Accounting Policies of Geodesic Ltd. Company

Jun 30, 2013

A. Accounting Conventions:

Te financial statements are prepared under the historical cost convention, in accordance with Indian Generally Accepted Accounting Principles ("GAAP"), the accounting standards notified by the Companies (Accounting Standards) Rules, 2006 (as amended), as adopted consistently by the company. All income and expenditure having a material bearing on the financial statements are recognised on accrual basis.

Te significant accounting policies followed by the Company are as discussed below which consistent with those are followed in the previous year.

b. Use of Estimates:

Te preparation of the financial statements in conformity with GAAP requires that the management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and difference between these actual results and estimates are recognised in the period in which these results are known / have materialised.

c. Revenue Recognition:

Licensing Income

Revenue from sale of user licenses for software applications is recognised only after the title in the user license is transferred on obtaining confirmation from the customer as per the terms of the agreement.

Software Sales

Revenue is recognised to the extent it is probable that the economic benefits will fow to the Company and no significant uncertainty exists as to its ultimate realisation or collection. Software sale is accounted as and when the sale takes place.

Product Sales

Te Company recognises the sale of hardware devices on shipment of the same to the customer.

Services

Annual Technical / Maintenance Services revenue is accrued over the period of the contract.

Provision for Bad Debts

Te Company earlier followed a policy of making provision for bad and doubtful debts based on its review of sundry debtors outstanding as on the date of Balance Sheet. However from the current year the Company has revised a policy of making provision for bad and doubtful debts as on the date of Balance Sheet in respect of all debts for sales and services, which are outstanding for more than 2 years.

Interest

Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend Income

Revenue is recognised when the right to receive the same is established up to the Balance Sheet Date.

Other Income

Other Income is accounted on accrual basis as and when the right to receive arises.

d. Inventories:

Closing stock of finished goods of GeoAmida is valued at cost or net realisable value, whichever is lower. Cost is determined using First-in-First-Out method. Work in progress is valued at cost. Stock in transit is valued at cost.

e. Prior Period Items and Extraordinary and Exceptional Items:

Income or expenses that arise due to error of omission to record them in the period of incurrence are classified as prior period items. A separate disclosure along with the nature and amount is made in the financial statement. Income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the Company are classified as extraordinary items. Specific disclosure of such events/transactions is made in the financial statements. Similarly, any external event beyond the control of the Company, significantly impacting income or expense, is also treated as extraordinary item and disclosed as such.

On certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company, is such that its disclosure improves an understanding of the performance of the Company. Such income or expense is classified as an exceptional item and accordingly disclosed in the notes to accounts.

f. Fixed Assets, Intangible Assets And Work In Progress:

Fixed Assets:

Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any, thereon. Cost comprises the purchase price and any cost attributable to bringing the asset to its intended location and in working condition for its intended use.

Intangible Asset:

Te costs related to development of a new base software are capitalised along with related implementation costs and are classified under Intangible Assets as per AS-26. Its enduring useful life is reasonably estimated by the management.

Capital Work In Progress:

Costs incurred for acquiring of software rights and development of new software are recognised as internally generated software and transferred to Capital WIP till the product is launched.

Revenue expenditure incurred on further research for development / on up-gradation of the existing software is charged to Profit and Loss Account in the period in which it is incurred.

Leasehold improvements:

Leasehold improvements are written off from the date they are put to use over the remaining period of the primary lease.

g. Depreciation:

Depreciation, on all assets except those specified in the table below, is provided for using the Written Down Value Method as per the useful lives of the assets estimated by the management, or at the rates prescribed under Schedule-XIV of the Companies Act, 1956 whichever are higher. Depreciation on additions and deletions is charged pro-rata from / till the period of their use.

Depreciation on Testing and Tooling Software and other Computer software is provided for at 40% on WDV based on the estimated useful life of the computer software, which rate is higher than that prescribed under the Companies Act, 1956. Depreciation is charged so as to write-of the cost of the assets on the following basis:

h. Foreign Currency Transactions:

Te Company is exposed to currency fluctuations on foreign currency transactions.

Initial Recognition

Foreign Currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Conversion

Foreign currency monetary items are converted into reported currency on the balance sheet date using the closing rate.

Exchange Difference

Te difference between the rate at which foreign currency transactions are accounted and the rate at which they are realised / settled is recognised in the Profit and Loss Account.

