IRFC FINAL - Indian Railway Finance Corporation Ltd.

SCHEDULE-16SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTSA. Significant Accounting Policies1. Basis for preparation of Financial Statementsa) The financial statements are prepared under the historical cost convention, in accordance with theGenerally Accepted Accounting Principles, the Provisions of the Companies Act, 1956 and the applicableguidelines issued by the Reserve Bank of India as adopted consistently by the Company.b) Use of EstimatesThe preparation of financial statements in conformity with Generally Accepted Accounting Principlesrequires management to make estimates and assumptions that affect the reported amounts of asset andliabilities, disclosure of contingent assets and liabilities at the date of the financial statements and thereported amounts of revenue and expenses during the reporting period. Examples of such estimatesinclude estimated useful life of fixed assets and estimated useful life of leased assets. Managementbelieves that estimates used in the preparation of financial statements are prudent and reasonable. Actualresults could differ from these estimates. Adjustments as a result of differences between actual andestimates are made prospectively.2. Revenue Recognitiona) Lease Income in respect of assets given on lease (including assets given prior to 01-04-2001) is recognisedin accordance with the accounting treatment provided in Accounting Standard -19.b) Lease Rentals on assets taken on lease and sub-leased to Ministry of Railways (MOR) prior to 01.04.2001,are accounted for at the rates of lease rentals provided in the agreements with the respective lessors andthe sub-lessee (MOR), on accrual basis, as per the Revised Guidance Note on accounting for Leasesissued by the Institute of Chartered Accountants of India (ICAI).c) Interest Income is recognised on time proportion basis. Dividend Income is recognised when the right toreceive payment is established.d) Income relating to non performing assets is recognised on receipt basis in accordance with the guidelinesissued by the Reserve Bank of India.3. Foreign Currency Transactionsa) Initial RecognitionAt the rates prevailing on the date of transactioni) for acquisition of assets, andii) for interest payment on Loans, Commitment Charges and expenses.b) Recognition at the end of Accounting PeriodForeign Currency monetary assets and liabilities, other than the foreign currency liabilities swapped intoIndian Rupees, are reported using the closing exchange rate in terms of the provisions of AS 11 issuedby the Institute of Chartered Accountants of India.Foreign Currency Liabilities swapped into Indian Rupees are stated at the reference rates fixed in theswap transactions, and not translated at the year end rate.c) Exchange Differencesi) Exchange differences arising on the actual settlement of monetary assets and liabilities at rates differentfrom those at which they were initially recorded during the year, or reported in previous financialstatements, other than the exchange differences on settlement of foreign currency loans and interestthereon recoverable separately from the lessee under the lease agreements, are recognised as incomeor expenses in the year in which they arise.ii) Notional Exchange Differences arising on reporting of outstanding long term foreign currency46