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Accounting Policies of E2E Networks Ltd. Company
Mar 31, 2025
1. CORPORATE INFORMATION
E2E Networks Limited (âthe Companyâ) was incorporated on August 20, 2009. The Company is in the business of providing
Cloud computing services. The Company is listed on the Capital Market Segment (âMain Boardâ) of National Stock Exchange.
The financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated April 17,
2025.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND MATERIAL ACCOUNTING POLICIES
2.1 Basis of preparation
These Standalone financial statements are prepared in accordance with Indian Accounting Standard (Ind AS), under
the historical cost convention on accrual basis except for certain financial instruments which are measured at fair
values, the provisions of the Companies Act, 2013 (âthe Actâ) (to the extent notified) and guidelines issued by the
Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule
3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.
The financial statements are presented in Indian Rupees âINRâ or âRs.â and all amounts disclosed in the financial
statements have been rounded off to the nearest lakhs (as per requirement of Schedule III), unless otherwise stated.
2.2 Summary of material accounting policies
i. Material accounting judgements, estimates and assumptions.
The preparation of financial statements in conformity with principles of Ind AS requires the management to make
judgements, estimates and assumptions that effect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are
based on the managementâs best knowledge of current events and actions, uncertainty about these assumptions
and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at
the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year:
a. Useful lives of property, plant and equipment and Intangible assets: As described in the significant
accounting policies, the Company reviews the estimated useful lives of property, plant and equipment and
intangible assets at the end of each reporting period.
b. Provisions and contingencies: A provision is recognised when the Company has a present obligation as a
result of a past event and 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. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates. Contingent liabilities are disclosed when there is a possible
obligation arising from past events, the existence of which will be confirmed only by the occurrence or non¬
occurrence of one or more uncertain future events not wholly within the control of the Company or a present
obligation that arises from past events where it is either not probable that an outflow of resources will be
required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent assets are
neither recognized nor disclosed in the financial statements.
c. Defined benefit plans (gratuity benefits): The cost of the defined benefit gratuity plan and the present
value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves
making various assumptions that may differ from actual developments in the future. These include the
determination of the discount rate, future salary increases and mortality rates. Due to the complexities
involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes
in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to
change is the discount rate. In determining the appropriate discount rate for plans operated, the management
considers the interest rates of government bonds in currencies consistent with the currencies of the post¬
employment benefit obligation. The mortality rate is based on publicly available mortality table. The mortality
table tend to change only at interval in response to demographic changes. Future salary increases and
gratuity increases are based on expected future inflation rates. Further details about gratuity obligations are
given in note 28.
d. Revenue recognition - refer accounting policy in note vii.
ii. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non current classification. An
asset is treated as current when it is:
a. Expected to be realised or intended to be sold or consumed in normal operating cycle
b. Held primarily for the purpose of trading
c. Expected to be realised within twelve months after the reporting period, or
d. Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
a. It is expected to be settled in normal operating cycle
b. It is held primarily for the purpose of trading
c. It is due to be settled within twelve months after the reporting period, or
d. There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period.
The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and
cash equivalents. The Company has identified twelve months as its operating cycle.
iii. Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either:
a. In the principal market for the asset or liability, or
b. In the absence of a principal market, in the most advantageous market for the asset or liability.
c. The principal or the most advantageous market must be accessible by the Company.
d. The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
e. A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
f. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the
use of unobservable inputs.
g. All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the Balance Sheet on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re assessing
categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy as explained above.
iv. Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any.
Cost includes expenditures directly attributable to the acquisition of the asset. General and specific borrowing
costs directly attributable to the construction of a qualifying asset are capitalised as part of the cost.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Considering the application of Schedule II, the management believes that useful life currently used, fairly reflect
its estimate of the useful lives and residual value of property plant and equipment,
The management estimate of the useful lives of the property plant and equipment and intangibles assets based
on the technical evaluation is as follows:
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at
each financial year end and adjusted prospectively, if appropriate.
Depreciation on property plant and equipment is provided on the straight line method based on estimated useful
lives, as estimated by the management. Depreciation is charged on a pro-rata basis for assets purchased/sold
during the year.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the income statement when the asset is derecognised.
v. Intangible assets
Intangible assets with definite life
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are
not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is
incurred.
Intangible assets (other than those acquired in business combination) with finite lives are amortised on a straight¬
line basis over the estimated useful economic life being 3-10 years. All Intangible assets are assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life of
amortizable intangibles is reviewed and where appropriate is adjusted, annually. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to
modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss
unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future
economic benefits are expected from its use or disposal. Any gains or losses arising from derecognition of an
intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of
the asset and are recognised in the statement of profit or loss when the asset is derecognised.
The amortisation period and method are reviewed at least annually. If the expected useful life of the asset is
significantly different from previous estimates, the amortisation period is changed accordingly.
Intangible assets with indefinite life
Indefinite-lived intangible assets consist of Internet Protocol (âIPâ) addresses. IP are the numerical addresses
used to identify a particular piece of hardware connected to the Internet. Since the IP Addressâs usefulness to the
business is not limited by time, or any other factors, the life of these assets have been taken as indefinite, hence
not amortised. The useful life of Indefinite-lived intangible assets are reviewed annually to determine whether
events and circumstances continue to support an indefinite useful life assessment for that asset.