Te Company uses foreign exchange forward and option contracts to hedge its exposure to movements in foreign exchange rates. Te use of these foreign exchange forward and option contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.

Exchange differences on such contracts are recognised in the Profit and Loss Account in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the period.

Effective from 1st January, 2011 the Company has adopted AS 30 and 32 Financial Instrument (Recognition and Measurement) Accounting Standards as prescribed by ICAI. Te forward exchange contracts entered into, to hedge the foreign currency risk of a firm commitment or a highly probable transaction are marked to market at the end of the period and the gains and losses arising therein are included in the results of the operations and the same are reflected in the Hedge Reserve Account until the transaction is complete.

i. Investments:

Investments that are readily realisable and intended to be held for not more than a period of 12 months are classified as Current Investment. All other investments are Long term Investments and are classified as Non-current investments. Current Investments are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However provision for diminution in value is made to recognise a decline other than temporary in the value of long term investments.

j. Retirement Benefits:

Defend Contribution Plan:-

Company''s contributions paid/payable to provident fund are recognised in the Profit and Loss account of the period when the contribution to the fund is due. Te provident fund plan is operated by the regional Provident Fund Commissioner.

Defined Benefit Plan:-

Te Company provides for gratuity, a defend benefit retirement plan (the "Gratuity Plan") covering eligible employees. In accordance with the Payment of Gratuities Act, 1972, Te Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes all the ascertained liabilities to the LIC Gratuity Fund. Liabilities with regard to Leave Encashment are determined by actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes to the LIC Leave Encashment Fund.

k. Employee Stock Compensation Cost:

Measurement and disclosure of the employee share based payment plans is done in accordance with the Guidance Note on Accounting for Employee share based payments, issued by the Institute of Chartered Accountants of India. Te Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortised over the vesting period of the option on a straight line basis.

l. Borrowing Costs:

Te Company conservatively provides for interest on the FCCB at the notional interest rate as specified in the Term Sheet. Te notional interest charge for the period is adjusted for exchange rate fluctuation by applying the closing exchange rate and the corresponding effect is given to the provision for interest on Bonds.

m. Segment Reporting:

Primary Business Segment

Te Company is primarily engaged in a single business segment of software product sale and related consultancy services, and accordingly, there is only one reportable segment.

Geographical Segment

Secondary segmental reporting is based on the geographical location of customers. Te geographical segment has been disclosed on the revenues within India and revenues outside India.

n. Leases:

Finance Leases

i. Accounting

Assets taken under a finance lease are accounted for as per the Guidance Note issued by the Institute of Chartered Accountants of India (ICAI).

ii. Initial Recognition

Te assets under a finance lease are recognised in the books of account at the Cost of Acquisition.

iii. Amortisation

Te cost of these assets is amortised over the lease period or estimated useful life of the asset, whichever is lower.

Operating Leases

Leases, where the lesser effectively retains substantially all the risks and benefits of the ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Accounts on a straight line basis over the lease term.

o. Earnings Per Share:

Basic Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (the said net proft or loss has been arrived at after deducting preference dividend and attributable taxes) by the weighted number of equity shares outstanding during the period. Te weighted number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split and reverse share split (consolidation of shares). For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the efects of all dilutive potential equity shares.

p. Provision For Taxation:

Income tax is accounted for in accordance with Accounting Standard 22 on Accounting for Taxes on Income. Taxes comprise both current and deferred tax.

Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws.

Te tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. Tey are measured using the substantively enacted tax rates and tax regulations. Te carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufficient future taxable income will be available against which the deferred tax asset can be realised.

Minimum Alternate Tax (MAT) paid in the period is charged to the statement of Profit and Loss as current tax. Te Company recognises MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during that specified period i.e. the period for which MAT credit is allowed to be carried forward. In the period in which Company recognises MAT credit as an asset in accordance with the guidance note on accounting for credit available in respect of Minimum Alternate Tax under Income Tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement". Te Company reviews the "MAT Credit Entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.

Tax on distributed profits payable in accordance with the provisions of Section 115O of the Income-tax Act, 1961, is, in accordance with the Guidance Note on Accounting for Corporate Dividend Tax, regarded as a tax on distribution of profits and is not considered in determination of the profits for the period.

