IRFC FINAL - Indian Railway Finance Corporation Ltd.

Provision for current income tax and fringe benefit tax is made in accordance with the provisions of theIncome Tax Act, 1961.Deferred tax expense or benefit is recognised on timing differences, being the difference between taxableincomes and accounting income, that originate in one period and are capable of reversal in one or moresubsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws thathave been enacted or substantively enacted by balance sheet date.10. Employee BenefitsEmployee Benefits are valued and disclosed in the Annual Accounts in accordance with AccountingStandard-15 (Revised).a) Short-term employee benefits are recognised as an expense at the undiscounted amount in the Profit &Loss Account of the year in which the related service is rendered.b) Long-term employee benefits are recognised as an expense in the Profit & Loss Account for the year inwhich the employee has rendered services. The expense is recognised at the present value of the amountpayable as per actuarial valuations. Actuarial gain and losses in respect of such benefits are recognisedin the Profit and Loss Account.11. Provisions, Contingent Liabilities and Contingent AssetsThe Company recognises provisions when it has a present obligation as a result of a past event. This occurswhen it becomes probable that an outflow of resources embodying economic benefits might be required tosettle the obligation and when a reliable estimate of the amount of the obligation can be made.Provisions are determined based on management estimate required to settle the obligation at the balancesheet date. These are reviewed at each balance sheet date and adjusted to reflect the current managementestimates. In cases where the available information indicates that the loss on the contingency is reasonablypossible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financialstatements.Contingent Assets, if any, are not recognised in the financial statements since this may result in therecognition of income that may never be realised.Notes on Accounts1. (a) Lease rental has been charged on the assets leased from the first day of the month in which the assets havebeen identified and placed on line.(b) Ministry of Railways (MOR) has charged interest on the value of the assets identified prior to the paymentsmade by the company, from the first day of the month in which the assets have been identified and placedon line to the first day of the month in which the money is paid to the MOR. However, no interest ischarged from the MOR on the amount paid by the company prior to the identification of Rolling stock bythem.(c) (i) Interest rate variation on the floating rate linked rupee borrowings and interest rate and exchange ratevariations on interest payments in case of the foreign currency borrowings are adjusted against theLease Income in terms of the variation clauses in the lease agreements executed with the Ministry ofRailways. During the year, such differential has resulted in an amount of Rs.8258 Lacs accruing toCompany (P.Y. Rs.7773 Lacs), which has been accounted for in the Lease Income.(ii) In respect of foreign currency borrowings, which have not been hedged, a variation clause has beenincorporated in the lease agreements specifying the notional swap cost adopted for working outthe cost of funds on the leases executed with MOR. Swap Cost in respect of these foreign currencyborrowings is compared with the amount recovered by the company on such account and accordingly,the same is adjusted against the lease income. During the year 2008 - 09, in respect of these foreigncurrency borrowings, the company has recovered a sum of Rs.3125 Lacs (P.Y. Rs.2980 Lacs) on thisaccount from MOR against the actual swap cost payments of Rs.4737 Lacs (P.Y. Rs.3788 Lacs). Afteradjusting swap cost, an amount of Rs.1612 Lacs has been recovered from MOR (P.Y. Rs.808 Lacs).48