Notes to financial statements for the year ended December 31,

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Notes to financial statements for the year ended 1. Nature of operations CRISIL Limited ( the Company ) is a global analytical Company providing ratings and research services. CRISIL is India s leading
Transcript
Notes to financial statements for the year ended 1. Nature of operations CRISIL Limited ( the Company ) is a global analytical Company providing ratings and research services. CRISIL is India s leading ratings agency and also the foremost provider of high-end research to the world s largest banks and leading corporations. With sustainable competitive advantage arising from our strong brand, unmatched credibility, market leadership across businesses, and large customer base, CRISIL delivers analysis, opinions, and solutions that make markets function better. 1.1 Basis of preparation of financial statement The financial statements have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on an accrual basis in compliance with all material aspect of the Accounting Standards (AS) Notified by Companies Accounting Standard Rules, 2006 (as amended) and the relevant provisions of the Companies Act, The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year except for the change in Accounting Policy explained in Point No Summary of significant accounting policies 2.1 Change in accounting policy a) Presentation and disclosure of financial statements During the year ended, the Revised Schedule VI notified under the Companies Act 1956, has become applicable to the company, for preparation and presentation of its financial statements. The adoption of Revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year. b) Current/ Non-Current classification of assets and liabilities All assets and liabilities have been classified as current or non-current as per the Company s normal operating cycle and other criteria set out in the Revised Schedule VI to the Companies Act, Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as up to twelve months for the purpose of current and non-current classification of assets and liabilities. 2.2 Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management s best knowledge of current events and actions, actual results could differ from these estimates. 2.3 Fixed assets Fixed assets are stated at cost, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Items of fixed asset held for disposal are stated at lower of the net book value and net realisable value and are shown under other current assets. Software purchased is charged to the Statement of Profit and Loss as and when incurred. 2.4 Depreciation Depreciation is provided using the Straight Line Method ( SLM ) as per the useful lives of the assets estimated by the management, or at the rates prescribed under schedule XIV of the Act, whichever is higher. Corporate Overview A Glance Statutory Reports Financial Statements Standalone Consolidated Assets Rates (SLM) Schedule XIV Rates (SLM) Buildings 5.00% 1.63% Furniture & fixtures 10.00% 6.33% Office equipments 10.00% 4.75% Office equipments 33.33% 4.75% (Mobile Instruments) Computers 33.33% 16.21% Vehicles 33.33% 9.50% Leasehold Improvements are amortised over the lease term or useful life of the asset, whichever is less. Fixed assets having original cost of less than Rs. 5,000 individually, are depreciated fully in the year / period of purchase. 2.5 Impairment The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset s net selling price and value in use. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. 2.6 Operating leases Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. 2.7 Investments Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. 2.8 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Income from operations Income from operations comprises of income from initial rating fees and surveillance services, global research and analytical services, customised research, subscriptions to information products and services, revenue from initial public offering (IPO) grading services and independent equity research (IER) services. Initial rating fees are deemed to accrue at 96% on the date the rating is awarded and the balance 4% is recorded equally over 11 months subsequent to the month in which the rating was awarded. Revenue on service contracts are recognised on completion of related services. Surveillance fee,subscription to information products and services and revenue from IPO grading are accounted on a time proportion basis. Revenue from customised research and IER services are recognised in the period in which such assignments are carried out or milestones achieved or as per agreement with client. Fees with respect to certain categories of clients are recognised only when there is a reasonable certainty of collection. Interest income Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividend income Revenue is recognised when the shareholders right to receive payment is established by the balance sheet date. Profit /(loss) on sale of investment Profit /(loss) on sale of investment is accounted when the sale / transfer deed is executed. On disposal of such investments, the difference between the carrying amount and the disposal proceeds, net of expenses, is recongnised in the Statement of Profit and Loss statement. Notes to financial statements for the year ended 2.9 Retirement and other employee benefits Retirement benefits in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective authorities. Gratuity liability is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred Foreign currency transactions Initial recognition Foreign currency transactions are recorded in reporting currency (INR) by applying to the foreign currency amount to the monthly average exchange rates for the respective periods in which the transaction takes place. Conversion Foreign currency monetary items are reported using the closing rates. Non monetary items which are carried in terms of historical costs denominated in a foreign currency are reported using the exchange rate at the date of transaction. Exchange difference Exchange differences relating to long term monetary items, arising during the year, such differences are accumulated in the Foreign Currency Monetary Item Translation Account and amortised to the Statement of Profit and Loss over the balance life of the long term monetary item. All other exchange differences are recognised as income or expense in the Statement of Profit and Loss. Non-monetary items carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rate that existed, when the values