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Accounting Policies of Ramco Systems Ltd. Company
Mar 31, 2025
MATERIAL ACCOUNTING POLICIES
a. Revenue recognition
Revenue is measured based on the transaction
price, which is the consideration, adjusted for finance
components and volume discounts, service level
credits, performance bonus, price concessions and
incentives, if any, as specified in the contract with the
customers.
Revenue is recognized in the P&L upon transfer of
control of promised products or services to customers
in an amount that reflects the consideration which the
Company expects to receive in exchange for those
services or products and excluding taxes or duties.
To recognize revenues, the Company applies the
following five step approach:
(1) identify the contract with a customer, (2) identify
the performance obligations in the contract, (3)
determine the transaction price, (4) allocate the
transaction price to the performance obligations in
the contract, and (5) recognize revenues when a
performance obligation is satisfied.
At contract inception, the Company assesses its
promise to transfer products or services to a customer
to identify separate performance obligations.
The Company applies judgment to determine whether
each product or service promised to a customer
is capable of being distinct, and are distinct in the
context of the contract, if not, the promised products
or services are combined and accounted as a single
performance obligation. The Company allocates the
contract value to separately identifiable performance
obligations based on their relative standalone selling
price (mostly as reflected in the contracts) or residual
method. Standalone selling prices are determined
based on sale prices for the components when
it is regularly sold separately. In cases where the
Company is unable to determine the standalone
selling price, the Company uses expected cost-plus
margin approach in estimating the standalone selling
price.
For performance obligations where control is
transferred over time, revenues are recognized
by measuring progress towards completion of the
performance obligation. The selection of the method
to measure progress towards completion requires
judgment and is based on the nature of the promised
products or services to be provided.
The method for recognizing revenues depends on
the nature of the products sold/services rendered:
(1) Revenue from Software Products
(a) Software Licensing
Software licensing revenues represent
all fees earned from granting customers
licenses to use the Companyâs software,
through initial licensing and or through the
purchase of additional modules or user
rights. For software license arrangements
that do not require significant modification
or customization of the underlying software,
revenue is recognized on delivery of the
software and when the customer obtains a
right to use such licenses.
(b) Subscription for Software as a Service
Subscription fees for offering the hosted
software as a service are recognized as
revenue ratably on straight line basis, over
the term of the subscription arrangement.
(c) Product Support Services
Fees for product support services, covering
inter alia improvement and upgradation of
the basic Software, whether sold separately
(e.g., renewal period AMC) or as an element
of a multiple-element arrangement, are
recognized as revenue ratably on straight
line basis, over the term of the support
arrangement.
(d) Application Maintenance Services
Fees for the application maintenance
services, covering inter alia the support of
the customized software, are recognized
as revenue ratably on straight line basis,
over the term of the support arrangement.
(e) Royalty income
Royalty income represents fees charged
at arms-length basis on the revenue
earned from external customers by the
subsidiaries, by way of Software Licensing,
Product Support Services, Subscription
for Software as a Service and Application
Maintenance Service, in respect of
Companyâs Software Products. Such
royalty income is recognized at the point
of time at which the subsidiaries recognize
the said revenue.
(2) Revenue from Software Services
(a) Implementation/Professional Services
Software Implementation/Professional
Services contracts are either fixed price or
time and material based.
Revenues from fixed price contracts,
where the performance obligations are
satisfied over time, are recognized using
the âpercentage of completionâ method.
Percentage of completion is determined
based on project costs incurred to date
as a percentage of total estimated project
costs required to complete the project.
The cost expended (or input) method has
been used to measure progress towards
completion as there is a direct relationship
between input and productivity. The
performance obligations are satisfied as
and when the services are rendered since
the customer generally obtains control of
the work as it progresses.
Where the Software is required to be
substantially customized as part of the
implementation service, the entire fee for
licensing and implementation services
is considered to be a single performance
obligation and the revenue is recognized
using the percentage of completion
method as the implementation services
are performed.
Revenues from implementation services
in respect of hosting contracts are to be
recognized as revenue ratably over the
longer of the contract term or the estimated
expected life of the customer relationship.
However, considering the existence of
partners being available for rendering such
implementation services, these services
are considered to be a separate element
and recognized in accordance with
percentage of completion method.
When total cost estimates exceed revenues
in an arrangement, the estimated losses
are recognized in the P&L in the period
in which such losses become probable
based on the current contract estimates as
a contract provision.
In the case of time and material contracts,
revenue is recognized based on billable
time spent in the project, priced at the
contractual rate.
Any change in scope or price is considered
as a contract modification. The Company
accounts for modifications to existing
contracts by assessing whether the
services added are distinct and whether
the pricing is at the standalone selling
price. Services added that are not distinct
are accounted for on a cumulative catch
up basis, while those that are distinct are
accounted for prospectively as a separate
contract if the additional services are
priced at the standalone selling price.
Non-refundable one-time upfront fees
for enablement/application installation,
consisting of standardization set-up,
initiation or activation or user login creation
services in the case of hosting contracts,
are recognized in accordance with
percentage of completion method once the
customer obtains a right to access and use
the Software.
(b) Managed Services
Fees for managed services, which
include business processing services,
are recognized as revenue as the related
services are performed.
(c) Contract balances
Contract assets primarily relate to unbilled
amounts on implementation/professional
services contracts and are classified as
non-financial asset as the contractual
right to consideration is dependent on
completion of contractual milestones
(which we refer to as unbilled services
revenue).
Unbilled revenues on software licensing
are classified as a financial asset where
the right to consideration is unconditional
upon passage of time (which we refer to
as unbilled licenses revenue). The unbilled
royalty revenue is also grouped here.
A contract liability is an entityâs obligation
to transfer software products or software
services to a customer for which the entity
has received consideration (or the amount
is due) from the customer (which we refer
to as unearned revenue).
The Company assesses the timing of the
transfer of software products or software
services to the customer as compared
to the timing of payments to determine
whether a significant financing component
exists. As a practical expedient, the
Company does not assess the existence of
a significant financing component when the
difference between payment and transfer
of deliverables is a year or less. If the
difference in timing arises for reasons other
than the provision of finance to either the
customer or us, no financing component is
deemed to exist.
(3) Revenue from Resale of Hardware & Software
Revenue from sale of traded hardware/software
is recognized on transfer of significant risks,
rewards and control to the customer.
b. Finance income
Finance income Interest on bank deposits/
investments (short term other than equity) is
recognized on accrual basis. Interest income from
financial assets is recognized using effective interest
rate method.
c. Employee benefits expense
Short term employee benefits
Short-term employee benefits viz., salaries, wages,
other benefits are recognized as an expense at the
undiscounted amount in the P&L for the year in
which the related service is rendered. A liability is
recognized for the amount expected to be paid under
short-term cash bonus 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.
Share based payments
When the stock options are exercised, the Company
issues fresh issue of Equity Shares, upon receipt of
exercise price from the option grantees. The proceeds
received are allocated to Share Capital up to the
face value of shares issued, with any excess being
accounted as Securities Premium in the Balance
Sheet. The cost of fair value determined at the grant
date is expensed over the vesting period in the Profit
and Loss.
Post-employment benefits Defined Contribution
Plan
A defined contribution plan is a post-employment
benefit plan where the Companyâs legal or
constructive obligation is limited to the amount that
it contributes and are expensed as an employee
benefits expense in the P&L in the period in which
the related service is provided by the employee.
The Company contributes monthly to Employeesâ
Provident Fund & Employeesâ Pension Fund
administered by the Employeesâ Provident Fund
Organization, Government of India, at 12% of
employeeâs basic salary.
The Company contributes to Superannuation Fund/
National Pension System (NPS) at a sum equivalent
to 15% (not exceeding rupees one lakh fifty thousand
per annum) and 10% respectively, of the eligible
employeeâs basic salary, for those who have opted to
participate based on the options exercised by them.
Contributions to Provident Fund, Superannuation
Fund, and National Pension System (NPS) are
recognized as an expense in the P&L for the year in
which the employees have rendered services. There
are no further obligations except for the above said
contributions.
Defined Benefit Plan
The Company contributes to a defined benefit plan
viz., an approved Gratuity Fund, for its employees
including eligible employees in subsidiary companies.
It is in the form of lump sum payments to vested
employees on resignation, retirement, death while
in employment or on termination of employment,
for an amount equivalent to 15 daysâ basic salary for
each completed year of service. Vesting occurs upon
completion of five years of continuous service. The
Company makes annual contributions to the Gratuity
scheme administered through the trust formed for the
purpose. The liability for Gratuity is ascertained as at
the end of the financial year, based on the actuarial
valuation by an independent external actuary as at
the Balance Sheet date using the âprojected unit
credit method.
Remeasurement of net defined benefit asset/liability
comprising of actuarial gains or losses arising from
experience adjustments and changes in actuarial
assumptions are charged/credited to OCI in the
period in which they arise and immediately transferred
to retained earnings. Other costs are accounted for in
the P&L.
Other long term employee benefits
The Company provides for expenses towards
compensated absences provided to its employees,
while it is expected to be carried forward beyond
twelve months as a long-term employee benefit,
which is the amount of future benefit that employees
have accumulated at the end of the year. The expense
is recognized at the present value of the amount
payable determined based on actuarial valuation by
an independent external actuary as at the Balance
Sheet date using the âprojected unit credit method.
d. Income taxes
Current tax is the amount of tax payable or receivable
on the taxable income or loss for the year as
determined in accordance with the tax rates (and tax
laws) that have been enacted at the reporting date.
Current tax assets and liabilities are offset, when the
Company has legally enforceable right to set off the
recognized amounts and intends to settle the asset
and the liability on a net basis.
Deferred tax is recognized using the Balance Sheet
approach on temporary differences between the
tax bases of assets and liabilities and their carrying
amounts for financial reporting at the reporting date.
The Company reviews the âMAT Credit Entitlementâ
at each Balance Sheet date and writes down the
carrying amount of the same to the extent there is
no longer convincing evidence to the effect that the
Company will pay normal Income tax during the
specified period.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year where
the asset is realized or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by same
governing tax laws and the Company has legally
enforceable right to set off current tax assets against
current tax liabilities.
Both current tax and deferred tax relating to items
recognized outside the P&L is recognized in OCI.
e. Property, plant and equipments (PPE)
Property, plant and equipment are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. The cost comprises of
purchase price, borrowing cost if capitalization criteria
are met and directly attributable cost of bringing the
asset to its working condition for the intended use. When
significant parts of plant and equipment are required
to be replaced at intervals, the Company depreciates
them separately based on their specific useful lives.
Depreciation in the books of the Company is charged
on a pro-rata basis on the Straight Line Method as
indicated under Schedule II of the Act, over the useful
life of the assets.
The useful lives of various assets used by the
Company are tabled below:
An item of property, plant and equipment and any
significant part initially recognized is de-recognized
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or
loss arising on de-recognition of the asset (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in
the P&L when the asset is de-recognized.
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.
f. Leases
Company as a lessee
The Company recognizes right-of-use assets
and a lease liability at the commencement date,
except short term leases and low value leases. The
Companyâs lease asset classes primarily consist of
leases for Land, Buildings and Office equipments.
Right-of-use assets are depreciated on a straight line
basis over the lease term.
They are subsequently measured at cost less
accumulated depreciation and impairment losses.
The lease liability measured at amortized cost using
the effective interest method. In calculating the
present value of lease payments, the Company uses
its incremental borrowing rate. It is remeasured when
there is a change in future lease payments arising
from a change in an index or rate, if there is a change
in the Companyâs estimate of the amount expected
to be payable under a residual value guarantee, or if
Company changes its assessment of whether it will
exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in the
P&L if the carrying amount of the right-of-use asset
has been reduced to zero.