After initial recognition, an Indefinite-lived intangible assets is carried at revalued amount, being its fair value at
the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated
impairment losses. For the purpose of revaluations, fair value is measured by reference to an active market.
Revaluations shall be made with such regularity that at the end of the financial year the carrying amount of the
asset does not differ materially from its fair value.
The increase in Indefinite-lived intangible assets carrying amount as a result of a revaluation is recognised in
other comprehensive income and accumulated in equity under the heading of revaluation surplus. Any increase
is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously
recognised in profit or loss. If an Indefinite-lived intangible assets carrying amount is decreased as a result of
a revaluation, the decrease is recognised in profit or loss. The decrease is recognised in other comprehensive
income to the extent of any credit balance in the revaluation surplus in respect of that asset. The decrease
recognised in other comprehensive income reduces the amount accumulated in equity under the heading of
revaluation surplus.
vi. Leases
The Company assesses at contract inception whether a contract is, or contains, a lease.
That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term
leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and
right-of-use assets representing the right to use the underlying assets.
a. Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
depreciation and accumulated impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of right-of use assets includes the amount of lease liabilities recognised, initial direct costs incurred,
and lease payments made at or before the commencement date less any lease incentives received. Right-
of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated
useful lives of the assets The Company has lease contracts for leased equipmentâs having a lease term
ranging up to 5 years.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the note xiv Impairment of non-financial
assets.
b. Lease Liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present
value of lease payments to be made over the lease term. The lease payments include fixed payments
(including in-substance fixed payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The
lease payments also include the exercise price of a purchase option reasonably certain to be exercised by
the Company and payments of penalties for terminating the lease, if the lease term reflects the Company
exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are
recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the lease is not readily determinable. After
the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if
there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future
payments resulting from a change in an index or rate used to determine such lease payments) or a change
in the assessment of an option to purchase the underlying asset.
c. Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of office premises
and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption
to leases of office equipment that are considered to be low value. Lease payments on short term leases and
leases of low-value assets are recognised as expense on a straight line basis over the lease term.
vii. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured. The Companyâs revenue from cloud computing services and managed hosting
services are recognized when the said services are rendered to the customers over the period of the contracts
or based on actual utilization of such services and when no significant uncertainty exists regarding the amount of
the consideration that will be derived from the sale / rendering of services and regarding its collection.
a. Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the
applicable interest rate. Interest income is included under the head âother incomeâ in the statement of profit
and loss.
b. Contract balances
The policies for contract balances, i.e. contract assets, trade receivables and contract liabilities, are as
follows:
Contract assets
A contract asset is the right to consideration in exchange for services transferred to the customer (which consist
of unbilled revenue). If the Company performs by transferring services to a customer before the customer pays
consideration or before payment is due, a contract asset is recognised for the earned consideration that is
unconditional.
Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the
passage of time is required before payment of the consideration is due). Refer to accounting policies of financial
assets in financial instruments-initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before
the Company transfers services to the customer, a contract liability is recognised when the payment is made
or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company
performs under the contract.
viii. Taxes
Tax expense comprises current and deferred tax.
a. Current 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 and tax laws prevailing in the respective tax jurisdictions where
the company operates. The tax rates and tax laws used to compute the amount are those that are enacted
or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in
equity is recognized in equity and not in the statement of profit and loss.
b. Deferred Tax
Deferred income taxes reflect the impact of temporary differences between taxable income and accounting
income originating during the current year and reversal of temporary differences for the earlier years.
Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the
reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and
not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are
recognized for deductible temporary differences 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 realized.
In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax
assets are recognized only if there is virtual certainty supported by convincing evidence that they can be
realized against future taxable profits.
At each reporting date, the company re-assesses unrecognized deferred tax assets. It recognizes
unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be available against which such deferred tax
assets can be realized.
ix. Employee benefits
a. Short term employee benefits
Short term employee benefits are expensed as the related service is provided. A liability is recognized for the
amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and the obligation can be estimated reliably.
Benefits such as salaries, wages and bonus etc., are recognized in the statement of profit and loss in the
period in which the employee provides the related service.
b. Post-employment benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions
into a separate entity and will have no legal or constructive obligation to pay further amounts.
Provident Fund: Provident fund is a defined contribution plan. The Company expenses its contributions
towards provident fund which are being deposited with the Regional Provident Fund Commissioner.
Defined benefit plans: Gratuity is a post-employment defined benefit plan covering eligible employees.
The Gratuity Plan provides a lump sum payment to eligible employees at retirement, death, incapacitation or
termination of employment, of an amount based on the respective employeeâs base salary and the tenure of
employment. The liability is actuarially determined (using the projected unit credit method) at the end of each
year. Changes due to service cost and net interest cost /income is recognized in the statement of profit and
loss. Re-measurements of net defined benefit liability/(asset) which comprise of actuarial gains and losses
are recognized in other comprehensive income.
c. Other long term employee benefits: Benefits under compensated absences constitute other employee
benefits. Employee entitlements to annual leave are recognized when they accrue to the eligible employees.
