Cash and Cash Equivalents Accounting Policy disclosed by Bajaj Finance Limited

Ind AS 1 was amended with effect from 1 April 2023 to replace the requirement to disclose significant accounting policy with disclosure of material accounting policy information. The amendment also provided the principles for assessing whether an accounting policy is material accounting policy. This post compares the accounting policy on Cash and Cash Equivalents disclosed by Bajaj Finance Limited in the financial statements before and after the amendment.

Cash and cash equivalents Accounting Policy disclosed in the Financial Statements for the year ended 31 March 2023:
Cash and cash equivalents include cash on hand and other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Analysis for Material Accounting Policy Information:
Primary condition – Accounting policy relates to material transaction, other event or condition:
The company has reported cash and cash equivalents in a separate line item in Balance Sheet and therefore, the primary condition is met.

Secondary conditions – Any one of these need to be met:
1. The company changed its accounting policy during the reporting period and this change resulted in a material change to the information in the financial statements – No. The company cannot change its accounting policy on cash and cash equivalents as there has been no amendment to Ind AS 7 in this regard.
2. The company chose the accounting policy from one or more options permitted by Ind AS – No. Ind AS 7 does not permit any accounting policy choice for cash and cash equivalents. The policy choice given in Ind AS 7 is for presentation of cash flows from operating activities.
3. Accounting policy was developed in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors – No. Ind AS 7 specifically applies to Cash and Cash Equivalents. Therefore, in accordance with paragraph 7 of Ind AS 8, the company shall apply the requirements of Ind AS 7.
4. The accounting policy relates to an area for which an entity is required to make significant judgements or assumptions in applying an accounting policy, and the company discloses those judgements or assumptions in accordance with paragraph 122 and 125 of Ind AS 1. – No. The company has not disclosed cash and cash equivalents as an item in the note critical judgements, assumptions and key sources of estimation and uncertainty.
5. The accounting is complex such that the company applies more than one Ind AS to a class of material transactions – No. The accounting for cash and cash equivalents requires application of only Ind AS 7.
6. The disclosure of accounting policy is required by a standard. – No. Ind AS 7 requires disclosure of components of cash and cash equivalents but not accounting policy on the same.

Conclusion:
As only the primary condition is met, the company need not disclose the accounting policy on cash and cash equivalents in its material accounting policy information.

Comments on Accounting Policy disclosure in Financial Statements for the year ended 31 March 2025:
It may be noted that the financial statements of the company for the year ended 31 March 2025 do not include the policy on cash and cash equivalents which shows that the company has made changes in its accounting policies to disclose only material accounting policy information.