The Company presents right-of-use assets that do
not meet the definition of investment property in
âProperty, Plant and Equipmentâ and Lease liabilities
as a separate line item on face of the Balance Sheet.
The Company has opted not to recognise right-of-
use assets and lease liabilities for short-term leases
that have a lease term of 12 months or less. The
Company recognises the lease payments associated
with these leases as an expense on a straight-line
basis over the lease term.
Company as a lessor
Operating lease receipts are recognized in the P&L
on straight-line basis over the lease terms except
where the payments are structured to increase in
line with the general inflation to compensate for the
expected inflationary cost increases.
g. Intangible assets
Intangible assets acquired from third party and the
patents granted, are measured on initial recognition
at cost.
The cost of development of software are capitalized
and recognized as an Intangible asset, when the
expenditure can be measured reliably, the product
or process is technically and commercially feasible,
future economic benefits are probable and the
Company intends to and has sufficient resources
to complete development and intends to use or
commercially exploit. Subsequent expenditure
is capitalized only when it increases the future
economic benefits. Research costs and internally
generated intangibles (excluding capitalized software
development costs) are not capitalized and the
related expenditure is reflected in the P&L in the
period in which the expenditure is incurred.
The useful lives of intangible assets of the Company
are assessed as finite.
Intangible assets with finite lives are amortized
over the useful economic life and assessed
for impairment whenever there is an indication
that the intangible asset may be impaired. The
amortization period and the amortization method
for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period.
Gains or losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognized in the P&L
when the asset is de-recognized.
Costs incurred in the development of the product,
together with repository of new business components,
upon completion of the development phase, have
been classified and grouped as âProduct softwareâ
under intangible assets. Similarly, costs incurred in
the development of technology platform framework,
which would enable the Company to provide
solutions - both standard and customized - in an
efficient manner, have been classified and grouped
as âTechnology platformâ under intangible assets.
During the period of development and thereafter, the
asset is tested for impairment annually.
The useful life of the above assets is estimated as
under:
h. Financial Instruments
The Company initially determines the classification of
financial assets and liabilities. After initial recognition,
no re-classification is made for financial assets, which
are categorized as equity instruments at FVTOCI,
and financial assets/liabilities that are specifically
designated as FVTPL. However, other financial
assets are re-classifiable when there is a change in
the business model of the Company.
Financial assets
Financial assets comprise of investments in equity
and mutual funds, loans, trade receivables, cash and
cash equivalents and other financial assets.
Initial recognition and measurement
All financial assets are recognized initially at fair
value plus or minus, in the case of financial assets
not recorded at fair value through P&L (FVTPL),
transaction costs that are directly attributable to the
acquisition or issue of the financial asset. However,
Trade receivables that do not contain a significant
financing component are initially measured at
transaction price.
Where the fair value of a financial asset at initial
recognition is different from its transaction price, the
difference between the fair value and the transaction
price is recognized as a gain or loss in the P&L at
initial recognition if the fair value is determined
through a quoted market price in an active market
for an identical asset (i.e. level 1 input) or through a
valuation technique that uses data from observable
markets (i.e. level 2 input).
In case the fair value is not determined using a
level 1 or level 2 input as mentioned above, the
difference between the fair value and transaction
price is deferred appropriately and recognized as a
gain or loss in the P&L only to the extent that such
gain or loss arises due to a change in factor that
market participants take into account when pricing
the financial asset.
Subsequent measurement
For subsequent measurement, the Company
classifies a financial asset in accordance with the
below criteria:
(a) The Companyâs business model for managing
the financial asset and,
Financial liabilities
Financial liabilities comprise of Borrowings, Trade
payables, Derivative financial instruments, Financial
guarantee obligations, Lease liabilities and Other
financial liabilities.
Initial recognition and measurement
All financial liabilities are recognized initially at
fair value minus, in the case of financial liabilities
not recorded at fair value through P&L (FVTPL),
transaction costs that are attributable to the
acquisition of the financial liability.
Where the fair value of a financial liability at initial
recognition is different from its transaction price, the
difference between the fair value and the transaction
price is recognized as a gain or loss in the P&L at
initial recognition if the fair value is determined
through a quoted market price in an active market
for an identical asset (i.e. level 1 input) or through a
valuation technique that uses data from observable
markets (i.e. level 2 input).
In case the fair value is not determined using a level
1 or level 2 input as mentioned above, the difference
between the fair value and transaction price is
deferred appropriately and recognized as a gain or
loss in the P&L only to the extent that such gain or
loss arises due to a change in factor that market
participants take into account when pricing the
financial liability.
Subsequent measurement
All financial liabilities of the Company are
subsequently measured at amortized cost using the
effective interest method except for certain items
like foreign exchange forward contracts that do not
qualify for hedge accounting are measured at fair
through P&L (FVTPL).
Transaction cost of financial guarantee contracts
that are directly attributable to the issuance of the
guarantee are recognized initially as a liability at fair
value. Subsequently, the liability is measured at the
higher of the amount of loss allowance determined
as per impairment requirements of Ind AS 109 and
the amount recognized less cumulative amortization.
Fair value measurement
The fair value of an asset or a liability is measured
using the assumptions that the market participants
would use when pricing the asset or liability, assuming
that the market participants act in the economic best
interest.
All assets and liabilities for which fair value is
measured and disclosed in the financial statements
are categorized within fair value hierarchy based on
the lowest level input that is significant to the fair value
measurement as a whole. The fair value hierarchy is
described as below:
Level 1: Unadjusted quoted prices in active markets
for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest
level inputs that are significant to the fair value
measurement is directly or indirectly observable.
Level 3: Valuation techniques for which the lowest
level inputs that are significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognized in the
Balance Sheet on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by reassessing categorization
at the end of each reporting period (i.e.) based on the
lowest level input that is significant to the fair value
measurement as a whole.
For the purpose of fair value disclosures, the
Company has determined the classes of assets and
liabilities based on the nature, characteristics and
risks of the assets or liabilities and the level of the fair
value hierarchy as explained above.
i. Impairment of non-financial assets
The carrying amount of assets i.e., property, plant and
equipment including right-of-use asset, investment
properties, cash generating units and intangible
assets other than inventories & deferred tax assets,
are reviewed for impairment at each reporting date,
if there is any indication of impairment based on
internal and external factors.
Non-financial assets are treated as impaired when
the carrying amount of such asset exceeds its
recoverable value.
The Company impairs the Unbilled services revenue
using the simplified approach wherein Expected
Credit Loss model (ECL) is applied.
The ECL over lifetime of the assets are estimated by
using a provision matrix which is based on historical
loss rates reflecting current conditions and forecasts
of future economic conditions which are grouped
on the basis of similar credit characteristics such
as nature of industry, customer segment, past due
status and other factors that are relevant to estimate
the expected cash loss from these assets.
Mar 31, 2024
6. MATERIAL ACCOUNTING POLICIES
a. Revenue recognition
Revenue is measured based on the transaction price, which is the consideration, adjusted for finance components and volume discounts, service level credits, performance bonus, price concessions and incentives, if any, as specified in the contract with the customers.
Revenue is recognized in the P&L upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those services or products and excluding taxes or
duties. To recognize revenues, the Company applies the following five step approach:
(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied.
At contract inception, the Company assesses its promise to transfer products or services to a customer to identify separate performance obligations. The Company applies judgment to determine whether each product or service promised to a customer is capable of being distinct, and are distinct in the context of the contract, if not, the promised products or services are combined and accounted as a single performance obligation. The Company allocates the contract value to separately identifiable performance obligations based on their relative standalone selling price (mostly as reflected in the contracts) or residual method. Standalone selling prices are determined based on sale prices for the components when it is regularly sold separately. In cases where the Company is unable to determine the standalone selling price, the Company uses expected cost-plus margin approach in estimating the standalone selling price.
For performance obligations where control is transferred over time, revenues are recognized by measuring progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the promised products or services to be provided.
The method for recognizing revenues depends on the nature of the products sold / services rendered:
(1) Revenue from Software Products
(a) Software Licensing
Software licensing revenues represent all fees earned from granting customers licenses to use the Companyâs software, through initial licensing and or through the purchase of additional modules or user rights. For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized on delivery of the
software and when the customer obtains a right to use such licenses.
(b) Subscription for Software as a Service Subscription fees for offering the hosted software as a service are recognized as revenue ratably on straight line basis, over the term of the subscription arrangement.
(c) Product Support Services
Fees for product support services, covering inter alia improvement and upgradation of the basic Software, whether sold separately (e.g., renewal period AMC) or as an element of a multiple-element arrangement, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.
(d) Application Maintenance Services
Fees for the application maintenance services, covering inter alia the support of the customized software, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.
(e) Royalty income
Royalty income represents fees charged at arms-length basis on the revenue earned from external customers by the subsidiaries, by way of Software Licensing, Product Support Services, Subscription for Software as a Service and Application Maintenance Service, in respect of Companyâs Software Products. Such royalty income is recognized at the point of time at which the subsidiaries recognize the said revenue.
(2) Revenue from Software Services
(a) Implementation / Professional Services Software Implementation / Professional Services contracts are either fixed price or time and material based.
Revenues from fixed price contracts, where the performance obligations are satisfied over time, are recognized using the âpercentage of completionâ method. Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost
expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. The performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Where the Software is required to be substantially customized as part of the implementation service, the entire fee for licensing and implementation services is considered to be a single performance obligation and the revenue is recognized using the percentage of completion method as the implementation services are performed.
Revenues from implementation services in respect of hosting contracts are to be recognized as revenue ratably over the longer of the contract term or the estimated expected life of the customer relationship. However, considering the existence of partners being available for rendering such implementation services, these services are considered to be a separate element and recognized in accordance with percentage of completion method.
When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the P&L in the period in which such losses become probable based on the current contract estimates as a contract provision.
In the case of time and material contracts, revenue is recognized based on billable time spent in the project, priced at the contractual rate.
Any change in scope or price is considered as a contract modification. The Company accounts for modifications to existing contracts by assessing whether the services added are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively as a separate contract if the additional services are
priced at the standalone selling price. Non-refundable one-time upfront fees for enablement / application installation, consisting of standardization set-up, initiation or activation or user login creation services in the case of hosting contracts, are recognized in accordance with percentage of completion method once the customer obtains a right to access and use the Software.
(b) Managed Services
Fees for managed services, which include business processing services, are recognized as revenue as the related services are performed.
(c) Contract balances
Contract assets primarily relate to unbilled amounts on implementation / professional services contracts and are classified as non-financial asset as the contractual right to consideration is dependent on completion of contractual milestones (which we refer to as unbilled services revenue).
Unbilled revenues on software licensing are classified as a financial asset where the right to consideration is unconditional upon passage of time (which we refer to as unbilled licenses revenue). The unbilled royalty revenue is also grouped here.
A contract liability is an entityâs obligation to transfer software products or software services to a customer for which the entity has received consideration (or the amount is due) from the customer (which we refer to as unearned revenue).
The Company assesses the timing of the transfer of software products or software services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, the Company does not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance
to either the customer or us, no financing component is deemed to exist.
(3) Revenue from Resale of Hardware & Software
Revenue from sale of traded hardware / software is recognized on transfer of significant risks, rewards and control to the customer.
b. Finance income
Finance income Interest on bank deposits/ investments (short term other than equity) is recognized on accrual basis. Interest income from financial assets is recognized using effective interest rate method.
c. Employee benefits expense
Short term employee benefits Short-term employee benefits viz., salaries, wages, other benefits are recognized as an expense at the undiscounted amount in the P&L for the year in which the related service is rendered. A liability is recognized for the amount expected to be paid under short-term cash bonus 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.