An accrual is made for the estimated liability for annual leave as a result of services provided by the
eligible employees up to the Balance Sheet date. The obligation is measured on the basis of independent
actuarial valuation at the end of each year using the projected unit credit method. Expenses are recognized
immediately in the statement of profit and loss.
d. Share based payment
Equity-settled share-based payments to employees and others providing similar services are measured at
the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value
of equity-settled share-based transactions are set out in note 35.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will
eventually vest, with a corresponding increase in equity. At the end of each reporting year, the Company
revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the
original estimates, if any, is recognised in Statement of profit and loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to the share based payment reserve.
The Company has created an Employee Benefit Trust for providing share-based payment to its employees.
The Company uses the Trust as a vehicle for distributing shares to employees under the employee
remuneration schemes. The Trust buys shares of the Company from the market, for giving shares to
employees. The Company treats Trust as its extension and shared held by the Trust are treated as treasury
shares.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from
Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the
Companyâs own equity instruments. Any difference between the carrying amount and the consideration, if
reissued, is recognised in capital reserve. Share options exercised during the reporting year are satisfied
with treasury shares reserve.
x. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The Board of directors of the Company has been identified as the Chief Operating Decision
Maker which reviews and assesses the financial performance and makes the strategic decisions.
xi. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity
shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of
equity shares, compulsorily convertible cumulative preference shares and compulsorily convertible preference
share outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity
shareholders of the Company and the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2024
1. CORPORATE INFORMATION
E2E Networks Limited (âthe Companyâ) was incorporated on August 20, 2009. The Company is in the business of providing
Cloud computing services. The Company is listed on the Capital Market Segment (âMain Boardâ) of National Stock Exchange.
The financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated May 24,
2024.
2. Basis of preparation of financial statements and material accounting policies
2.1 Basis of preparation
These Standalone financial statements are prepared in accordance with Indian Accounting Standard (Ind AS), under the historical cost convention on accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (âthe Actâ) (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.
The financial statements are presented in Indian Rupees âINRâ or âRs.â and all amounts disclosed in the financial statements have been rounded off to the nearest lakhs (as per requirement of Schedule III), unless otherwise stated.
2.2 Summary of material accounting policies
i. Material accounting judgements, estimates and assumptions.
The preparation of financial statements in conformity with principles of Ind AS requires the management to make judgements, estimates and assumptions that effect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
a. Useful lives of property, plant and equipment and Intangible assets: As described in the material accounting policies, the Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period.
b. Provisions and contingencies: A provision is recognised when the Company has a present obligation as a result of a past event and 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. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent assets are neither recognized nor disclosed in the financial statements.
c. Defined benefit plans (gratuity benefits): The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated, the management considers the interest rates of government bonds in currencies consistent with the currencies of the postemployment benefit obligation. The mortality rate is based on publicly available mortality table. The mortality table tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates. Further details about gratuity obligations are given in note 29.
d. Revenue recognition - refer accounting policy in note vii.
ii. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non current classification. An asset is treated as current when it is:
a. Expected to be realised or intended to be sold or consumed in normal operating cycle
b. Held primarily for the purpose of trading
c. Expected to be realised within twelve months after the reporting period, or
d. Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
a. It is expected to be settled in normal operating cycle
b. It is held primarily for the purpose of trading
c. It is due to be settled within twelve months after the reporting period, or
d. There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
iii. Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
a. In the principal market for the asset or liability, or
b. In the absence of a principal market, in the most advantageous market for the asset or liability.
c. The principal or the most advantageous market must be accessible by the Company.
d. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
e. A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
f. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
g. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the Balance Sheet on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
iv. Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditures directly attributable to the acquisition of the asset. General and specific borrowing costs directly attributable to the construction of a qualifying asset are capitalised as part of the cost.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Considering the application of Schedule II, the management believes that useful life currently used, fairly reflect its estimate of the useful lives and residual value of property plant and equipment.
The management estimate of the useful lives of the property plant and equipment and intangibles assets based on the technical evaluation is as follows:
|
Property, Plant and Equipment |
Useful life |
|
Computers |
3 Years |
|
Computers Equipment |
6 Years |
|
Office Equipment |
5 Years |
|
Furniture and Fixtures |
10 Years |
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Depreciation on property plant and equipment is provided on the straight line method based on estimated useful lives, as estimated by the management. Depreciation is charged on a pro-rata basis for assets purchased/sold during the year.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
v. Intangible assets
Intangible assets with definite life
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets (other than those acquired in business combination) with finite lives are amortised on a straightline basis over the estimated useful economic life being 3-10 years. All Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life of amortizable intangibles is reviewed and where appropriate is adjusted, annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
The amortisation period and method are reviewed at least annually. If the expected useful life of the asset is significantly different from previous estimates, the amortisation period is changed accordingly.
Intangible assets with indefinite life
Indefinite-lived intangible assets consist of Internet Protocol (âIPâ) addresses. IP are the numerical addresses used to identify a particular piece of hardware connected to the Internet. Since the IP Addressâs usefulness to the business is not limited by time, or any other factors, the life of these assets have been taken as indefinite, hence not amortised. The useful life of Indefinite-lived intangible assets are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset.
After initial recognition, an Indefinite-lived intangible assets is carried at revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. For the purpose of revaluations, fair value is measured by reference to an active market. Revaluations shall be made with such regularity that at the end of the financial year the carrying amount of the asset does not differ materially from its fair value.
