Suryoday Small Finance Bank Limited
Annexure to the Financial Statements for the period ended December 31, 2020

Significant accounting policies (Contd.)

K. Taxation

Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities
in accordance with the Income Tax Act, 1961 enacted in India. Deferred taxes reflect the impact of current year timing differences
between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax
assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against
which such deferred tax assets can be realised. In situations where the Bank has unabsorbed depreciation or carry forward tax losses, all
deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against
future taxable profits.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Bank writes-down the carrying amount of a
deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be realised.

L. Earnings Per Share

Basic and diluted earnings per share are computed in accordance with Accounting Standard 20 — Earnings per share.

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.

Diluted earnings per equity share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were
exercised or converted to equity during the year. Diluted earnings per equity share are computed using the weighted average number of
equity shares and potential dilutive equity shares outstanding during the period except where the results are anti-dilutive.

 

M. Provisions, contingent liabilities and contingent assets
In accordance with AS 29, Provision, Contingent liabilities and Contingent Assets, the provision is recognised when the Bank has a
present obligation as a result of past event, where it is probable that an outflow of resources will be required to settle the obligation, in
respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best
estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect
the current best estimates.

A disclosure of contingent liability is made when there is:

+ a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non-occurrence of one or
more uncertain future events not within the control of the Bank; or

* a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no
provision or disclosure is made.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually
certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change
occurs.

N. Cash and cash equivalents

Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice.

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