Share based payments
When the stock options are exercised, the Company issues fresh issue of Equity Shares, upon receipt of exercise price from the option grantees. The proceeds received are allocated to Share Capital up to the face value of shares issued, with any excess being accounted as Securities Premium in the Balance Sheet. The cost of fair value determined at the grant date is expensed over the vesting period in the Profit and Loss.
Post-employment benefits Defined Contribution Plan
A defined contribution plan is a post-employment benefit plan where the Companyâs legal or constructive obligation is limited to the amount that it contributes and are expensed as an employee benefits expense in the P&L in the period in which the related service is provided by the employee.
The Company contributes monthly to Employeesâ Provident Fund & Employeesâ Pension Fund administered by the Employeesâ Provident Fund Organization, Government of India, at 12% of employeeâs basic salary.
The Company contributes to Superannuation Fund / National Pension System (NPS) at a sum equivalent to 15% (not exceeding rupees one lakh fifty thousand per annum) and 10% respectively, of the eligible employeeâs basic salary, for those who have opted to participate based on the options exercised by them.
Contributions to Provident Fund, Superannuation Fund, and National Pension System (NPS) are recognized as an expense in the P&L for the year in which the employees have rendered services. There are no further obligations except for the above said contributions.
Defined Benefit Plan
The Company contributes to a defined benefit plan viz., an approved Gratuity Fund, for its employees including eligible employees in subsidiary companies. It is in the form of lump sum payments to vested employees on resignation, retirement, death while in employment or on termination of employment, for an amount equivalent to 15 daysâ basic salary for each completed year of service. Vesting occurs upon completion of five years of continuous service. The Company makes annual contributions to the Gratuity scheme administered through the trust formed for the purpose. The liability for Gratuity is ascertained as at the end of the financial year, based on the actuarial valuation by an independent external actuary as at the Balance Sheet date using the âprojected unit credit method.
Remeasurement of net defined benefit asset / liability comprising of actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to OCI in the period in which they arise and immediately transferred to retained earnings. Other costs are accounted for in the P&L.
Other long term employee benefits The Company provides for expenses towards compensated absences provided to its employees, while it is expected to be carried forward beyond twelve months as a long-term employee benefit, which is the amount of future benefit that employees have accumulated at the end of the year. The expense is recognized at the present value of the amount payable determined based on actuarial valuation by an independent external actuary as at the Balance Sheet date using the âprojected unit credit method.
d. Income taxes
Current tax is the amount of tax payable or receivable on the taxable income or loss for the year as determined in accordance with the tax rates (and tax laws) that have been enacted at the reporting date.
Current tax assets and liabilities are offset, when the Company has legally enforceable right to set off the recognized amounts and intends to settle the asset and the liability on a net basis.
Deferred tax is recognized using the Balance Sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting at the reporting date.
The Company reviews the âMAT Credit Entitlementâ at each Balance Sheet date and writes down the carrying amount of the same to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income tax during the specified period.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year where the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by same governing tax laws and the Company has legally enforceable right to set off current tax assets against current tax liabilities.
Both current tax and deferred tax relating to items recognized outside the P&L is recognized in OCI.
e. Property, plant and equipments (PPE)
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Depreciation in the books of the Company is charged on a pro-rata basis on the Straight Line Method as indicated under Schedule II of the Act, over the useful life of the assets.
f. Leases
Company as a lessee
The Company recognizes right-of-use assets and a lease liability at the commencement date, except short term leases and low value leases. The Companyâs lease asset classes primarily consist of leases for Land, Buildings and Office equipments. Right-of-use assets are depreciated on a straight line basis over the lease term. They are subsequently measured at cost less accumulated depreciation and impairment losses.
The lease liability measured at amortized cost using the effective interest method. In calculating the present value of lease payments, the Company uses its incremental borrowing rate. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Companyâs estimate of the amount expected to be payable under a residual value guarantee, or if Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in the P&L if the carrying amount of the right-of-use asset has been reduced to zero.
The Company presents right-of-use assets that do not meet the definition of investment property in âProperty, Plant and Equipmentâ and Lease liabilities as a separate line item on face of the Balance Sheet. The Company has opted not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Company as a lessor
Operating lease receipts are recognized in the P&L on straight-line basis over the lease terms except where the payments are structured to increase in line with the general inflation to compensate for the expected inflationary cost increases.
g. Intangible assets
I ntangible assets acquired from third party and the patents granted, are measured on initial recognition at cost.
The cost of development of software are capitalized and recognized as an Intangible asset, when the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to and has sufficient resources to complete development and intends to use or commercially exploit. Subsequent expenditure is capitalized only when it increases the future economic benefits. Research costs and internally generated intangibles (excluding capitalized software development costs) are not capitalized and the related expenditure is reflected in the P&L in the period in which the expenditure is incurred.
The useful lives of intangible assets of the Company are assessed as finite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the P&L when the asset is de-recognized.
Costs incurred in the development of the product, together with repository of new business components, upon completion of the development phase, have been classified and grouped as âProduct softwareâ under intangible assets. Similarly, costs incurred in the development of technology platform framework, which would enable the Company to provide solutions - both standard and customized - in an efficient manner, have been classified and grouped as âTechnology platformâ under intangible assets. During the period of development and thereafter, the asset is tested for impairment annually.
h. Financial Instruments
The Company initially determines the classification of financial assets and liabilities. After initial recognition, no re-classification is made for financial assets, which are categorized as equity instruments at FVTOCI, and financial assets / liabilities that are specifically designated as FVTPL. However, other financial assets are re-classifiable when there is a change in the business model of the Company.
Financial assets
Financial assets comprise of investments in equity and mutual funds, loans, trade receivables, cash and cash equivalents and other financial assets.
Initial recognition and measurement
All financial assets are recognized initially at fair value plus or minus, in the case of financial assets not recorded at fair value through P&L (FVTPL), transaction costs that are directly attributable to the acquisition or issue of the financial asset. However, Trade receivables that do not contain a significant financing component are initially measured at transaction price.
Where the fair value of a financial asset at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the P&L at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the P&L only to the extent that such gain or loss arises due to a change in factor that market participants take into account when pricing the financial asset.
Subsequent measurement
For subsequent measurement, the Company classifies a financial asset in accordance with the below criteria:
(a) The Companyâs business model for managing the financial asset and,
Financial liabilities
Financial liabilities comprise of Borrowings, Trade payables, Derivative financial instruments, Financial guarantee obligations, Lease liabilities and Other financial liabilities.
Initial recognition and measurement:
All financial liabilities are recognized initially at fair value minus, in the case of financial liabilities not recorded at fair value through P&L (FVTPL), transaction costs that are attributable to the acquisition of the financial liability.
Where the fair value of a financial liability at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the P&L at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the P&L only to the extent that such gain or loss arises due to a change in factor that market participants take into account when pricing the financial liability.
Subsequent measurement
All financial liabilities of the Company are subsequently measured at amortized cost using the effective interest method except for certain items like foreign exchange forward contracts that do not qualify for hedge accounting are measured at fair through P&L (FVTPL).
Transaction cost of financial guarantee contracts that are directly attributable to the issuance of the guarantee are recognized initially as a liability at fair value. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
Fair value measurement
The fair value of an asset or a liability is measured using the assumptions that the market participants would use when pricing the asset or liability, assuming that the market participants act in the economic best interest.
All assets and liabilities for which fair value is measured and disclosed in the financial statements are categorized within fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described as below:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level inputs that are significant to the fair value measurement is directly or indirectly observable.
Level 3: Valuation techniques for which the lowest level inputs that are significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the Balance Sheet on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization at the end of each reporting period (i.e.) based on the lowest level input that is significant to the fair value measurement as a whole.
For the purpose of fair value disclosures, the Company has determined the classes of assets and liabilities based on the nature, characteristics and risks of the assets or liabilities and the level of the fair value hierarchy as explained above.
Impairment of non-financial assets
The carrying amount of assets i.e., property, plant and equipment including right-of- use asset, investment properties, cash generating units and intangible assets other than inventories & deferred tax assets, are reviewed for impairment at each reporting date, if there is any indication of impairment based on internal and external factors.
Non-financial assets are treated as impaired when the carrying amount of such asset exceeds its recoverable value.
The Company impairs the Unbilled services revenue using the simplified approach wherein Expected Credit Loss model (ECL) is applied. The ECL over lifetime of the assets are estimated by using a provision matrix which is based on historical loss rates reflecting current conditions and forecasts of future economic conditions which are grouped on the basis of similar credit characteristics such as nature of industry, customer segment, past due status and other factors that are relevant to estimate the expected cash loss from these assets.
Mar 31, 2023
3.1 Significant accounting policies
a. Fair value measurement
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.
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 recognized in the financial statements 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.
b. Revenue recognition
The Company derives revenues from Software Solutions & Services. Revenues are derived from the following streams:
(1) Revenue from Software Products, in the form of (a) Software Licensing (b) Subscription for Software as a Service (c) Product Support Services and (d) Application Maintenance Services;
(2) Revenue from Software Services, in the form of
(a) Implementation / Professional Services (b) Managed Services;
(3) Revenue from Resale of Hardware & Software
Revenue is measured based on the transaction price, which is the consideration, adjusted for finance components and volume discounts, service level credits, performance bonus, price concessions and incentives, if any, as specified in the contract with the customers.
Revenue is recognized in the profit and loss account upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those services or products and excluding taxes or duties. To recognize revenues, the Company applies the following five step approach:
(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied.
At contract inception, the Company assesses its promise to transfer products or services to a customer to identify separate performance obligations. The Company applies judgment to determine whether each product or service promised to a customer is capable of being distinct, and are distinct in the context of the contract, if not, the promised products or services are combined and accounted as a single performance obligation. The Company allocates the contract value to separately identifiable performance obligations based on their relative standalone selling price (mostly as reflected in the contracts) or residual method. Standalone selling prices are determined based on sale prices for the components when it is regularly sold separately. In cases where the
Company is unable to determine the standalone selling price, the Company uses expected cost- plus margin approach in estimating the standalone selling price.
For performance obligations where control is transferred over time, revenues are recognized by measuring progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the promised products or services to be provided.
The method for recognizing revenues depends on the nature of the products sold / services rendered:
(1) Revenue from Software Products
(a) Software Licensing
Software licensing revenues represent all fees earned from granting customers licenses to use the Companyâs software, through initial licensing and or through the purchase of additional modules or user rights. For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized on delivery of the software and when the customer obtains a right to use such licenses.
(b) Subscription for Software as a Service Subscription fees for offering the hosted software as a service are recognized as revenue ratably on straight line basis, over the term of the subscription arrangement.
(c) Product Support Services
Fees for product support services, covering inter alia improvement and upgradation of the basic Software, whether sold separately (e.g., renewal period AMC) or as an element of a multiple-element arrangement, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.
(d) Application Maintenance Services
Fees for the application maintenance services, covering inter alia the support of the customized software, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.
(e) Royalty income
Royalty income represents fees charged at arms-length basis on the revenue earned from external customers by the subsidiaries, by way of Software Licensing, Product Support Services, Subscription for Software as a Service and Application Maintenance Service, in respect of Companyâs Software Products. Such royalty income is recognized at the point of time at which the subsidiaries recognize the said revenue.