The increase in Indefinite-lived intangible assets carrying amount as a result of a revaluation is recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. Any increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. If an Indefinite-lived intangible assets carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. The decrease is recognised in other comprehensive income to the extent of any credit balance in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus.
vi. Leases
The Company assesses at contract inception whether a contract is, or contains, a lease.
That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
a. Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and accumulated impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets The Company has lease contracts for leased equipmentâs having a lease term ranging up to 5 years.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the note xiv Impairment of non-financial assets.
b. Lease Liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
c. Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of office premises and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short term leases and leases of low-value assets are recognised as expense on a straight line basis over the lease term.
vii. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The Companyâs revenue from cloud computing services and managed hosting services are recognized when the said services are rendered to the customers over the period of the contracts or based on actual utilization of such services and when no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale / rendering of services and regarding its collection.
a. Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head âother incomeâ in the statement of profit and loss.
b. Contract balances
The policies for contract balances, i.e. contract assets, trade receivables and contract liabilities, are as follows: Contract assets
A contract asset is the right to consideration in exchange for services transferred to the customer (which consist of unbilled revenue). If the Company performs by transferring services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is unconditional.
Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in financial instruments-initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
viii. Taxes
Tax expense comprises current and deferred tax.
a. Current 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 and tax laws prevailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
b. Deferred Tax
Deferred income taxes reflect the impact of temporary differences between taxable income and accounting income originating during the current year and reversal of temporary differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for deductible temporary differences 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 realized. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
At each reporting date, the company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
ix. Employee benefits
a. Short term employee benefits
Short term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Benefits such as salaries, wages and bonus etc., are recognized in the statement of profit and loss in the period in which the employee provides the related service.
b. Post-employment benefits Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Provident Fund: Provident fund is a defined contribution plan. The Company expenses its contributions towards provident fund which are being deposited with the Regional Provident Fund Commissioner.
Defined benefit plans: Gratuity is a post-employment defined benefit plan covering eligible employees. The Gratuity Plan provides a lump sum payment to eligible employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs base salary and the tenure of employment. The liability is actuarially determined (using the projected unit credit method) at the end of each year. Changes due to service cost and net interest cost /income is recognized in the statement of profit and loss. Re-measurements of net defined benefit liability/(asset) which comprise of actuarial gains and losses are recognized in other comprehensive income.
c. Other long term employee benefits: Benefits under compensated absences constitute other employee benefits. Employee entitlements to annual leave are recognized when they accrue to the eligible employees. An accrual is made for the estimated liability for annual leave as a result of services provided by the
eligible employees up to the Balance Sheet date. The obligation is measured on the basis of independent actuarial valuation at the end of each year using the projected unit credit method. Expenses are recognized immediately in the statement of profit and loss.
d. Share based payment
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 35.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting year, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share based payment reserve.
The Company has created an Employee Benefit Trust for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Company from the market, for giving shares to employees. The Company treats Trust as its extension and shared held by the Trust are treated as treasury shares.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in capital reserve. Share options exercised during the reporting year are satisfied with treasury shares reserve.
x. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Board of directors of the Company has been identified as the Chief Operating Decision Maker which reviews and assesses the financial performance and makes the strategic decisions.
xi. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares, compulsorily convertible cumulative preference shares and compulsorily convertible preference share outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders of the Company and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
xii. Provisions and contingencies
A provision is recognised when the Company has a present obligation as a result of a past event and 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. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent assets are neither recognized nor disclosed in the financial statements.
xiii. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
Financial assets
All recognised financial assets are subsequently measured in their entirety at either amortised cost using the effective interest method or fair value, depending on the classification of the financial assets.
a. Classification of financial assets
Classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value through profit or loss, and
⢠those measured at amortised cost
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cashflows.
A financial asset that meets the following two conditions is measured at amortised cost unless the asset is designated at fair value through profit or loss under the fair value option:
⢠Business model test: The objective of the Companyâs business model is to hold the financial asset to collect the contractual cash flows.
⢠Cash flow characteristic test: The contractual term of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option.
⢠Business model test: The financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets.
⢠Cash flow characteristic test: The contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are measured at fair value through profit or loss.
b. Financial assets at fair value through profit or loss (FVTPL)
Investment in equity instruments is classified at fair value through profit or loss, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Financial assets that do not meet the amortised cost criteria or fair value through other comprehensive income criteria are measured at fair value through profit or loss. A financial asset that meets the amortised cost criteria or fair value through other comprehensive income criteria may be designated as at fair value through profit or loss upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets and liabilities or recognizing the gains or losses on them on different bases.