Te Company has started operations in SEEPZ from end of September 2008, which is a SEZ and which is entitled to 100% tax holiday under Section 10AA of the Income Tax Act, 1961 until March 2019. As a result, deferred tax, arising out of timing differences originating and reversing during the tax holiday period, is recognised.

Te Company started manufacture of GeoAmida in F.y. 2009-10 at their unit in Roorkee in, Uttarakhand, which is located in a tax free zone eligible for tax holiday under section 80(I)C of the Indian Income tax Act, 1961 until March 2019. As a result, deferred tax, arising out of timing differences originating and reversing during the tax holiday period, is recognised in the books.

q. Impairment Of Assets:

Te Company assesses at each balance sheet date whether there is any indication that an asset including goodwill may have been impaired. In case of such indication, the Company 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 to is less than its carrying amount, the carrying amount is reduced to its recoverable amount. Te reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

In respect of development costs and goodwill the impairment loss is reversed only when it is caused by specific external events and their efects have been reversed by subsequent external events.

r. Provisions And Contingent Liabilities: Provisions

Provisions, where measurement requires a substantial degree of estimation, are recognised in the books, only in the event of a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources, embodying economic benefits.

Contingent Liabilities

Contingent Liabilities, where existence will be confirmed either by the occurrence or the non-occurrence of one or more uncertain future events, are not recognised in the books of the Company, but are disclosed by way of a note to the Balance Sheet. Contingent Liabilities are periodically assessed by the management, and provision is made in the books where it becomes probable that an outflow of Future Economic Benefits will be required for an item previously dealt with, as a contingent liability, in the period in which there is a change in probability.

Contingent Assets

Contingent Assets are neither recognised in the books of accounts nor disclosed in any manner in the financial statements.

s. Miscellaneous Expenditure:

Bond Issue Expenses are amortised equally over a period of five years.

C Rights, preferences and restrictions attached to Equity Shares:

"Te Company has only one class of equity shares having par value of Rs.2 per share. Each holder of equity shares is entitled to one vote per share. Te dividend if any proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. Te distribution will be in proportion to the number of equity shares held by the shareholders".

F Shares allotted as fully paid up by way of bonus shares (during 5 years preceding June 30, 2012)

"Te Company allotted 3,03,89,788 equity shares as fully paid up bonus shares by utilisation of Securities premium reserve on September 03, 2007 pursuant to a shareholder''s resolution passed by postal ballot on July 23, 2007."

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Mar 31, 2011

1. ACCOUNTING CONVENTIONS:

The financial statements are prepared under the historical cost convention, in accordance with Generally Accepted Accounting Principles ("GAAP") in India, the accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956, adopted consistently by the Company. All income and expenditure having a material bearing on the financial statements are recognized on accrual basis.

The preparation of the financial statements in conformity with GAAP requires that the management make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and differences between these actual results and estimates are recognised in the period in which these results are known / have materialized.

The accounting policies as discussed below, are consistent with those used in the previous year.

2. REVENUE RECOGNITION:

- Licensing Income

Revenue from sale of user licenses for software applications is recognised only after the title in the user license is transferred on obtaining confrmation from the customer as per the terms of the agreement.

- Software Sales

Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and no significant uncertainty exists as to its ultimate realization or collection. Software sale is accounted as and when the sale takes place.

- Product Sales

The Company recognises the sale of hardware devices on shipment of the same to the customer.

- Services

Annual Technical / Maintenance Services revenue is accrued over the period of the contract.

- Interest

Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

- Dividend Income

Revenue is recognised when the right to receive the same is established upto the Balance Sheet Date.

- Other Income

Other Income is accounted on accrual basis as and when the right to receive arises.

3. FIXED ASSETS, INTANGIBLE ASSETS AND WORK IN PROGRESS:

- Fixed Assets

Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any, thereon. Cost comprises the purchase price and any cost attributable to bringing the asset to its intended location and in working condition for its intended use.

- Intangible Asset

The costs related to development of a new base software are capitalised along with related implementation costs and are classified under Intangible Assets as per AS-26. Its enduring useful life is reasonably estimated by the management.

- Capital Work In Progress

Costs incurred for acquiring of software rights and development of new software are recognised as internally generated software and transferred to Capital WIP till the product is launched.

Revenue expenditure incurred on further research for development / on up-gradation of the existing software is charged to Profit and Loss Account in the year in which it is incurred.