(2) Revenue from Software Services
(a) Implementation / Professional Services
Software Implementation / Professional Services contracts are either fixed price or time and material based.
Revenues from fixed price contracts, where the performance obligations are satisfied over time, are recognized using the âpercentage of completionâ method. Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. The performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Where the Software is required to be substantially customized as part of the implementation service, the entire fee for licensing and implementation services is considered to be a single performance obligation and the revenue is recognized using the percentage of completion method as the implementation services are performed.
Revenues from implementation services in respect of hosting contracts are to be recognized as revenue ratably over the longer of the contract term or the estimated expected life of the customer relationship.
However, considering the existence of partners being available for rendering such implementation services, these services are considered to be a separate element and recognized in accordance with percentage of completion method.
When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the statement of profit and loss in the period in which such losses become probable based on the current contract estimates as a contract provision.
In the case of time and material contracts, revenue is recognized based on billable time spent in the project, priced at the contractual rate.
Any change in scope or price is considered as a contract modification. The Company accounts for modifications to existing contracts by assessing whether the services added are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively as a separate contract if the additional services are priced at the standalone selling price.
Non-refundable one-time upfront fees for enablement / application installation, consisting of standardization set-up, initiation or activation or user login creation services in the case of hosting contracts, are recognized in accordance with percentage of completion method once the customer obtains a right to access and use the Software.
(b) Managed Services
Fees for managed services, which include business processing services, are recognized as revenue as the related services are performed.
(3) Revenue from Resale of Hardware & Software Revenue from sale of traded hardware / software is recognized on transfer of significant risks, rewards and control to the customer.
Contract assets, liabilities and financing arrangements
A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets primarily relate to unbilled amounts on implementation / professional services contracts and are classified as non-financial asset as the contractual right to consideration is dependent on completion of contractual milestones (which we refer to as unbilled services revenue).
Unbilled revenues on software licensing are classified as a financial asset where the right to consideration is unconditional upon passage of time (which we refer to as unbilled licenses revenue). The unbilled royalty revenue is also grouped here.
A contract liability is an entityâs obligation to transfer software products or software services to a customer for which the entity has received consideration (or the amount is due) from the customer (which we refer to as unearned revenue).
The Company assesses the timing of the transfer of software products or software services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, the Company does not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist.
c. Finance income
I nterest on bank deposits is recognized on accrual basis.
The imputed interest attributable to arrangements having extended credit period is eliminated from the revenue from operations and accounted as interest over the credit period.
d. Income taxes
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates as per the provisions of the Income tax Act, 1961 and other applicable tax laws. Current income tax payable by overseas branches of the Company if any is computed in accordance with the tax laws applicable in the jurisdiction in which the respective branch operates. The taxes paid are generally available for
set off against the Indian income tax liability of the Companyâs worldwide income, and if not available, charged off in the profit and loss account.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future tax liability, is recognized as an asset viz. MAT Credit Entitlement, to the extent there is convincing evidence that the Company will pay normal Income tax and it is highly probable that future economic benefits associated with it will flow to the Company during the specified period. The Company reviews the âMAT Credit Entitlementâ at each Balance Sheet date and writes down the carrying amount of the same to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income tax during the specified period.
Current tax assets and liabilities are offset, when the Company has legally enforceable right to set off the recognized amounts and intends to settle the asset and the liability on a net basis.
Deferred tax is recognized using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting at the reporting date. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that the sufficient taxable profit will be available to allow, all or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year where the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by same governing tax laws and the Company has legally enforceable right to set off current tax assets against current tax liabilities.
Both current tax and deferred tax relating to items recognized outside the Profit or Loss is recognized either in âOther Comprehensive Incomeâ or directly in âEquityâ as the case may be.
e. Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
When assets are acquired on Hire Purchase these are capitalized at the gross value and interest thereon charged to statement of profit and loss.
Depreciation in the books of the Company is charged on a pro-rata basis on the Straight Line Method as prescribed under Schedule II of the Companies Act, 2013 over the useful life of the assets.
An item of property, plant and equipment and any significant part initially recognized is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
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.
f. Right-of-use assets
Leases
The Company has adopted Ind AS 116 âLeasesâ with the date of initial application being April 01, 2019.
Ind AS 116 replaces Ind AS 17 - Leases & related interpretation & guidance. The Company has applied Ind AS 116 using the modified retrospective approach effective April 01,2019. The Companyâs lease asset classes primarily consist of leases for land, buildings and office equipments.
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. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (1) the contract involves the use of an identified asset, (2) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the Company has the right to direct the use of the asset.
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 recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
a) Right-of-use (âROUâ) assets
The Company recognizes right-of-use assets at the commencement date, except short term leases and low value leases. The Companyâs lease asset classes primarily consist of leases for Land, Buildings and Office equipments. The cost of right-of-use assets includes the amount of lease liabilities recognized, 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 lease term. They are subsequently measured at cost less accumulated depreciation and impairment losses.
For the purpose of impairment testing, the recoverable amount (i.e., the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets.
b) Lease liabilities
The Company recognizes lease liability at the commencement date 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 recognized 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 initial application date i.e., April 01,2019, because the interest rate implicit in the lease is not readily determinable. In respect of subsequent leases, the incremental borrowing rates are determined periodically, to calculate the present value of lease payments. After the lease 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) Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities include these options when it is reasonably certain that they will be exercised. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
d) Short term leases and leases of low-value assets
The Company applies the short term lease recognition exemption to its short term leases (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 such leases that are considered to be of low value. Lease payments on short term leases and leases of low-value assets are recognized as expense on a straight line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
g. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Internally generated intangibles, excluding capitalized software development costs, are not capitalized and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred.
The useful lives of intangible assets of the Company are assessed as finite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with
a finite useful life are reviewed at least at the end of each reporting period. 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 amortization period or method, as appropriate and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.
Software development costs
Research costs are expensed as incurred. Software development expenditures on product / platform are recognized as intangible assets when the Company can demonstrate:
> The technical feasibility of completing the intangible asset so that the asset will be available for use or sale,
> Its intention to complete and its ability and intention to use or sell the asset,
> How the asset will generate future economic benefits,
> The availability of resources to complete the asset,
> The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses, if any. Amortization of these assets begins from the year, following the year in which such development costs are incurred. It is amortized over the period of expected future benefit. Amortization expense is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Costs incurred in the development of the product, together with repository of new business components, upon completion of the development phase, have
been classified and grouped as âProduct softwareâ under intangible assets. Similarly, costs incurred in the development of technology platform framework, which would enable the Company to provide solutions - both standard and customized - in an efficient manner, have been classified and grouped as âTechnology platformâ under intangible assets.
During the period of development and thereafter, the asset is tested for impairment annually.
Patents
Company is filing patent applications and costs incurred for filing the patent application like consultancy and filing fees are capitalized upon grant of Patents.
The useful life of the above assets is estimated as under:
h. Borrowing costs
Borrowing cost include interest computed using Effective Interest Rate method, amortization of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs that are directly attributable to the acquisition, construction, production of a qualifying asset are capitalized as part of the cost of that asset which takes substantial period of time to get ready for its intended use. The Company determines the amount of borrowing cost eligible for capitalization by applying capitalization rate to the expenditure incurred on such cost. The capitalization rate determined based on the weighted average rate of borrowing cost applicable to the borrowings of the Company which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing cost that the Company capitalizes during the period does not exceed the amount of borrowing cost incurred during that period. All other borrowing costs are expensed in the period in which they occur.
i. Inventories
Inventories are valued at the lower of cost and net realizable value. Cost includes bringing the inventories to their present location and condition and is determined based on FIFO method. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
j. Impairment of non-financial assets
The carrying values of the non-financial assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment of the carrying amount of the Companyâs assets. If any indication exists, an assetâs recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of the asset exceeds the recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognized for an asset in earlier accounting periods no longer exists or may have decreased such reversal of impairment loss is recognized in the statement of profit and loss.
Mar 31, 2018
a. Fair value measurement
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.
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 recognized in the financial statements 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.
b. Revenue recognition
Revenue is recognized in accordance with Ind AS 18: âRevenueâ. This requires exercise of judgment and the use of estimates in connection with the determination of the amount of revenue to be recognized in each accounting period.
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, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defi ned terms of payment and excluding taxes or duties.
Revenue in excess of billings are classified as unbilled revenue while billings in excess of revenues are classif ed as unearned revenue.
The specific recognition criteria described below must be met before revenue is recognized.
Revenues are derived from the following streams: (1) Software License (2) Software development / implementation services (3) Product Support Services (4) Application Maintenance Services (5) Software as a Service (SaaS) (6) Managed Services (7) Value Added Resale Hardware & Software and (8) Other income.
License fees
Software license revenues represent all fees earned from granting customers licenses to use the Companyâs software, through initial licensing and or through the purchase of additional modules or user rights. For software license arrangements that do not require signifi cant modifi cation or customization of the underlying software, revenue is recognized on delivery of the software, including cases with extended credit period, when, in the opinion of the Company, there are no collectability concerns.
Software development / implementation fees
Software development / implementation contracts are either fixed price or time and material based. In the case of fixed price contracts, revenue is recognized in accordance with percentage of completion method. In the case of time and material contracts, revenue is recognized based on billable time spent in the project, priced at the contractual rate.
Non-refundable one-time upfront fees for enablement / application installation, consisting of standardization set-up, initiation or activation or user login creation services in the case of hosting contracts, forming part of the implementation services are recognized in accordance with percentage of completion method.
Product support service fees
Fees for product support services, covering inter alia improvement and upgradation of the basic Software, whether sold separately (e.g., renewal period AMC) or as an element of a multiple-element arrangement, are recognised as revenue ratably on straight line basis, over the term of the support arrangement.
Application maintenance service fees
Fees for the application maintenance services, covering inter alia the support of the customized software, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.
Software as a Service (SaaS) fees
Subscription fees for offering the hosted software as a service are recognized as revenue ratably on straight line basis, over the term of the subscription arrangement.
Managed services fees
Fees for managed services, which include business processing services, are recognized as revenue as services are provided.
Value added resale hardware & software
Revenue from sale of traded hardware / software is recognized on transfer of signifi cant risks and rewards of ownership to customers which generally coincides with dispatch of goods.
Multiple element arrangements
Software licenses are often sold in combination with implementation and product support services. The consideration in such multiple element contracts is allocated based either on the fair value of each element or on the residual method. Under the residual method, the balance of the consideration, after allocating the fair values of undelivered components of a transaction has been allocated to the delivered components for which specif c fair values do not exist.
In cases, where implementation services significantly alter the softwareâs capabilities, software license revenue is recognized on percentage of completion method, instead of considering software and implementation services as separate elements.
Revenues from implementation services in respect of hosting contracts are to be recognized as revenue ratably over the longer of the contract term or the estimated expected life of the customer relationship. However, considering the existence of partners being available for rendering such implementation services, these services are considered to be a separate element and recognized in accordance with percentage of completion method.
Other income
Interest on bank deposits and rental income are recognized on accrual basis.
The imputed interest attributable to arrangements having extended credit period is eliminated from the revenue from operations and accounted as interest over the credit period.
c. Income Taxes
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates as per the provisions of the Income tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefi ts in the form of adjustment to future tax liability, is recognized as an asset viz. MAT Credit Entitlement, to the extent there is convincing evidence that the Company will pay normal Income tax and it is highly probable that future economic benefits associated with it will flow to the Company during the specif ed period. The Company reviews the âMAT Credit Entitlementâ at each Balance Sheet date and writes down the carrying amount of the same to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income tax during the specified period.