Financial assets which are fair valued through profit or loss are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss.
c. Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortised cost less provision for impairment.
d. Cash and cash equivalents
In the Statement of Cash Flows, cash and cash equivalents includes cash in hand, cheques and balances with bank and short term highly liquid investments with original maturities of three months or less that are readily convertible to known amount of cash. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet and forms part of financing activities in the Statement of Cash Flows. Book overdraft is shown within other financial liabilities in the Balance Sheet and forms part of operating activities in the Statement of Cash Flows.
e. Impairment of financial assets:
The Company assesses impairment based on expected credit losses (ECL) model to the following:
⢠financial assets measured at amortised cost
⢠financial assets measured at fair value through other comprehensive income Expected credit loss are measured through a loss allowance at an amount equal to:
⢠the twelve month expected credit losses (expected credit losses that result from those default events on the financial instruments that are possible within twelve months after the reporting date); or
⢠full life time expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
f. Derecognition of financial assets
A financial asset is derecognised only when
⢠The Company has transferred the rights to receive cash flows from the financial asset or
⢠Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients
⢠The right to receive cash flows from the asset has expired.
g. Foreign Exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost or fair value through profit or loss the exchange differences are recognised in profit or loss except for those which are designated as hedge instrument in a hedging relationship. Further change in the carrying amount of investments in equity instruments at fair value through other comprehensive income relating to changes in foreign currency rates are recognised in other comprehensive income.
Financial liabilities and equity instruments
h. Classification of debt or equity
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
i. Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
j. Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at fair value through Statement of Profit and Loss.
k. Trade and other payables
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year which are unpaid.
l. Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of Profit and Loss over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired.
The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in Statement of Profit and Loss.
m. Foreign exchange gains or losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in profit or loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of the reporting period. For financial liabilities that are measured as at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognised in Statement of Profit and Loss.
n. Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired.
o. Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
xiv. Impairment of non-financial assets
Property, plant and equipment and other intangible assets represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation / amortisation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined at the time the asset is acquired and reviewed periodically. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. The estimated useful life is reviewed at least annually.
xv. Cash Flow Statement
Cash flows are reported using the indirect method, whereby loss for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
xvi. Events occurring after the balance sheet date
Based on the nature of the event, the company identifies the events occurring between the balance sheet date and the date on which the financial statements are approved as âAdjusting Eventâ and âNon-adjusting eventâ. Adjustments to assets and liabilities are made for events occurring after the balance sheet date that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance sheet date or because of statutory requirements or because of their special nature. For non-adjusting events, the company may provide a disclosure in the financial statements considering the nature of the transaction.
Mar 31, 2023
1. Corporate information
E2E Networks Limited (''the Company'') was incorporated on August 20,2009. The Company is in the business of providing Cloud computing services. The Company is listed on the Capital Market Segment (âMain Board1) of National Stock Exchange.
The financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated May 23, 2023.
2. Basis of preparation of financial statements and significant accounting policies2.1 Basis of preparation
These Standalone financial statements are prepared in accordance with Indian Accounting Standard (Ind AS), under the historical cost convention on accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 ("the Act") (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.
The financial statements are presented in Indian Rupees "INR" or "Rs." and all amounts disclosed in the financial statements have been rounded off to the nearest lakhs (as per requirement of Schedule III), unless otherwise stated.
2.2 Summary of significant accounting policiesi. Significant accounting judgements, estimates and assumptions.
The preparation of financial statements in conformity with principles of Ind AS requires the management to make judgements, estimates and assumptions that effect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
a) Useful lives of property, plant and equipment and Intangible assets: As described in the significant accounting policies, the Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period.
b) Provisions and contingencies: A provision is recognised when the Company has a present obligation as a result of a past event and 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. These
are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent assets are neither recognized nor disclosed in the financial statements.
c) Defined benefit plans (gratuity benefits): The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate; future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality table. The mortality table tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates. Further details about gratuity obligations are given in note 28.
d) Revenue recognition - refer accounting policy in note vii.
ii. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
a) Expected to be realised or intended to be sold or consumed in normal operating cycle
b) Held primarily for the purpose of trading
c) Expected to be realised within twelve months after the reporting period, or
d) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
a) It is expected to be settled in normal operating cycle
b) It is held primarily for the purpose of trading
c) It is due to be settled within twelve months after the reporting period, or
d) There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
⢠The principal or the most advantageous market must be accessible by the Company.
⢠The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest
⢠A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
⢠The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
⢠All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the Balance Sheet on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
iv. Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditures directly attributable to the acquisition of the asset. General and specific borrowing costs directly attributable to the construction of a qualifying asset are capitalised as part of the cost.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Considering the application of Schedule II, the management believes that useful life currently used, fairly reflect its estimate of the useful lives and residual value of property plant and equipment, though these lives in certain cases are different from the lives prescribed under Schedule II.
The management estimate of the useful lives of the property plant and equipment and intangibles assets based on the technical evaluation is as follows:
|
Property, plant and equipment |
Useful lives |
|
Computer and Computer Equipment |
3 years |
|
Office Equipment |
5 years |
|
Furniture and Fixtures |
10 years |
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Depreciation on property plant and equipment is provided on the written down value method based on estimated useful lives, as estimated by the management Depreciation is charged on a pro-rata basis for assets purchased/sold during the year. Individual assets costing less than INR 5,000 are fully depreciated in the year of purchase.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
v. Intangible assetsIntangible assets with definite life
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets (other than those acquired in business combination) with finite lives are amortised on a straight-line basis over the estimated useful economic life being 3-10 years. All Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life of amortizable intangibles is reviewed and where appropriate is adjusted, annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
The amortisation period and method are reviewed at least annually. If the expected useful life of the asset is significantly different from previous estimates, the amortisation period is changed accordingly.
