Arohan Financial Services Limited | Annual Report 2022-23

125 | Annual Report | 2022-2023 Arohan Financial Services Limited Summary of significant accounting policies and other explanatory information for the year ended 31 March 2023 (Contd.) cash flows when determining an impairment allowance for loans and advances. In estimating these cash flows, the Company makes judgments about the borrower’s financial situation. These estimates are based on assumptions about a number of factors such as credit quality, level of arrears etc. and actual results may differ, resulting in future changes to the impairment allowance. Provisions Provisions created in respect of a range of future obligations such as litigation. Some of the provisions involve significant judgment about the likely outcome of various events and estimated future cash flows. The measurement of these provisions involves the exercise of management judgments about the ultimate outcomes of the transactions. Payments that are expected to be incurred after more than one year are discounted at a rate, which reflects both current interest rates and the risks specific to that provision. Useful lives of depreciable/ amortisable assets Management reviews its estimate of the useful lives of depreciable/ amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of assets. c) Property, plant and equipment Recognition and initial measurement Property, plant and equipment are stated at their cost of acquisition. The cost comprises purchase price, borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in the statement of profit and loss. Subsequent measurement (depreciation method, useful lives and residual value) Property, plant and equipment are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation on property, plant and equipment is provided on the straight line method over the useful life of the assets as prescribed under Part ‘C’ of Schedule II, which is also the management’s estimates of useful lives of such assets. Asset class Useful life Office equipment 5 years Computer equipment 3 years Computer servers 6 Years Motor vehicle 8 years Furniture and fixtures 10 years Depreciation is calculated on pro rata basis from the date on which the asset is ready for use till useful life or the date the asset is sold/ disposed, whichever is earlier. The residual values, useful lives and method of depreciation are reviewed at the end of each financial year. De-recognition An item of property, plant and equipment and any significant part initially recognised is de- recognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the statement of profit and loss, when the asset is de-recognised.