Current tax assets and liabilities are offset, when the Company has legally enforceable right to set off the recognized amounts and intends to settle the asset and the liability on a net basis.
Deferred tax is recognized using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting at the reporting date.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year where the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by same governing tax laws and the Company has legally enforceable right to set off current tax assets against current tax liabilities.
Both current tax and deferred tax relating to items recognized outside the Profit or Loss is recognized either in âOther Comprehensive Incomeâ or directly in âEquityâ as the case may be.
d. Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use.When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
When assets are acquired on Hire Purchase these are capitalized at the gross value and interest thereon charged to statement of profit and loss.
Depreciation in the books of the Company is charged on a pro-rata basis on the Straight Line Method as prescribed under Schedule II of the Companies Act, 2013 over the useful life of the assets.
The useful lives used by the Company on various assets are tabled below:
An item of property, plant and equipment and any signifi cant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
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.
e. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Internally generated intangibles, excluding capitalized software development costs, are not capitalized and the related expenditure is refected in the statement of profit and loss in the period in which the expenditure is incurred.
The useful lives of intangible assets of the Company are assessed as finite.
Intangible assets with f nite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a fi nite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benef ts embodied in the asset are considered to modify the amortization period or method, as appropriate and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
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 recognized in the statement of profit or loss when the asset is derecognized.
Software development costs
Research costs are expensed as incurred. Software development expenditures on product / platform are recognized as intangible assets when the Company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- Its intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses, if any. Amortization of these assets begins from the year, following the year in which such development costs are incurred. It is amortized over the period of expected future benefi t. Amortization expense is recognized in the statement of profi t and loss unless such expenditure forms part of carrying value of another asset.
Costs incurred in the development of the product, together with repository of new business components, upon completion of the development phase, have been classified and grouped as âProduct softwareâ under intangible assets. Similarly, costs incurred in the development of technology platform framework, which would enable the Company to provide solutions - both standard and customized - in an efficient manner, have been classif ed and grouped as âTechnology platformâ under intangible assets.
During the period of development and thereafter, the asset is tested for impairment annually.
Patents
Company is fling patent applications and costs incurred for fling the patent application like consultancy and fling fees are capitalized upon grant of Patents.
The useful life of the above assets is estimated as under:
f. Borrowing costs
Borrowing cost include interest computed using Effective Interest Rate method, amortization of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs that are directly attributable to the acquisition, construction, production of a qualifying asset are capitalized as part of the cost of that asset which takes substantial period of time to get ready for its intended use. The Company determines the amount of borrowing cost eligible for capitalization by applying capitalization rate to the expenditure incurred on such cost. The capitalization rate determined based on the weighted average rate of borrowing cost applicable to the borrowings of the Company which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing cost that the Company capitalizes during the period does not exceed the amount of borrowing cost incurred during that period. All other borrowing costs are expensed in the period in which they occur.
g. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfi lment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to 01 April 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Company as a lessee
A lease is classifi ed at the inception date as a fi nance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in fi nance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on the borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the statement of profi t and loss on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classifi ed as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Leases are classifi ed as fi nance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to refect a constant periodic rate of return on the net investment outstanding in respect of the lease.
h. Inventories
Inventories are valued at the lower of cost and net realizable value.
Cost includes bringing the inventories to their present location and condition and is determined based on FIFO method.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
i. Impairment of non-financial assets
The carrying values of the non-financial assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment of the carrying amount of the Companyâs assets. If any indication exists, an assetâs recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of the asset exceeds the recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash fiows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognized for an asset in earlier accounting periods no longer exists or may have decreased such reversal of impairment loss is recognized in the statement of profit and loss.
j. Provisions, contingent liabilities and contingent assets
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refects, when appropriate, the risks specif c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Contingent liability is a possible obligation that may arise from past events and its existence will be confi rmed only by occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or it is not probable that an outf ow of resources embodying economic benefi ts will be required to settle the obligation and the same are not recognized but disclosed in the financial statements.
Insurance claims are accounted on the basis of claims admitted or expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect ultimate collection. Any subsequent change in the recoverability is provided for. Contingent Assets are neither recognized nor disclosed.
k. Employee benefi ts expense Short-term employee benefi ts
Short-term employee benefits viz., salaries, wages and other benefits are recognized as expenses at the undiscounted amount as per contractual terms in the statement of profit and loss for the year in which the related service is rendered.
Defined contribution plans Superannuation
The senior officers of the Company have been given an option to participate in Defined Contribution Plan (âThe Superannuation Planâ) maintained by the Life Insurance Corporation of India. For those who opt to participate, the company makes contributions not exceeding Rupees one lakh fifty thousand per annum, based on specified percentage of basic salary of each covered employee. For those who do not opt to participate, an amount equivalent to the contribution determined at the time of exercise of option is paid along with salary. The Company has no further obligation beyond its contribution/payments.
National pension system
The employees of the Company have been given an option to participate in a def ned contribution plan (ââNational Pension Systemâ), maintained by the fund managers approved by the Pension Fund Regulatory and Development Authority. For those who opt to participate, the Company makes contributions equal to 10% of the covered employeeâs basic salary. For those who do not opt to participate, an amount equivalent to the contribution determined at the time of exercise of option is paid along with salary. The Company has no further obligation beyond its contributions/payments.
Provident fund
In addition to the above benefits, all employees receive benefits from a Provident fund, which is def ned contribution plan. Both the employee and employer each make monthly contributions to the plan equal to 12% of the covered employeeâs basic salary. These contributions are made to the employeesâ provident fund maintained by the Government of India. The company has no further obligations under the plan beyond its monthly contributions.
Defined benefit plans Gratuity
In accordance with the Indian Law, the Company provides for gratuity, a defi ned benefit plan (âThe Gratuity Planâ), covering all employees. The employees are covered under the Company Gratuity Scheme of the Life Insurance Corporation of India. The liability for Gratuity is ascertained as at the end of the financial year, based on the actuarial valuation by an independent external actuary as at the Balance Sheet date using the âprojected unit credit methodâ.
Remeasurement of net defi ned benefi t asset / liability comprising of actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to other comprehensive income in the period in which they arise and immediately transferred to retained earnings. Other costs are accounted in the consolidated statement of profit and loss.
Leave encashment
The Company has a policy of providing encashment of unavailed leave for its employees. The obligation for the leave encashment is recognized based on an independent external actuarial valuation at the Balance Sheet date. The expense is recognized in the statement of profit and loss at the present value of the amount payable determined based on actuarial valuation using âprojected unit credit methodâ.
l. Financial instruments
1.1 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.
1.2 Financial assets and liabilities are offset and the net amount is presented in the Balance Sheet when and only when the Company has a legal right to offset the recognized amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
1.3 The Company initially determines the classification of fnancial assets and liabilities. After initial recognition, no re-classification is made for financial assets which are categorised as equity instruments at FVTOCI and financial assets / liabilities that are specifi cally designated as FVTPL. However, other financial assets are re-classifiable when there is a change in the business model of the Company. When the Company reclassif es the fnancial assets, such reclassifications are done prospectively from the first day of the immediately next reporting period. The Company does not restate any previously recognized gains, losses including impairment gains or losses or interest.
Financial assets
1.4 Financial assets comprises of investments in equity and mutual funds, trade receivables, cash and cash equivalents and other financial assets.
1.5 Depending on the business model (i.e) nature of transactions for managing those financial assets and its contractual cash flow characteristics, the financial assets are initially measured at fair value and subsequently measured and classified at:
a) Amortised cost; or
b) Fair value through other comprehensive income (FVTOCI); or
c) Fair value through profit or loss (FVTPL)
Amortised cost represents carrying amount on initial recognition at fair value plus or minus transaction cost.
1.6 The Company has evaluated the facts and circumstances on date of transition to Ind AS for the purpose of classifi cation and measurement of financial assets. Accordingly, financial assets are measured at FVTPL except for those financial assets whose contractual terms give rise to cash fi ows on specifi ed dates that represents solely payments of principal and interest thereon, are measured as detailed below depending on the business model:
Investment in equity of subsidiaries are carried at cost (i.e) previous GAAP carrying amount as at the date of transition to Ind AS. The Company has exercised an irrevocable option at time of initial recognition to measure the changes in fair value of other equity investments at FVTOCI. Accordingly, the Company classifi es its financial assets for measurement as below:
1.7 Financial assets are derecognized (i.e) removed from the financial statements, when its contractual rights to the cash fi ows expire or upon transfer of the said assets. The Company also derecognises when it has an obligation to adjust the cash fiows arising from the financial asset with third party and either upon transfer of:
a. significant risk and rewards of the financial asset, or
b. control of the financial asset
However, the Company continue to recognise the transferred financial asset and its associated liability to the extent of its continuing involvement, which are measured on the basis of retainment of its rights and obligations of financial asset. The Company has applied the de-recognition requirements prospectively.
1.8 Upon derecognition of its financial asset or part thereof, the difference between the carrying amount measured at the date of recognition and the consideration received including any new asset obtained less any new liability assumed shall be recognized in the Statement of Profit and Loss.
1.9 For impairment purposes, significant financial assets are tested on individual basis at each reporting date. Other financial assets are assessed collectively in groups that share similar credit risk characteristics. Accordingly, the impairment testing is done retrospectively on the following basis:
Financial liabilities
1.10 Financial liabilities comprises of Borrowings, Trade payables, Derivative f i nancial instruments, Financial guarantee obligation and other financial liabilities.
1.11 The Company measures its financial liabilities as below:
1.12 Financial liabilities are derecognized when and only when it is extinguished (i.e) when the obligation specif ed in the contract is discharged or cancelled or expired.
1.13 Upon derecognition of its fnancial liabilities or part thereof, 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 recognized in the Statement of Profit and Loss.
m. Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprises of cash at banks and on hand and short-term deposits with an original maturity of three months or less, highly liquid investments that are readily convertible into cash.
n. Cash dividend
The Company recognizes a liability to make cash dividend, when the distribution is authorized and the distribution is no longer at the discretion of the Company. A corresponding amount is recognized directly in equity including applicable taxes.
o. Cash flow statement
Cash flows are presented using indirect method, whereby profit / loss before extraordinary items and 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.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
p. Share based payments
Stock options granted to the option grantees in the Company / subsidiaries are measured at the fair value of the equity instruments granted. For each stock option, the measurement of fair value is performed on the grant date. The grant date is the date on which the options are granted. The fair value so determined is revised only if the stock option scheme is modif ed in a manner that is beneficial to the employees. The ex-modification fair value is recognized as an employee expense equally over the vesting period and the incremental fair value resulting from modification of the scheme, is recognized over the vesting period remaining after the modification date.
Graded vesting options
If the options vest in instalments (i.e. the options vest pro rata over the vesting period), then each instalment is treated as a separate share option grant because each instalment has a different vesting period.
q. Earnings Per Share (EPS)
Net profit after tax is divided by the weighted average number of equity shares outstanding.
When an item of income or expense which is otherwise required to be recognized in the statement of profit and loss is debited or credited to Equity, the amount in respect thereof is suitably adjusted in Net Prof t for the purpose of computing Earnings Per Share.
Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of Equity Shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profi t attributable to equity holders of the Company by the weighted average number of Equity Shares outstanding during the year plus the weighted average number of Equity Shares that would be issued on conversion of all the dilutive potential Equity Shares into Equity shares.
r. Operating segments
The Companyâs business operation comprises of single operating segment viz., Software and related solutions. Operating segment has been identified on the basis of nature of products and reported in a manner consistent with the internal reporting provided to Chief Operating Decision Maker.
s. Assets held for sale
Assets held for sale are measured at the lower of carrying amount or fair value less costs to sell.