Intangible assets with indefinite life
Indefinite-lived intangible assets consist of Internet Protocol ("IPâ) addresses. IP are the numerical addresses used to identify a particular piece of hardware connected to the Internet Since the IP Address''s usefulness to the business is not limited by time, or any other factors, the life of these assets have been taken as indefinite, hence not amortised. The useful life of Indefinite-lived intangible assets are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset.
After initial recognition, an Indefinite-lived intangible assets is carried at revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. For the purpose of revaluations, fair value is measured by reference to an active market. Revaluations shall be made with such regularity that at the end of the financial year the carrying amount of the asset does not differ materially from its fair value.
The increase in Indefinite-lived intangible assets carrying amount as a result of a revaluation is recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. Any increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. If an Indefinite-lived intangible assets carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. The decrease is recognised in other comprehensive income to the extent of any credit balance in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and accumulated impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the note xiv Impairment of non-financial assets.
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments [including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
c) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of office premises and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The Company''s revenue from cloud computing services and managed hosting services are recognized when the said services are rendered to the customers over the period of the contracts or based on actual utilization of such services and when no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale / rendering of services and regarding its collection.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss.
The policies for contract balances, i.e. contract assets, trade receivables and contract liabilities, are as follows:
A contract asset is the right to consideration in exchange for services transferred to the customer (which consist of unbilled revenue). If the Company performs by transferring services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is unconditional.
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in financial instruments - initial recognition and subsequent measurement
A contract liability is the obligation to transfer services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
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 and tax laws prevailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of temporary differences between taxable income and accounting income originating during the current year and reversal of temporary differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for deductible temporary differences 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 realized. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
At each reporting date, the company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
ix. Employee benefitsa) Short term employee benefits
Short term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Benefits such as salaries, wages and bonus etc., are recognized in the statement of profit and loss in the period in which the employee provides the related service.
b) Post-employment benefitsi) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Provident Fund: Provident fund is a defined contribution plan. The Company expenses its contributions towards provident fund which are being deposited with the Regional Provident Fund Commissioner.
Gratuity is a post-employment defined benefit plan covering eligible employees. The Gratuity Plan provides a lump sum payment to eligible employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs base salary and the tenure of employment. The liability is actuarially determined (using the projected unit credit method) at the end of each year. Changes due to service cost and net interest cost /income is recognized in the statement of profit and loss. Re-measurements of net defined benefit liability / (asset) which comprise of actuarial gains and losses are recognized in other comprehensive income.
c) Other long term employee benefits: Benefits under compensated absences constitute other employee benefits. Employee entitlements to annual leave are recognized when they accrue to the eligible employees. An accrual is made for the estimated liability for annual leave as a result of services provided by the eligible employees up to the Balance Sheet date. The obligation is measured on the basis of independent actuarial valuation at the end of each year using the projected unit credit method. Expenses are recognized immediately in the statement of profit and loss.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 36.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting year, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share based payment reserve.
The Company has created an Employee Benefit Trust for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Company from the market, for giving shares to employees. The Company treats Trust as its extension and shared held by the Trust are treated as treasury shares.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in capital reserve. Share options exercised during the reporting year are satisfied with treasury shares reserve.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Board of directors of the Company has been identified as the Chief Operating Decision Maker which reviews and assesses the financial performance and makes the strategic decisions.
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares, compulsorily convertible cumulative preference shares and compulsorily convertible preference share outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders of the Company and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
xii. Provisions and contingencies
A provision is recognised when the Company has a present obligation as a result of a past event and 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. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount
cannot be made. Contingent assets are neither recognized nor disclosed in the financial statements.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
All recognised financial assets are subsequently measured in their entirety at either amortised cost using the effective interest method or fair value, depending on the classification of the financial assets.
a) Classification of financial assets
Classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cashflows.
A financial asset that meets the following two conditions is measured at amortised cost unless the asset is designated at fair value through profit or loss under the fair value option :
⢠Business model test: The objective of the Company''s business model is to hold the financial asset to collect the contractual cash flows.
⢠Cash flow characteristic test: The contractual term of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option.
⢠Business model test: The financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets.
⢠Cash flow characteristic test: The contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are measured at fair value through profit or loss.
b) Investments in equity instrument at fair value through other comprehensive income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument by instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instrument. This election is not permitted if the equity instrument is held for trading. These elected investments are initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value with gains / losses arising from changes in fair value recognised in other comprehensive income. This cumulative gain or loss is not reclassified to the Statement of Profit and Loss on disposal of the investments.
c) Equity investment in Subsidiaries, Associates and Joint Ventures
Investments representing equity interest in subsidiaries, associates and joint ventures are carried at cost less any provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable.
d) Financial assets at fair value through profit or loss (FVTPL)
Investment in equity instruments is classified at fair value through profit or loss, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Financial assets that do not meet the amortised cost criteria or fair value through other comprehensive income criteria are measured at fair value through profit or loss. A financial asset that meets the amortised cost criteria or fair value through other comprehensive income criteria may be designated as at fair value through profit or loss upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets and liabilities or recognizing the gains or losses on them on different bases.
Financial assets which are fair valued through profit or loss are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss.
Trade receivables are recognized initially at fair value and subsequently measured at amortised cost less provision for impairment.
