IRFC COVER-final - Indian Railway Finance Corporation Ltd.

10) Employee BenefitsEmployee Benefits are valued and disclosed in the Annual Accounts in accordance with Accounting Standard -15 (Revised).a) Short-term employee benefits are recognised as an expense at the undiscounted amount in the Profit & Loss Account of the year inwhich the employees have rendered services entitling them to contributions.b) Long-term employee benefits are recognised as an expense in the Profit & Loss Account for the year in which the employee hasrendered services. The expense is recognised at the present value of the amount payable as per actuarial valuations. Actuarial gainand losses in respect of such benefits are recognised in 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 occurs when it becomes probable thatan outflow of resources embodying economic benefits might be required to settle the obligation and when a reliable estimate of the amountof the obligation can be made.Provisions are determined based on Management estimate required to settle the obligation at the balance sheet date. These are reviewedat each balance sheet date and adjusted to reflect the current management estimates. In cases, where the available information indicatesthat the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in thefinancial statements.Contingent Assets, if any, are not recognised in the financial statements since this may result in the recognition of income that may neverbe realised.Notes on Accounts1. (a) Lease rental is charged on the assets leased from the first day of the month in which the assets have been identified and placed online.(b)Ministry of Railways (MOR) charges interest on the value of the assets identified prior to the payments made by the company, from thefirst day of the month in which the assets have been identified and placed on line to the first day of the month in which the money ispaid to the MOR. However, no interest is charged from the MOR on the amount paid by the company prior to identification of Rollingstock by them.(c) (i) Interest rate variation on the floating rate linked rupee borrowings and interest rate and exchange rate variations on interestpayments in case of the foreign currency borrowings are adjusted against the Lease Income in terms of the variation clauses inthe lease agreements executed with the Ministry of Railways. During the year, such differential has resulted in an amount of R 405Lacs accruing to company (P.Y. R 8258 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 been incorporated in the leaseagreements specifying a notional swap cost adopted for working out the cost of funds on the leases executed with MOR. SwapCost in respect of these foreign currency borrowings is compared with the amount recovered by the company on such accountand accordingly, the same is adjusted against the lease income. During the year 2009 - 10, in respect of these foreign currencyborrowings, the company has recovered a sum of R 5200 Lacs (P.Y. R 3125 Lacs) on this account from MOR against the actualswap cost payments of R 4670 Lacs (P.Y. R 4737 Lacs). After adjusting swap cost, an amount of R 530 Lacs has been paid to MOR(P.Y. R 1612 Lacs recovered from MOR).(iii) Interest expense in respect of interest accrued but not due on foreign currency loans has been considered at base interest /exchange rate and the difference on account of variation between base rate and the rate prevailing on the reporting date hasbeen shown as recoverable / payable to MOR. During the current year, the amount payable to MOR on such account works outto R 683 Lacs (P.Y. recoverable R 61 lacs).2. (a) The Reserve Bank of India has issued Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms(Reserve Bank) Directions, 2007 vide notification no.DNBS.193 DG(VL)-2007 dated 22nd February 2007. The Company, being aGovernment Company and not accepting / holding public deposits, these Directions, except the provisions contained in Paragraph 19thereof, are not applicable to the Company.(b)In terms of Reserve Bank of India Notification No.DNBC.138/CGM (VSNM) - 2000 dated 13th January 2000, the provisions of Section45 IC of the Reserve Bank of India Act, 1934 (2 of 1934) regarding creation of Reserve Fund, do not apply to the Company.50