Mar 31, 2017
1. Corporate information
Ramco Systems Limited (the âCompanyâ) is a public limited company domiciled and headquartered in India and incorporated under the provisions of Companies Act,1956. Its shares are listed in BSE Limited and National Stock Exchange of India Limited. The registered offi ce of the Company is located at No. 47, P.S.K Nagar, Rajapalayam 626108 and corporate office and R&D center is located at 64, Sardar Patel Road, Taramani, Chennai 600113.
The Company develops Enterprise Resource Planning (ERP) Software solutions for various verticals in various domains like Human Capital Management, Aviation Maintenance Repair & Overhaul, Banking Analytics and provides these with related solutions and services, including managed services. The Software is either delivered on-premise or offered as a service hosted on cloud.
The financial statements of the Company for the year were approved and adopted by Board of Directors of the Company in its meeting held on 30 May 2017.
2. Basis of preparation of separate financial statements
2.1 The financial statements for the period up to 31 March 2016 were prepared in accordance with Accounting Standards notified under section 133 of the Companies Act, 2013 read together with Rule 7 of the Companies (Accounts) Rules, 2014 (Previous Indian GAAP). Pursuant to the mandatory requirement for adoption of Indian Accounting Standards (Ind AS), as notif ed by the Ministry of Corporate Affairs (MCA), the Company has prepared its financial statements for the year ended 31 March 2017 in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules 2015 as amended from time to time. As mandated by the Ind AS, the comparative figures in the financial statements with respect to the previous year also have been restated. As a fi rst time adopter of Ind AS, the comparative Balance Sheet prepared for the opening date (01 April 2015 being the date of transition), is prepared under Ind AS. Refer note no.32 for information on how the Company adopted Ind AS.
2.2 The financial statements have been prepared on the historical cost basis except certain financial instruments (refer note no.3.a and 3.l) and defined benefit plan assets, share based payments that are measured at fair values.
2.3 Foreign currency transactions
The functional currency of the Company is Indian Rupee. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transaction. The monetary items denominated in the foreign currency at the year-end are translated at the exchange rates prevailing on the date of the balance sheet and the loss or gain arising out of such transactions is adjusted in the Statement of Profit and Loss.
2.4 Translation of financial statements of foreign branches
Functional currency of foreign branches is the respective local currency of domicile. All income and expenditure transactions during the year are reported at a monthly moving average exchange rate for the respective periods. All assets and liabilities are translated at the rate prevailing on the Balance Sheet date. Net gain / loss on foreign currency translation is recognized in Other Comprehensive Income. As allowed by Ind AS 101, cumulative currency translation differences for all foreign operations have been reset to zero at the date of transition, viz., 01 April 2015.
2.5 An asset is treated as current when it is:
- Expected to be realized or intended to sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- 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.
2.6 A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
2.7 Deferred tax assets and liabilities are classified as non-current assets and liabilities.
2.8 The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
2.9 The financial statements are presented in Indian Rupees rounded to the nearest million with two decimals.
3. Significant accounting policies
a. Fair value measurement
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.
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 recognized in the financial statements 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.
b. Revenue recognition
Revenue is recognized in accordance with Ind AS 18: âRevenueâ. This requires exercise of judgment and the use of estimates in connection with the determination of the amount of revenue to be recognized in each accounting period.
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, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties.
The specific recognition criteria described below must be met before revenue is recognized.
Revenues are derived from the following streams: (1) Software License (2) Software development / implementation services (3) Product Support Services (4) Application Maintenance Services (5) Software as a Service (SaaS)
(6) Managed Services (7) Value Added Resale Hardware & Software and (8) Other income.
License fees
Software license revenues represent all fees earned from granting customers licenses to use the Companyâs software, through initial licensing and or through the purchase of additional modules or user rights. For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized on delivery of the software, including cases with extended credit period, when, in the opinion of the Company, there are no collectability concerns.
Software development / implementation fees
Software development / implementation contracts are either fixed price or time and material based. In the case of fixed price contracts, revenue is recognized in accordance with percentage of completion method. In the case of time and material contracts, revenue is recognized based on billable time spent in the project, priced at the contractual rate.
Non-refundable one-time upfront fees for enablement / application installation, consisting of standardization set-up, initiation or activation or user login creation services in the case of hosting contracts, forming part of the implementation services are recognized in accordance with percentage of completion method.
Product support service fees
Fees for product support services, covering inter alia improvement and up gradation of the basic Software, whether sold separately (e.g., renewal period AMC) or as an element of a multiple-element arrangement, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.
Application maintenance service fees
Fees for the application maintenance services, covering inter alia the support of the customized software, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.
Software as a Service (SaaS) fees
Subscription fees for offering the hosted software as a service are recognized as revenue ratably on straight line basis, over the term of the subscription arrangement.
Managed services fees
Fees for managed services, which include business processing services, are recognized as revenue as services are provided.
Value added resale hardware & software
Revenue from sale of traded hardware / software is recognized on transfer of significant risks and rewards of ownership to customers which generally coincides with dispatch of goods.
Multiple element arrangements
Software licenses are often sold in combination with implementation and product support services. The consideration in such multiple element contracts is allocated based either on the fair value of each element or on the residual method. Under the residual method, the balance of the consideration, after allocating the fair values of undelivered components of a transaction has been allocated to the delivered components for which specific fair values do not exist.
In cases, where implementation services significantly alter the softwareâs capabilities, software license revenue is recognized on percentage of completion method, instead of considering software and implementation services as separate elements.
Revenues from implementation services in respect of hosting contracts are to be recognized as revenue ratably over the longer of the contract term or the estimated expected life of the customer relationship. However, considering the existence of partners being available for rendering such implementation services, these services are considered to be a separate element and recognized in accordance with percentage of completion method.
Other income
Interest on bank deposits and rental income are recognized on accrual basis.
The imputed interest attributable to arrangements having extended credit period is eliminated from the revenue from operations and accounted as interest over the credit period.
c. Income Taxes
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates the provisions of the Income tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future tax liability, is recognized as an asset viz. MAT Credit Entitlement, to the extent there is convincing evidence that the Company will pay normal Income tax and it is highly probable that future economic benefits associated with it will flow to the Company during the specified period. The Company reviews the âMAT Credit Entitlementâ at each Balance Sheet date and writes down the carrying amount of the same to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income tax during the specified period.
Current tax assets and liabilities are offset, when the Company has legally enforceable right to set off the recognized amounts and intends to settle the asset and the liability on a net basis.
Deferred tax is recognized using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting at the reporting date.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year where the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by same governing tax laws and the Company has legally enforceable right to set off current tax assets against current tax liabilities.
Both current tax and deferred tax relating to items recognized outside the Profit or Loss is recognized either in âOther Comprehensive Incomeâ or directly in âEquityâ as the case may be.
d. Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
When assets are acquired on Hire Purchase these are capitalized at the gross value and interest thereon charged to statement of profit and loss.
Depreciation in the books of the Company is charged on a pro-rata basis on the Straight Line Method as prescribed under Schedule II of the Companies Act, 2013 over the useful life of the assets.
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
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.
e. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Internally generated intangibles, excluding capitalized software development costs, are not capitalized and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred.
The useful lives of intangible assets of the Company are assessed as finite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. 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 amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
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 recognized in the statement of profit or loss when the asset is derecognized.
Software development costs
Research costs are expensed as incurred. Software development expenditures on product / platform are recognized as intangible assets when the Company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- Its intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses, if any. Amortization of these assets begins from the year, following the year in which such development costs are incurred. It is amortized over the period of expected future benefit. Amortization expense is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Costs incurred in the development of the product, together with repository of new business components, upon completion of the development phase, have been classified and grouped as âProduct softwareâ under intangible assets. Similarly, costs incurred in the development of technology platform framework, which would enable the Company to provide solutions -both standard and customized - in an efficient manner, have been classified and grouped as âTechnology platformâ under intangible assets.
Patents
Company is fling patent applications and costs incurred for fling the patent application like consultancy and fling fees are capitalized upon grant of Patents.
f. Borrowing costs
Borrowing cost include interest computed using Effective Interest Rate method, amortization of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs that are directly attributable to the acquisition, construction, production of a qualifying asset are capitalized as part of the cost of that asset which takes substantial period of time to get ready for its intended use. The Company determines the amount of borrowing cost eligible for capitalization by applying capitalization rate to the expenditure incurred on such cost. The capitalization rate determined based on the weighted average rate of borrowing cost applicable to the borrowings of the Company which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing cost that the Company capitalizes during the period does not exceed the amount of borrowing cost incurred during that period. All other borrowing costs are expensed in the period in which they occur.
g. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to 01 April 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on the borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Company as a less or
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
h. Inventories
Inventories are valued at the lower of cost and net realizable value.
Cost includes bringing the inventories to their present location and condition and is determined based on FIFO method.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
i. Impairment of non-financial assets
The carrying values of the non-financial assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment of the carrying amount of the Companyâs assets. If any indication exists, an assetâs recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of the asset exceeds the recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognized for an asset in earlier accounting periods no longer exists or may have decreased such reversal of impairment loss is recognized in the statement of profit and loss.
j. Provisions, contingent liabilities and contingent assets
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Contingent liability is a possible obligation that may arise from past events and its existence will be confirmed only by occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the same are not recognized but disclosed in the financial statements.
Insurance claims are accounted on the basis of claims admitted or expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect ultimate collection. Any subsequent change in the recoverability is provided for. Contingent Assets are neither recognized nor disclosed.
k. Employee benefits expense Short-term employee benefits
Short-term employee benefits viz., salaries, wages and other benefits are recognized as expenses at the undiscounted amount as per contractual terms in the statement of profit and loss for the year in which the related service is rendered.
Defined contribution plans Superannuation
The senior officers of the Company have been given an option to participate in Defined Contribution Plan (âThe Superannuation Planâ) maintained by the Life Insurance Corporation of India. For those who opt to participate, the company makes contributions not exceeding Rupees One Lakh per annum, based on specified percentage of basic salary of each covered employee. For those who do not opt to participate, an amount equivalent to the contribution determined at the time of exercise of option is paid along with salary. The Company has no further obligation beyond its contribution/payments.
National pension system
The employees of the Company have been given an option to participate in a defined contribution plan (ââNational Pension Systemâ), maintained by the fund managers approved by the Pension Fund Regulatory and Development Authority. For those who opt to participate, the Company makes contributions equal to 10% of the covered employeeâs basic salary. For those who do not opt to participate, an amount equivalent to the contribution determined at the time of exercise of option is paid along with salary. The Company has no further obligation beyond its contributions/payments.
Provident fund
In addition to the above benefits, all employees receive benefits from a Provident fund, which is defined contribution plan. Both the employee and employer each make monthly contributions to the plan equal to 12% of the covered employeeâs basic salary. These contributions are made to the employeesâ provident fund maintained by the Government of India. The company has no further obligations under the plan beyond its monthly contributions.
Defined benefit plans Gratuity
In accordance with the Indian Law, the Company provides for gratuity, a defined benefit plan (âThe Gratuity Planâ), covering all employees. The employees are covered under the Company Gratuity Scheme of the Life Insurance Corporation of India. The liability for Gratuity is ascertained as at the end of the financial year, based on the actuarial valuation by an independent external actuary as at the Balance Sheet date using the âprojected unit credit methodâ.
Remeasurement of net defined benefit asset / liability comprising of actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to other comprehensive income in the period in which they arise and immediately transferred to retained earnings. Other costs are accounted in the consolidated statement of profit and loss.
