ICICI Bank 2016 Annual Report Download - page 142

Annual Report 2015-2016140
Schedules
forming part of the Accounts (Contd.)
Financial Statements of ICICI Bank Limited
7. Accounting for derivative contracts
The Bank 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 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 liabilities and accounted pursuant to the principles of
hedge accounting. Hedge swaps are accounted for on an accrual basis and are not marked to market unless their
underlying transaction is marked to market.
Foreign currency and rupee derivative contracts entered into for trading purposes are marked to market and the
resulting gain or loss (net of provisions, if any) is accounted for in the prot 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 prot and loss
account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) 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 specied period. The Bank 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 meeting of the
Board Governance, Remuneration & Nomination Committee 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.
9. Employee Benets
Gratuity
The Bank pays gratuity, a dened benet plan, to employees who retire or resign after a minimum prescribed period
of continuous service and in case of employees at overseas locations as per the rules in force in the respective
countries. The Bank makes contribution to a trust which administers the funds on its own account or through
insurance companies.
The actuarial gains or losses arising during the year are recognised in the prot and loss account.
Actuarial valuation of the gratuity liability is determined by an actuary appointed by the Bank. Actuarial valuation of
gratuity liability is determined based on certain assumptions regarding rate of interest, salary growth, mortality and
staff attrition as per the projected unit credit method.
Superannuation Fund and National Pension Scheme
The Bank contributes 15.00% of the total annual basic salary of certain employees to superannuation funds, a dened
contribution plan, managed and administered by insurance companies. Further, the Bank contributes 10.00% of
the total basic salary of certain employees to National Pension Scheme (NPS), a dened contribution plan, which
is managed and administered by pension fund management companies. The Bank also gives an option to its
employees allowing them to receive the amount in lieu of such contributions along with their monthly salary during
their employment.
The amounts so contributed/paid by the Bank to the superannuation fund and NPS or to employee during the year
are recognised in the prot and loss account.