equity shares of their respective companies.
The Group, except the banking subsidiaries, follows the intrinsic value method to account for its stock-based employee
compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying
stock over the exercise price on the grant date and amortised over the vesting period. The fair market price is the latest
closing price, immediately prior to the grant date, which is generally the date of the Board of Directors meeting in which
the options are granted, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on
more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is
considered. In the case of ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company, the
fair value of the shares is determined based on an external valuation report. The banking subsidiaries namely, ICICI Bank
UK and ICICI Bank Canada account for the cost of the options granted to employees by ICICI Bank using the fair value
method based on binomial tree model.
4. Income taxes
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Group. The current
tax expense and deferred tax expense is determined in accordance with the provisions of the Income Tax Act, 1961
and as per Accounting Standard 22 - Accounting for Taxes on Income, respectively. Deferred tax adjustments comprise
changes in the deferred tax assets or liabilities during the year.
Deferred tax assets and liabilities are recognised by considering the impact of timing differences between taxable
income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are
measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The
impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account.
Deferred tax assets are recognised and re-assessed at each reporting date, based upon the management’s judgement
as to whether their realisation is considered as reasonably certain. However, in case of domestic companies, where
there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if
there is virtual certainty of realisation of such assets.
In the consolidated financial statements, deferred tax assets and liabilities are computed at an individual entity level and
aggregated for consolidated reporting.
forming part of the Consolidated Accounts (Contd.)
schedules