were determined. Exchange differences arising as a result of the above are recognised as income or expense in the Statement of Profit and Loss. Forward contract Forward contracts are entered into, to hedge the foreign currency risk of the underlying outstanding at the balance sheet date and also to hedge the foreign currency risk of firm commitment or highly probable forecast transactions. The premium or discount on forward contracts that are entered into, to hedge the foreign currency risk of the underlying outstanding at the balance sheet date arising at the inception of each contract, is amortised as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognised as income or as expense for the year. In relation to the forward contracts entered into, to hedge the foreign currency risk of the underlying outstanding at the balance sheet date, the exchange difference is calculated as the difference between the foreign currency amount of the contract translated at the exchange rate at the reporting date or the settlement date where the transaction is settled during the reporting year, and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognised in the Statement of Profit and Loss in the reporting year in which the exchange rates change. The Company has adopted the principles of AS 30 Financial Instruments: Recognition and Measurement in respect of its derivative financial instruments that are not covered by AS 11 Accounting for the Effects of Changes in Foreign Exchange Rates and that relate to a firm commitment or a highly probable forecast transaction. In accordance with AS 30, such derivative financial instruments, which qualify for cash flow hedge accounting and Corporate Overview A Glance Statutory Reports Financial Statements Standalone Consolidated where the Company has met all the conditions of AS 30, are fair valued at the balance sheet date and the resultant gain / loss is credited / debited to the Hedging reserve account included in the Reserves and surplus. This gain / loss would be recorded in the Statement of Profit and Loss when the underlying transactions affect earnings. Other derivative instruments that relate to a firm commitment or a highly probable forecast transaction and that do not qualify for hedge accounting, have been recorded at fair value at the reporting date and the resultant gain / loss has been credited / debited to the Statement of Profit and Loss for the year. Foreign currency translation on long term monetary items In line with notification of the Companies (Accounting Standards) Amendment Rules, 2011 issued by Ministry of Corporate Affairs on 29, 2011 amending Accounting Standard - 11 (AS - 11) The Effects of Changes in Foreign Exchange Rates (revised 2003), the Company has chosen to exercise the option under para 46A inserted in the standard by the notification. Accordingly, exchange differences on all long term monetary items, with prospective effect from April 01, 2011, has been accumulated in the Foreign currency monetary translation account and amortised to the Statement of Profit and Loss over the balance life of the long term monetary item Taxes on income Tax expense comprises of current and deferred. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act of 1961 enacted in India. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. At each balance sheet date, the Company reassesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax assets are reviewed at each Balance Sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent it is no longer reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write down is reversed to the extent that it becomes reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available Segment reporting policies Segment policies: The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole. Identification of segments: The Company s operating businesses are organised and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the geographical locations of customers. Notes to financial statements for the year ended Inter segment transfers: The Company generally accounts for intersegment services and transfers as if the services or transfers were to third parties at current market prices. Allocation of common costs: Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items: unallocable income and expenses includes general corporate income and expense items which are not allocated to any business segment Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares Provisions A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates Cash and cash equivalents Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less Employee stock compensation cost Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortised over the vesting period of the option on a straight line basis wherever grant price is lower then the market price. 3. Share capital Authorised Capital: 100,000,000 Equity Shares of Re.1 each (P.Y. 100,000,000 of Re.1 each) Issued, Subscribed and Paid Up: 70,235,740 Equity Shares of Re. 1 each fully paid up (P.Y. 70,058,440 of Re. 1 each) [Of the above, 6,000,000 Equity Shares of Re.1 are held by Standard & Poor s International LLC, USA (P.Y. 6,000,000 of Re.1 each) and 31,209,480 Equity Shares of Re.1 are held by S&P India, LLC (P.Y. 31,209,480 of Re. 1 each) (wholly-owned subsidiaries of The McGraw-Hill Companies, Inc., The Ultimate Holding Company)] 31, ,000, ,000,000 70,235,740 70,058,440 Total 70,235,740 70,058,440 Corporate Overview A Glance Statutory Reports Financial Statements Standalone Consolidated (a) Reconciliation of the shares outstanding at the beginning and at the end of the year Nos. Equity shares At the beginning of the year (face value of Re. 1/- per share) 70,058,440 70,058,440 Add - Issued during the year Under employee stock option 177, ,300 scheme (ESOS) (Refer note 34) Outstanding at the end of the year 70,235,740 70,235,740 31, 2011 Nos. Equity shares At the beginning of the year (face value of Re. 1/- per share) 70,968,440 70,968,440 Less - Buy-back during the year (Refer note 33) (910,000) (910,000) Outstanding at the end of the year 70,058,440 70,058,440 (b) Terms/ rights attached to equity shares The company has only one class of equity shares having par value of Re.1 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. (c) Shares held by holding/ultimate holiding and/ or their subsidiaries Out of equity shares issued by the company, shares held by its holding company, ultimate holding company and their subsidiaries/ associates are as below: 31, ,000,000 Equity Shares of Re.1 are held by Standard &
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