- Leasehold improvements:

Leasehold improvements are written off from the date they are put to use over the remaining period of the primary lease.

4. DEPRECIATION:

- Depreciation, on all assets except those specified in the table below, is provided for using the Written Down Value Method as per the useful lives of the assets estimated by the management, or at the rates prescribed under Schedule-XIV of the Companies Act, 1956 whichever are higher. Depreciation on additions and deletions is charged pro-rata from / till the period of their use.

- Depreciation on Testing and Tooling Software and other Computer software is provided for at 40% on WDV based on the estimated useful life of the computer software, which rate is higher than that prescribed under the Companies Act, 1956.

5. IMPAIRMENT OF ASSETS:

The Company assesses at each balance sheet date whether there is any indication that an asset including goodwill may have been impaired. In case of such indication, the Company 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 to 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 recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

In respect of development costs and goodwill the impairment loss is reversed only when it is caused by specific external events and their effects have been reversed by subsequent external events.

6. INVESTMENTS:

Investments that are intended to be held for a period of not more than a year at the time of purchase are classified as a current investment. All other investments are classified as Long Term Investments. Current Investments are carried at lower of cost and fair value determined on an individual investment basis. Long Term Investments are carried at cost. However the provision for diminution in value is made to recognise a decline other than temporary in the value of long term investments.

7. INVENTORIES:

Closing stock of finished goods of GeoAmida is valued at cost or net realizable value, whichever is lower. Cost is determined using First-in-First-Out method. Work in progress is valued at cost. Stock in transit is valued at cost.

8. LEASES:

a) Finance lease payments are apportioned between the finance lease charges and the reduction of the outstanding lease liability. The finance lease charges are recognised in the Profit and Loss Account.

b) Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Account on a straight line basis over the lease term.

9. FOREIGN CURRENCY TRANSACTIONS:

The Company is exposed to currency fuctuations on foreign currency transactions.

- Initial Recognition

Foreign Currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

- Conversion

Foreign currency monetary items are converted into reported currency on the balance sheet date using the closing rate.

- Exchange Difference

The difference between the rate at which foreign currency transactions are accounted and the rate at which they are realized /settled, is recognized in the Profit and Loss Account.

- The Company uses foreign exchange forward and option contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward and option contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.

Exchange differences on such contracts are recognised in the Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.

Effective from 1st January, 2011 the Company has adopted AS 30 and 32 Financial Instrument (Recognition and Measurement) Accounting Standards as prescribed by ICAI. The forward exchange contracts entered into, to hedge the foreign currency risk of a frm commitment or a highly probable transaction are marked to market at the end of the year and the gains and losses arising therein are included in the results of the operations and the same are reflected in the Hedge Reserve Account until the transaction is complete.

10. RETIREMENT BENEFITS:

a) Defined Contribution Plan:

Company's contributions paid/payable to provident fund are recognised in the Profit and Loss account of the year when the contribution to the fund is due. The provident fund plan is operated by the regional Provident Fund Commissioner.

b) Defined Benefit Plan:

The Company provides for gratuity a defined benefit retirement plan (the "Gratuity Plan") covering eligible employees. In accordance with the Payment of Gratuities Act, 1972, The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes all the ascertained liabilities to the LIC Gratuity Fund. Liabilities with regard to Leave Encashment are determined by actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes to the LIC Leave Encashment Fund.

11. PROVISION FOR TAXATION:

Income tax comprises of current tax provision and the net change in the deferred tax. Current tax provision is made in accordance with the Income Tax Act, 1961.

Minimum Alternative Tax (MAT) paid in accordance to the tax laws, which gives rise to the future economic benefits in the form of adjustment of future income tax liabilities, is considered as an asset if there is convincing evidence that the Company will pay normal income tax after the tax holiday period. The tax effect of temporary differences between the book profit and taxable profit are reflected through Deferred Tax Asset / Deferred Tax Liability.

The Company is eligible for 100% tax holiday under Section 10A of the Income Tax Act, 1961 until March 2011. The Company has started operations in SEEPZ from end of September 2008, which is a SEZ and which is entitled to 100% tax holiday under Section 10AA of the Income Tax Act, 1961 until March 2019. As a result, deferred tax, arising out of timing differences originating and reversing during the tax holiday period, is recognised.