Leave encashment
The Company has a policy of providing encashment of unveiled leave for its employees. The obligation for the leave encashment is recognized based on an independent external actuarial valuation at the Balance Sheet date. The expense is recognized in the statement of profit and loss at the present value of the amount payable determined based on actuarial valuation using âprojected unit credit methodâ.
l. Financial instruments
1.1 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.
1.2 Financial assets and liabilities are offset and the net amount is presented in the Balance sheet when and only when the Company has a legal right to offset the recognized amounts and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
1.3 The Company initially determines the classification of financial assets and liabilities. After initial recognition, no re-classification is made for financial assets which are categorized as equity instruments at FVTOCI and financial assets / liabilities that are specifically designated as FVTPL. However, other financial assets are re-classifiable when there is a change in the business model of the Company. When the Company reclassifies the financial assets, such reclassifications are done prospectively from the fi rst day of the immediately next reporting period. The Company does not restate any previously recognized gains, losses including impairment gains or losses or interest.
Financial assets
1.4 Financial assets comprises of investments in equity and mutual funds, trade receivables, cash and cash equivalents and other financial assets.
1.5 Depending on the business model (i.e) nature of transactions for managing those financial assets and its contractual cash flow characteristics, the financial assets are initially measured at fair value and subsequently measured and classified at:
a) Amortized cost; or
b) Fair value through other comprehensive income (FVTOCI); or
c) Fair value through profit or loss (FVTPL)
Amortized cost represents carrying amount on initial recognition at fair value plus or minus transaction cost.
1.6 The Company has evaluated the facts and circumstances on date of transition to Ind AS for the purpose of classification and measurement of financial assets. Accordingly, financial assets are measured at FVTPL except for those financial assets whose contractual terms give rise to cash flows on specified dates that represents solely payments of principal and interest thereon, are measured as detailed below depending on the business model:
Investment in equity of subsidiaries are carried at cost (i.e) previous GAAP carrying amount as at the date of transition to Ind AS. The Company has exercised an irrevocable option at time of initial recognition to measure the changes in fair value of other equity investments at FVTOCI. Accordingly, the Company classifies its financial assets for measurement as below:
1.7 Financial assets are derecognized (i.e) removed from the financial statements, when its contractual rights to the cash flows expire or upon transfer of the said assets. The Company also derecognizes when it has an obligation to adjust the cash flows arising from the financial asset with third party and either upon transfer of:
a. significant risk and rewards of the financial asset, or
b. control of the financial asset
However, the Company continue to recognize the transferred financial asset and its associated liability to the extent of its continuing involvement, which are measured on the basis of detainment of its rights and obligations of financial asset. The Company has applied the de-recognition requirements prospectively.
1.8 Upon derecognition of its financial asset or part thereof, the difference between the carrying amount measured at the date of recognition and the consideration received including any new asset obtained less any new liability assumed shall be recognised in the Statement of Profit and Loss.
1.9 For impairment purposes, significant financial assets are tested on individual basis at each reporting date. Other financial assets are assessed collectively in groups that share similar credit risk characteristics. Accordingly, the impairment testing is done retrospectively on the following basis:
1.12 Financial liabilities are derecognized when and only when it is extinguished (i.e) when the obligation specified in the contract is discharged or cancelled or expired.
1.13 Upon derecognition of its financial liabilities or part thereof, 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 recognized in the Statement of Profit and Loss.
m. Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprises of cash at banks and on hand and short-term deposits with an original maturity of three months or less, highly liquid investments that are readily convertible into cash.
n. Cash dividend
The Company recognizes a liability to make cash dividend, when the distribution is authorized and the distribution is no longer at the discretion of the Company. A corresponding amount is recognized directly in equity including applicable taxes.
o. Cash flow statement
Cash flowsâ are presented using indirect method, whereby profit / (loss) before extraordinary items and 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.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
p. Share based payments
Stock options granted to the option grantees in the Company / subsidiaries are measured at the fair value of the equity instruments granted. For each stock option, the measurement of fair value is performed on the grant date. The grant date is the date on which the options are granted. The fair value so determined is revised only if the stock option scheme is modified in a manner that is beneficial to the employees. The ex-modification fair value is recognized as an employee expense equally over the vesting period and the incremental fair value resulting from modification of the scheme, is recognized over the vesting period remaining after the modification date.
Graded vesting options
If the options vest in installments (i.e. the options vest pro rata over the vesting period), then each installment is treated as a separate share option grant because each installment has a different vesting period.
q. Earnings Per Share (EPS)
Net profit after tax is divided by the weighted average number of equity shares outstanding.
When an item of income or expense which is otherwise required to be recognized in the statement of profit and loss is debited or credited to Equity, the amount in respect thereof is suitably adjusted in Net Prof t for the purpose of computing Earnings Per Share.
Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of Equity Shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Equity Shares outstanding during the year plus the weighted average number of Equity Shares that would be issued on conversion of all the dilutive potential Equity Shares into Equity shares.
r. Operating segments
The Companyâs business operation comprises of single operating segment viz., Software and related solutions. Operating segment has been identified on the basis of nature of products and reported in a manner consistent with the internal reporting provided to Chief Operating Decision Maker.
4. Significant estimates and judgments
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, and the disclosure of contingent liabilities. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision effects only that period or in the period of the revision or future periods, if the revision affects both current and future years.
Accordingly, the management has applied the following estimates / assumptions / judgments in preparation and presentation of financial statements:
Property, plant and equipment and intangible assets
The residual values and estimated useful life of PPEs, Intangible assets are assessed by technical team duly reviewed by the management at each reporting date. Wherever the management believes that the assigned useful life and residual value are appropriate, such recommendations are accepted and adopted for computation of depreciation / amortization / impairment.
Current taxes
Calculations of income taxes for the current period are done based on applicable tax laws and managementâs judgments by evaluating positions taken in tax returns and interpretations of relevant provisions of law.
Deferred tax asset (including MAT credit entitlement)
Significant management judgment is exercised by reviewing the deferred tax assets at each reporting date to determine the amount of deferred tax assets that can be retained / recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
Contingent liabilities
Management judgment is exercised for estimating the possible outflow of resources, if any, in respect of contingencies / claims / litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.
Impairment of financial assets
The impairment for financial assets are done based on assumptions about risk of default and expected loss rates. The assumptions, selection of inputs for calculation of impairment are based on management judgment considering the past history, market conditions and forward looking estimates at the end of each reporting date.
Impairment of non-financial assets (PPE / Intangible assets)
The impairment of non-financial assets is determined based on estimation of recoverable amount of such assets. The assumptions used in computing the recoverable amount are based on management judgment considering the timing of future cash flows, discount rates and the risks specific to the asset.
Defined benefit plans and other long term benefits
The cost of the defined benefit plan and other long term benefits, and the present value of such obligation are determined by the independent actuarial valuer. Management believes that the assumptions used by the actuary in determination of the discount rate, future salary increases, mortality rates and attrition rate are reasonable. Due to the complexities involved in the valuation and its long term nature, this obligation is highly sensitive to changes in these assumptions.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities could not be measured based on quoted prices in active markets, management uses valuation techniques including the Discounted Cash Flow (DCF) model, to determine its fair value. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is exercised in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility.
Share based payments
The Company initially measures the equity settled transactions with employees using fair value model. This requires determination of most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including volatility and dividend yield and making assumptions about them.
Mar 31, 2016
I Basis of Preparation and presentation of financial statements
A Basis of Preparation
The financial statements are prepared under the historical cost convention in accordance with the Generally Accepted Accounting
Principles (GAAP) and materially comply with the mandatory Accounting Standards issued by the Institute of Chartered Accountants
of India and referred to Section 129 & 133 of the Companies Act 2013. All income and expenditure having a material bearing on the
financial statements are recognized on accrual basis.
B Use of Estimates
The preparation of financial statements in accordance with the generally accepted accounting principles requires management to
make judgments, estimates and assumptions that affect 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 upon management''s
best knowledge of current events and actions, actual results could differ from these estimates in the future periods.
II Revenue Recognition
A Software and related services i) License Fees
License Fee revenue is recognized on delivery of the software.
ii) Software development / Implementation Fees
Software development / Implementation Contracts are either fixed price based or time and material based. In case of fixed price
contracts, revenue is recognized in accordance with percentage of completion method of accounting. In case of time and material
contracts, revenue is recognized based on billable time spent in the project, priced at the contractual rate.
iii) Annual Maintenance Contract
Revenue from Maintenance services is recognized on a pro-rata basis over the period of the contract.
B Value Added Resale Hardware & Software
Revenue from sales is recognized upon dispatch of goods to customers.
C Other Income
Interest and rental income are recognized on accrual basis. Net gain on mutual fund investments are recognized on sale of such
investments.
III Fixed Assets and Depreciation
A Tangible Assets
Tangible Assets are capitalized at historical cost and includes freight, installation cost, finance cost, net of taxes and duties
wherever applicable and other incidental expenses incurred during the installation stage.
Assets acquired on Hire Purchase are capitalized at the gross value and interest thereon charged to Statement of Profit & Loss.
In respect of assets leased prior to 1st April 2001, the lease rentals paid during the year are charged to Statement of Profit &
Loss. In respect of assets leased on or after April 1, 2001, the accounting treatment prescribed by Accounting Standard 19 on
"Leases" is followed.
Depreciation on tangible assets is charged on a pro-rata basis on the Straight Line Method as prescribed under Schedule II of the
Companies Act, 2013 over the useful life of those assets.
B Intangible Assets
a) Costs incurred in the development of ERP product, together with repository of new business components, upon completion of the
development phase, have been classified and grouped as "Product Software" under Fixed Assets.
Similarly, costs incurred in the development of technology platform framework, which would enable the company to provide
solutions - both standard and customized - in an efficient manner, have been classified and grouped as "Technology Platform"
under Fixed Assets, once the same is available for use.
b) Company is filing patent applications and costs incurred for filing the patent application like consultancy and filing fees
are capitalized upon grant of Patents.
The useful life of the above assets is estimated as ten years and depreciation is charged accordingly.
c) Computer Software purchased for own use are grouped under Intangible Assets. Depreciation is charged on a pro-rata basis on
the Straight Line Method as per the rates prescribed under Schedule II of the Companies Act, 2013 over the useful life of those
assets.
IV Investments
Long term investments are stated at cost and short term investments are valued at lower of cost and net realizable value.
V Inventories
Inventories are valued at lower of cost or net realizable value. Cost includes cost incurred in bringing the inventories to their
present location and condition and is determined based on FIFO method.
VI Foreign Currency Transactions
The functional currency of the Company is Indian Rupee.
Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transaction. The
monetary items denominated in the foreign currency at the yearend are translated at the exchange rates prevailing on the date of
the balance sheet or wherever forward contracts are booked, at the respective rates as per such forward contracts and the loss or
gain arising out of such transactions is adjusted in the Statement of Profit and Loss. Exchange difference in respect of foreign
currency liabilities incurred for acquiring fixed assets on or before accounting period commencing after December 7, 2006 is
added to the cost of respective fixed assets.
VII Translation of Financial Statements of Foreign Branch
All income and expenditure transactions during the year are reported at a monthly moving average exchange rate for the respective
periods. Monetary assets and liabilities are translated at the rate prevailing on the balance sheet date. Non-monetary assets
and liabilities are translated at the rate prevailing on the date of the transaction and the balance in ''head office account''
whether debit or credit, is reported at the amount of the balance in the ''branch account'' in the books of the head office, after
adjusting for unresponded transactions. Net gain / loss on foreign currency translation is recognized in the Statement of Profit
and Loss.