In the Statement of Cash Flows, cash and cash equivalents includes cash in hand, cheques and balances with bank and short term highly liquid investments with original maturities of three
months or less that are readily convertible to known amount of cash. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet and forms part of financing activities in the Statement of Cash Flows. Book overdraft is shown within other financial liabilities in the Balance Sheet and forms part of operating activities in the Statement of Cash Flows.
g) Impairment of financial assets:
The Company assesses impairment based on expected credit losses (ECL) model to the following:
⢠financial assets measured at amortised cost
⢠financial assets measured at fair value through other comprehensive income
Expected credit loss are measured through a loss allowance at an amount equal to:
⢠the twelve month expected credit losses (expected credit losses that result from those default events on the financial instruments that are possible within twelve months after the reporting date); or
⢠full life time expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
h) Derecognition of financial assets
A financial asset is derecognised only when
⢠The Company has transferred the rights to receive cash flows from the financial asset or
⢠Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients
⢠The right to receive cash flows from the asset has expired.
i) Foreign Exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost or fair value through profit or loss the exchange differences are recognised in profit or loss except for those which are designated as hedge instrument in a hedging relationship. Further change in the carrying amount of investments in equity instruments at fair value through other comprehensive income relating to changes in foreign currency rates are recognised in other comprehensive income.
Financial liabilities and equity instrumentsj) Classification of debt or equity
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at fair value through Statement of Profit and Loss.
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year which are unpaid.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of Profit and Loss over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired.
The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in Statement of Profit and Loss.
o) Foreign exchange gains or losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in profit or loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of the reporting period. For financial liabilities that are measured as at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognised in Statement of Profit and Loss.
p) Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
q) Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
xiv. Impairment of non-financial assets
Property, plant and equipment and other intangible assets represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation /amortisation is derived after determining an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined at the time the asset is acquired and reviewed periodically. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. The estimated useful life is reviewed at least annually.
Cash flows are reported using the indirect method, whereby loss for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
xvi. Events occurring after the balance sheet date
Based on the nature of the event, the company identifies the events occurring between the balance sheet date and the date on which the financial statements are approved as ''Adjusting Event'' and ''Non-adjusting event''. Adjustments to assets and liabilities are made for events occurring after the balance sheet date that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance sheet date or because of statutory requirements or because of their special nature. For non-adjusting events, the company may provide a disclosure in the financial statements considering the nature of the transaction.
Mar 31, 2018
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (''the Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
B. USE OF ESTIMATES
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known or materialise.
C. Current / Non-Current Classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the following criteria:
a. it is expected to be realised in, or is intended for sale or consumption in, the company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting date; or
d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
Current assets include the current portion of non-current financial assets. All other assets are classified as noncurrent.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
a. it is expected to be settled in the company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting date; or
d. the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the above definition and the nature of services provided, the Company has ascertained its operating cycle as 12 months for the purpose of current - non-current classification of assets and liabilities.
D. FIXED ASSETS
Tangible Assets
Fixed Assets have been stated at actual cost inclusive of installation cost, taxes and other incidental expenses. The life of the certain assets has been taken less than as per life prescribed in schedule II of companies act 2013. Eg. The life of Servers in schedule 11 of companies act is prescribed to be 6 years whereas the life of the same has been taken 3 years and life of Temporary Structure as per companies act is 3 years whereas the life of the same has been taken 5 years. This decision is supported by the advice of technical expert.
E. Other Intangible Assets
Other Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortisation/depletion and impairment loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the Other Intangible Assets.
F. Leases
Leases are classified as operating lease when lessor allows for the use of an asset but does not convey rights of ownership of the asset. An operating lease represents an off-balance sheet financing of assets, where a leased asset and associated liabilities of future rent payments are not included on the balance sheet of a company. Company has an operating lease with an IBM India Private Limited For 3 Years, but the lessor may at its option transfer the assets at a nominal cost to E2E Networks Limited. Since the cost of the asset after the expiry of the lease term will almost be nil, so management of the company have treated that lease as an operating lease.
G. DEPRECIATION, AMORTISATION AND DEPLETION
Depreciation on tangible assets is provided on the WDV method over the useful lives of assets as prescribed in Schedule II to the Companies Act, 2013. Depreciation for assets purchased / sold during a period is proportionately charged.
H- IMPAIRMENT OF ASSETS
At each Balance Sheet date, an assessment is done to determine whether there is any indication of impairment to the assets. If any such indication exists, the management estimates the recoverable amount of the asset. If such recoverable amount of the Asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Profit &Loss account. If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is re-assessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost. In the current reporting period, the company didn''t find any such indication requiring impairment or its reassessement.
I. REVENUE RECOGNITION
The Company''s revenue from cloud computing services and managed hosting services are recognised when the said services are rendered to the customers over the period of the contracts or based on actual utilization of such services and when no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale / rendering of services and regarding its collection.
Revenue from sale of traded goods is recognised when property in those goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the traded goods and regarding its collection.
J. INVESTMENTS
Trade Investments are the investments made to enhance the company''s business interests. Investments are classified into current and long term investments. Investments that are readily realizable and intended to be held for not more than an year from the date of acquisition are classified as current investments. All other investments are classified as long term investments.
Current investments are stated at lower of cost or fair value. The comparison of cost and fair value is done separately in respect of each category of investments.