No provision is considered necessary for taxation for the year since there is no taxable income under the normal provisions of the Income Tax Act. Further even the book profit is not liable to Minimum Alternate Tax as the same entirely arises from an undertaking in the Special Economic Zone (SEZ).

The Company started manufacture of GeoAmida in F.Y. 2009-10 at their unit in Roorkee in, Uttaranchal, which is located in a tax free zone eligible for tax holiday under section 80(I)C of the Indian Income tax Act, 1961 until March 2019. As a result, deferred tax, arising out of timing differences originating and reversing during the tax holiday period, is recognised in the books.

12. EARNINGS PER SHARE:

Basic Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (the said net profit or loss has been arrived at after deducting preference dividend and attributable taxes) by the weighted number of equity shares outstanding during the period. The weighted number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split and reverse share split (consolidation of shares). For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

13. MISCELLANEOUS EXPENDITURE:

Preliminary Expenses are amortised equally over a period of ten years. Share /Bond Issue Expenses and Deferred Revenue Expenses are amortised equally over a period of fve years.

14. SEGMENT REPORTING: Primary Business Segment

The Company is primarily engaged in a single business segment of software product sale and related consultancy services, and accordingly, there is only one reportable segment.

Geographical Segment

Secondary segmental reporting is based on the geographical location of customers. The geographical segment has been disclosed on the revenues within India and revenues outside India.

15. EMPLOYEE STOCK COMPENSATION COST:

Measurement and disclosure of the employee share based payment plans is done in accordance with the Guidance Note on Accounting for Employee share based payments, issued by the Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.

16. BORROWING COSTS:

The Company conservatively provides for interest on the FCCB at the notional interest rate as specified in the Term Sheet. The notional interest charge for the year is adjusted for exchange rate fuctuation by applying the closing exchange rate and the corresponding effect is given to the provision for interest on Bonds.

17. PROVISION AND CONTINGENT LIABILITIES:

Provision is recognised when the Company has a present obligation as a result of past events 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. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates.

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Mar 31, 2010

1. ACCOUNTING CONVENTIONS:

The financial statements are prepared under the historical cost convention, in accordance with Generally Accepted Accounting Principles ("GAAP") in India, the accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956, adopted consistently by the Company. All income and expenditure having a material bearing on the financial statements are recognized on accrual basis.

The preparation of the financial statements in conformity with GAAP requires that the management make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilites as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and difference between these actual results and estimates are recognised in the period in which these results are known / have materialized.

The accounting policies as discussed below, are consistent with those used in the previous year.

2. REVENUE RECOGNITION:

- Licensing Income

Revenue from sale of user licenses for software applications is recognised only after the title in the user license is transferred on obtaining confirmation from the customer as per the terms of the agreement.

- Sofware Sales

Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and no significant uncertainty exists as to its ultimate realization or collection. Software sale is accounted as and when the sale takes place.

- Product Sales

The Company recognises the sale of hardware devices on shipment and acceptance of the delivery by the customer.

- Services

Annual Technical / Maintenance Services revenue is accrued over the period of the contract.

- Interest

Revenue is recognised on a time proporti]on basis taking into account the amount outstanding and the rate applicable.

- Dividend Income

Revenue is recognised when the right to receive the same is established upto the Balance Sheet Date.

- Other Income

Other Income is accounted on accrual basis as and when the right to receive arises upto the Balance Sheet Date.

- Post sales client support services

Revenue also includes cost of after sale support services.

3. FIXED ASSETS, INTANGIBLE ASSETS AND WORK IN PROGRESS:

- Fixed Assets

Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any cost attributable for bringing the asset to its present location and in working condition for its intended use.

- Intangible Asset

The costs related to development of a new base software are capitalised along with related implementation costs and are classified under Intangible Assets as per AS-26. Its enduring useful life is reasonably estimated by the management.

- Capital Work In Progress

Revenue expenditure incurred on further research for development / on up-gradation of the existing sofware is charged to Profit and Loss Account in the year in which it is incurred. Costs incurred for acquiring of software rights and development of new software are recognised as internally generated software and transferred to Capital WIP till the product is launched.

5. IMPAIRMENT OF ASSETS:

The Company assesses at each balance sheet date whether there is any indication that an asset including goodwill may have been impaired. In case of such indication, the Company 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 to 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 recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is refected at the recoverable amount subject to a maximum of depreciated historical cost.

