SCHEDULE - 22 - SIGNIFICANT ACCOUNTING POLICIES (Illustrative) - Insolvency and Bankruptcy Board of India (Form of Annual Statement of Accounts) Rules, 2018

1 [SCHEDULE XXII [See sub-rule (1) of rule 4] SIGNIFICANT ACCOUNTING POLICIES (Illustrative) 1. ACCOUNTING CONVENTION The financial statements are prepared on the basis of historical cost convention, unless otherwise stated and on the accrual method of accounting. 2. INVESTMENTS 2.1 Investments classified as long term investments are carried at cost. Provision for decline, other than temporary, is made in carrying cost of such investments. 2.2 Investments classified as Current are carried at lower of cost and fair value. Provision for shortfall on the value of such investments is made for each investment considered individually and not on a global basis. 2.3 Cost includes acquisition expenses like brokerage, transfer stamps. 3. FIXED ASSETS 3.1 Fixed Assets are stated at cost of acquisition inclusive of inward freight, duties and taxes and incidental and direct expenses related to acquisition. In respect of projects involving construction, related pre-operational expenses (including interest on loans for specific project prior to its completion), form part of the value of the assets capitalized. 3.2 Fixed Assets received by way of non-monetary grants, (other than towards the Corpus Fund), are capitalized at values stated, by corresponding credit to Capital Reserve. 4. DEPRECIATION 4.1 Depreciation is provided on straight-line method as per rates specified in the Income-tax Act, 1961 except depreciation on cost adjustments arising on account of conversion of foreign currency liabilities for acquisition of fixed assets, which is amortized over the residual life of the respective assets. 4.2 In respect of additions to/deductions from fixed assets during the year, depreciation is considered on prorata basis. 4.3 Assets consisting ₹ 5,000 or less each are fully provided. 5. MISCELLANEOUS EXPENDITURE Deferred revenue expenditure is written off over a period of 5 years from the year it is incurred. 6. ACCOUNTING FOR SALES Sales include excise duty and are net of sales returns, rebate and trade discount. 7. GOVERNMENT GRANTS/SUBSIDIES 7.1 Government grants of the nature of contribution towards capital cost of setting up projects are treated as Capital Reserve. 7.2 Grants in respect of specific fixed assets acquired are shown as a deduction from the cost of the related assets. 7.3 Government grants/subsidy are accounted on realization basis. 8. FOREIGN CURRENCY TRANSACTIONS 8.1 Transactions denominated in foreign currency are accounted at the exchange rate prevailing at the date of the transaction. 8.2 Current assets, foreign currency loans and current liabilities are converted at the exchange rate prevailing as at the year end and the resultant gain/loss is adjusted to cost of fixed assets, if the foreign currency liability related to fixed assets, and in other cases is considered to revenue. 9. LEASE Lease rentals are expensed with reference to lease terms. 10. RETIREMENT BENEFITS 10.1 Liability towards gratuity payable on death/retirement of employees is accrued based on actuarial valuation. 10.2 Provision for accumulated leave encashment benefit to the employees is accrued and computed on the assumption that employees are entitled to receive the benefit as at each year end. ] ********** Notes 1. Inserted vide NOTIFICATION [F. No. 30/13/2018-Insolvency] dated 01-05-2018