Long term investments are stated at cost. A provision for diminution in the value of long term investments is made only if such a decline is other than temporary in the opinion of management. Investments other than in subsidiary and associates have been accounted as per Accounting Standard (AS) 13 on "Accounting for Investments".
K. INVENTORIES
Raw materials, components, stores and spares are valued at lower of cost and net realizable value. The company being a service company, doesn''t have any stock in trade as on 31st March 2018.
L. TRADE RECEIVABLES
Trade receivables are stated after writing off debts considered as bad, if any. Adequate provision shall be made for debts if considered doubtful.
M. EMPLOYEE BENEFITS
Employee benefit expenses include salary, wages, performance incentives, compensated absences, medical benefits and other perquisites. It also includes post-employment benefits such as provident fund.
Short term employee benefit obligations are estimated and provided for.
The company is registered with The Employees Provident Funds and Miscellaneous Provisions Act 1952 and with Employee State Insurance Act 1948, and both the Employee and the Company make monthly contributions to the provident fund plan and ESIC plan equal to a specified percentage of the covered employee''s salary.
Retirement benefit cost and termination benefit categorised as gratuity has been determined and recognised as expense during the year based on Actuarial Valuation Report of Gratuity liability as on 31st March 2018. The Detailed note of such calculation and provision has been set out in Note No 30.
Equity-settled share-based payments to employees of the Company are measured at the fair value of the equity instruments in March 2018. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note No 28. The fair value determined in March 2018 of the equity-settled sharebased payments to employees of the Company is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest.
N. TAXES ON INCOME
Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates. Deferred income tax reflect the current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier years/period. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that sufficient future income will be available except that deferred tax assets, in case there are unabsorbed depreciation or losses, are recognised if there is virtual certainty that sufficient future taxable income will be available to realise the same. Deferred tax assets/liabilities during the year has been calculated considering the WDV of assets instead of depreciation considered in previous reporting period. With the change of method of calculations of deferred tax, the difference of deferred tax which pertains to previous periods has been adjusted with balances of reserve and surplus in the balance sheet. Deferred tax assets and liabilities are measured using the tax rates and tax law that have been enacted or substantively enacted by the Balance Sheet date.
O. OTHER INCOME
Interest income is recognised on a accrual basis.
P. PRIOR PERIOD ITEMS
Prior period items arisen in the current year as a result of errors or omission in the preparation of the financial statements of prior period(s) are separately disclosed in the Statement of Profit and Loss.
Q. BORROWING COST
All borrowing costs are charged to revenue except to the extent they are attributable to qualifying assets which are capitalized. A Qualifying Asset is one that necessarily takes substantial period of time to get ready for its intend use. During the year under review there was no borrowing attributable to qualifying assets and hence no borrowing cost was capitalized.
R. CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents for the purpose of cash flow statement comprise cash in hand, bank balances and deposits.
S. FOREIGN CURRENCY TRANSACTIONS
(a) Initial Recognition
Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Statement of Profit and Loss.
(b)Measurement of foreign currency items at the Balance Sheet date
Foreign currency monetary items of the Company are restated at the closing exchange rates. Non-monetary items are recorded at the exchange rate prevailing on the date of the transaction. Exchange differences arising out of these translations are recognized in the Statement of Profit and Loss.
T. CASH FLOW STATEMENT
The Cash Flow Statement are reported using the indirect method, whereby net profit after tax is adjusted for the effects of transactions of non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the company are segregated, if necessary.
U. PROVISIONS AND CONTINGENT LIABLITIES AND CONTINGENT ASSETS
A provision is recognised if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis.
Provision in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc. are recognised when it is probable that a liability has been incurred and the amount can be estimated reliably.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed, unless the possibility of outflow of resources is remote.
Contingent assets are neither recognised nor disclosed 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.
V. DISCLOSURE OF EVENTS OCCURING AFTER BALANCE SHEET DATE EXPLANATORY
Initial Public Offering & Listing of Equity Shares In the Financial year 2017-18, the Company came out with an IPO of 38,58,000 Equity Shares of Face Value of Rs.10/- each for cash at a price of Rs. 57/- per Equity share (including a share premium of Rs.47/- per Equity Share) aggregating to Rs.2,199.06 Lakh. It comprised of fresh issue of 27,50,000 equity shares and offer for sale of 11,08,000 equity shares.
The said public issue was approved by the Members in their Extra-Ordinary General Meeting of the Company held on 16th February, 2018.
The Public issue opened for subscription on 03rd May, 2018 and closed on 07th May, 2018. The issue has received 12,407 applications for 38,58,000 Equity Shares (after eliminating applications rejected on technical ground) including one Market Maker Application for 1,94,000 Equity Shares. The issue was subscribed to the extent of 69.07 times as per application data (after eliminating applications rejected on Technical grounds).
The Company received In-principal approval from NSE for Public Issue of 38,58,000 equity shares on April 12, 2018.
NSE vide its letter dated May 14,2018, approved the listing and trading of Equity shares on the NSE (Capital Market Segment) EMERGE SME platform w.e.f. May 15,2018 with designated security code symbol "E2E".
Company has complied with all the requirements prescribed by the Companies Act, 2013, various SEBI regulations and stock exchange''s requirement, wherever required.
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