In respect of development costs and goodwill the impairment loss is reversed only when it is caused by specific external events and their effects have been reversed by subsequent external events.

6. INVESTMENTS:

Investments that are intended to be held for a period not more than a year at the time of purchase are classified as a current investment. All other investments are classified as long term investments. Current Investments comprising investments in mutual funds are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However the provision for diminution in value is made to recognise a decline other than temporary in the value of long term investments.

7. INVENTORIES:

Closing stock of finished goods of GeoAmida is valued at cost or net realizable value, whichever is lower. Cost is determined using First-in- First-Out method. Work in progress is valued at cost.

8. LEASE:

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Account on a straight line basis over the lease term.

9. FOREIGN CURRENCY TRANSACTIONS:

The Company is exposed to currency fluctuations on foreign currency transactions.

- Inital Recognition

Foreign Currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

- Conversion

Foreign currency monetary items are converted into reported currency on the balance sheet date using the closing rate.

- Exchange Difference

The difference between the rate at which foreign currency transactions are accounted and the rate at which they are realized /settled is recognized in the Profit and Loss Account.

- The Company uses foreign exchange forward and option contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward and option contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.

Exchange differences on such contracts are recognised in the Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.

10. RETIREMENT BENEFITS:

The Company provides for gratuity, a defined benefit retirement plan (the "Gratuity Plan") covering eligible employees. In accordance with the Payment of Gratuities Act, 1972, The Gratuity Plan provides a lump sum payment to vested employees at retrement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment. Liabilites with regard to the Gratuity Plan are determined by actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes all the ascertained liabilities to the LIC Gratuity Fund. Liabilities with regard to Leave Encashment are determined by actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes to the LIC Leave Encashment Fund.

11. PROVISION FOR TAXATION:

Income tax comprises of current tax provision and the net change in the deferred tax. Current tax provision is made in accordance with the Income Tax Act, 1961.

Minimum Alternative Tax (MAT) paid in accordance to the tax laws, which gives rise to the future economic benefits in the form of adjustment of future income tax liabilities, is considered as an asset if there is a convincing evidence that the Company will pay normal income tax after the tax holiday period. The tax effect of temporary differences between the book profit and taxable profit are refected through Deferred Tax Asset / Deferred Tax Liability.

The Company is eligible for 100% tax holiday under Section 10A of the Income Tax Act, 1961 until March 2011. The Company has started operations in SEEPZ from end of September 2008, which is a SEZ and which is entitled to 100% tax holiday under Section 10AA of the Income Tax Act, 1961 until March 2019. As a result, deferred tax, arising out of timing differences originating and reversing during the tax holiday period, is recognised.

No provision is considered necessary for taxation for the year since there is no taxable income under the normal provisions of the Income Tax Act. Further even the book profit is not liable to Minimum Alternate Tax as the same entirely arises from an undertaking in the Special Economic Zone (SEZ).

The Company started manufacture of GeoAmida at their unit in Roorkee, Uttaranchal, which is located in a tax free zone eligible for tax holiday under section 80(I)C of the Indian Income tax Act, 1961.

12. EARNINGS PER SHARE:

Basic Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (the said net profit or loss has been arrived at after deducting preference dividend and attributable taxes) by the weighted number of equity shares outstanding during the period. The weighted number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split and reverse share split (consolidation of shares). For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

13. MISCELLANEOUS EXPENDITURE:

Preliminary Expenses are amortised equally over a period of ten years. Share Issue Expenses and Deferred Revenue Expenses are amortised equally over a period of five years.

14. SEGMENT REPORTING:

- Primary Business Segment

The Company is primarily engaged in a single business segment of sofiware product sale and related consultancy services, and accordingly, there is only one reportable segment.

- Geographical Segment

Secondary segmental reporting is based on the geographical location of customers. The geographical segment has been disclosed on the revenues within India and revenues outside India.

15. EMPLOYEE STOCK COMPENSATION COST:

Measurement and disclosure of the employee share based payment plans is done in accordance with the Guidance Note on Accounting for Employee share based payments, issued by the Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.

16. BORROWING COSTS:

The Company conservatively provides for interest on the FCCB at the notional interest rate as specified in the Term Sheet. The notional interest charge or the year is adjusted for exchange rate fuctuation by applying the closing exchange rate and the corresponding effectis given to the provision for interest on Bonds.