VIII Employee Benefits
Short-term employee benefits viz., salaries, wages and other benefits are recognized as expenses at the actual value as per
contractual terms and such amounts are charged as expenses in the Statement of Profit and Loss for the year in which the related
service is rendered. Other benefits are treated as below:
Gratuity
In accordance with the Indian law, the company provides for gratuity, a defined benefit plan ("The Gratuity Plan"), covering all
employees. These employees are covered under the Group Gratuity Scheme of the Life Insurance Corporation of India. The
contribution to the said scheme are charged to the Statement of Profit and Loss. The liability for Gratuity is ascertained as at
the Balance Sheet date based on independent actuarial valuation in accordance with Accounting Standard 15(revised) and the charge
for current year arrived at. Accordingly, the difference between such charge and contribution is provided in the accounts by a
debit to the Statement of Profit and Loss.
Superannuation
The Senior officers of the Company have been given an option to participate in a defined contribution plan ("The Superannuation
Plan") maintained by the Life Insurance Corporation of India. For those who opt to participate, the company makes contributions
not exceeding Rupees one lakh per annum, based on a specified percentage of the basic salary of each covered employee. For those
who do not opt to participate, an amount equivalent to the contribution determined at the time of exercise of option is paid
along with salary. The company has no further obligation beyond its contributions / payments.
National Pension System
The employees of the Company have been given an option to participate in a defined contribution plan ("National Pension System"),
maintained by the fund managers approved by the Pension Fund Regulatory and Development Authority. For those who opt to
participate, the company makes contributions equal to 10% of the covered employee''s basic salary. For those who do not opt to
participate, an amount equivalent to the contribution determined at the time of exercise of option is paid along with salary. The
company has no further obligation beyond its contributions / payments.
Provident Fund
In addition to the above benefits, all employees receive benefits from a Provident fund, which is a defined contribution plan.
Both the employee and employer each make monthly contributions to the plan equal to 12% of the covered employee''s basic salary.
These contributions are made to the employees'' provident fund maintained by the Government of India. The Company has no further
obligations under the plan beyond its monthly contributions.
Leave Encashment
Leave encashment liability is ascertained as at the Balance Sheet date based on independent actuarial valuation in accordance
with Accounting Standard 15(revised) and is provided for in the books of accounts.
IX Earnings per share
Profit after tax is adjusted for prior period adjustments, if any and divided by the weighted average number of equity shares
outstanding during the period.
X Taxes on income
Current Tax is determined as the amount of tax payable in respect of the taxable income for the period. Deferred tax asset or
deferred tax liability is considered for timing differences in accordance with Accounting Standard 22. Deferred tax asset
arising on account of carry forward of losses is not considered.
Minimum Alternative Tax (MAT) credit asset is recognized only when and to the extent there is convincing evidence that the
Company will pay normal Income Tax during the specified period. The carrying amount of MAT credit asset is reviewed at each
Balance Sheet date.
XI Borrowing costs
Borrowing costs that are attributable to the acquisition or construction or production of qualifying assets are capitalized as
part of cost of those assets as per Accounting Standard 16. All other borrowing costs are charged to Statement of Profit and
Loss.
XII Impairment of assets
The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such
indication exists, 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 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 Statement of Profit
and Loss. 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.
Mar 31, 2013
I Basis of Preparation and Presentation of Financial Statements
A Basis of Preparation:
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles (GAAP) and materially comply with the mandatory Accounting
Standards issued by the Institute of Chartered Accountants of India and
notified under the Companies (Accounting Standards) Rules, 2006 and the
relevant provisions of the Companies Act, 1956. All income and
expenditure having a material bearing on the financial statements are
recognized on accrual basis.
B Use of Estimates:
The preparation of financial statements in accordance with the
generally accepted accounting principles requires management to make
judgements, estimates and assumptions that affect 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 upon management''s best knowledge of current
events and actions, actual results could differ from these estimates in
the future periods.
II Revenue Recognition
A Software and related services i) License Fees
License Fee revenue is recognised on delivery of the software.
ii) Software development / Implementation Fees
Software development / Implementation Contracts are either fixed price
based or time and material based. In case of fixed price contracts,
revenue is recognised in accordance with percentage of completion
method of accounting. In case of time and material contracts, revenue
is recognised based on billable time spent in the project, priced at
the contractual rate.
iii) Annual Maintenance Contract
Revenue from Maintenance services is recognized on a pro-rata basis
over the period of the contract.
B Value Added Resale Hardware & Software
Revenue from sales is recognised upon despatch of goods to customers.
C Other Income
Interest on bank deposits and rental income are recognised on accrual
basis.
III Fixed Assets and Depreciation
A Tangible Assets
Tangible Fixed Assets are capitalised at historical cost and includes
freight, installation cost, finance cost, net of taxes and duties
wherever applicable and other incidental expenses incurred during the
installation stage.
Depreciation is charged on a pro-rata basis on the Straight Line Method
as per the rates prescribed under Schedule XIV of the Companies Act,
1956.
Individual assets not exceeding Rs.5,000/- are depreciated in full in
the year of purchase.
Assets acquired on Hire Purchase are capitalised at the gross value and
interest thereon charged to Statement of Profit and Loss.
In respect of Assets leased prior to 1st April, 2001, the lease rentals
paid during the year are charged to Statement of Profit and Loss. In
respect of assets leased on or after 1st April, 2001, the accounting
treatment prescribed by Accounting Standard 19 on "Leases" is followed.
B Intangible Assets
(a) Costs incurred in the development of ERP product, together with
repository of new business components, upon completion of the
development phase, have been classified and grouped as "Product
Software" under Fixed Assets.
Similarly, costs incurred in the development of technology platform
framework, which would enable the company to provide solutions - both
standard and customized - in an efficient manner, have been classified
and grouped as "Technology Platform" under Fixed Assets, once the same
is available for use.
(b) Company is filing patent applications and costs incurred for filing
the patent application like consultancy and filing fees are capitalised
upon grant of Patents.
The useful life of the above assets is estimated as ten years and
depreciation is charged accordingly.
(c) Computer Software purchased for own use are grouped under
Intangible Assets. Depreciation is charged on a pro-rata basis on the
Straight Line Method as per the rates prescribed under Schedule XIV of
the Companies Act, 1956.
IV Investments
Long term investments are stated at cost and short term investments are
valued at lower of cost and net realizable value.
V Inventories
Inventories are valued at lower of cost and net realizable value. Cost
includes cost incurred in bringing the inventories to their present
location and condition and is determined based on FIFO method.
VI Foreign Currency Transactions
The functional currency of the Company is Indian Rupee.
Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transaction. The monetary items
denominated in the foreign currency at the year end are translated at
the exchange rates prevailing on the date of the Balance Sheet or
wherever forward contracts are booked, at the respective rates as per
such forward contracts and the loss or gain arising out of such
transactions is adjusted in the Statement of Profit and Loss. Exchange
difference in respect of foreign currency liabilities incurred for
acquiring fixed assets on or before accounting period commencing after
December 7, 2006 is added to the cost of respective fixed assets.
VII Translation of Financial Statements of Foreign Branch
All income and expenditure transactions during the year are reported at
a monthly moving average exchange rate for the respective periods.
Monetary assets and liabilities are translated at the rate prevailing
on the Balance Sheet date. Non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction and
the balance in ''head office account'' whether debit or credit, is
reported at the amount of the balance in the ''branch account'' in the
books of the head office, after adjusting for un responded
transactions. Net gain / loss on foreign currency translation is
recognized in the Statement of Profit and Loss.
VIII Employee Benefits
Short-term employee benefits, salaries, wages and other benefits are
recognized as expenses at the actual value as per contractual terms and
such amounts are charged as expenses in the Statement of Profit and
Loss for the year in which the related service is rendered. Other
benefits are treated as below:
Gratuity
In accordance with the Indian law, the company provides for gratuity, a
defined benefit plan ("The Gratuity Plan"), covering all employees.
These employees are covered under the Group Gratuity Scheme of the Life
Insurance Corporation of India. The contribution to the said scheme are
charged to the Statement of Profit and Loss. The liability for Gratuity
is ascertained as at the Balance Sheet date based on independent
actuarial valuation in accordance with Accounting Standard 15(revised)
and the charge for current year arrived at. Accordingly, the difference
between such charge and contribution is provided in the accounts by a
debit to the Statement of Profit and Loss.
Superannuation
The Senior officers of the Company have been given an option to
participate in a defined contribution plan ("The Superannuation Plan")
maintained by the Life Insurance Corporation of India. For those who
opt to participate, the company makes contributions not exceeding
Rupees one lakh per annum, based on a specified percentage of the basic
salary of each covered employee. For those who do not opt to
participate, an amount equivalent to the contribution determined at the
time of exercise of option is paid alongwith salary. The company has no
further obligation beyond its contributions / payments.
National Pension System
The employees of the Company have been given an option to participate
in a defined contribution plan ("National pension System"), maintained
by the fund managers approved by the Pension Fund Regulatory and
Development Authority. For those who opt to participate, the company
makes contributions equal to 10% of the covered employee''s basic
salary. For those who do not opt to participate, an amount equivalent
to the contribution determined at the time of exercise of option is
paid alongwih salary. The company has no further obligation beyond its
contributions / payments.
Provident Fund
In addition to the above benefits, all employees receive benefits from
a Provident fund, which is a defined contribution plan. Both the
employee and employer each make monthly contributions to the plan equal
to 12% of the covered employee''s basic salary. These contributions are
made to the employees'' provident fund maintained by the Government of
India. The Company has no further obligations under the plan beyond its
monthly contributions.
Leave Encashment
Leave encashment liability is ascertained as at the Balance Sheet date
based on independent actuarial valuation in accordance with Accounting
Standard 15(revised) and is provided for in the books of accounts.
IX Earnings per share
Profit after tax is adjusted for prior period adjustments, if any and
divided by the weighted average number of equity shares outstanding
during the period.
X Taxes on income
Current Tax is determined as the amount of tax payable in respect of
the taxable income for the period. Deferred tax asset or deferred tax
liability is considered for timing differences in accordance with
Accounting Standard 22. Deferred tax asset arising on account of carry
forward of losses is not considered.
Minimum Alternative Tax (MAT) credit asset is recognized only when and
to the extent there is convincing evidence that the Company will pay
normal Income Tax during the specified period. The carrying amount of
MAT credit asset is reviewed at each Balance Sheet date.
XI Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction or production of qualifying assests are capitalized as
part of cost of those assests as per Accounting Standard 16. All other
borrowing costs are charged to Statement of Profit and Loss
XII Impairment of assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, 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 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 Statement of Profit and Loss. 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.
Mar 31, 2012
I Basis of Preparation
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles (GAAP) and materially comply with the mandatory Accounting
Standards issued by the Institute of Chartered Accountants of India and
the provisions of the Companies Act, 1956. All income and expenditure
having a material bearing on the financial statements are recognized on
accrual basis.
II Revenue Recognition A Software and related services
i) License Fees
License Fee revenue is recognized on delivery of the software.
ii) Software development / Implementation Fees
Software development / Implementation Contracts are either fixed price
based or time and material based. In case of fixed price contracts,
revenue is recognized in accordance with percentage of completion
method of accounting. In case of time and material contracts, revenue
is recognized based on billable time spent in the project, priced at
the contractual rate.
iii) Annual Maintenance Contract
Revenue from Maintenance services is recognized on a pro-rata basis
over the period of the contract.
B Value Added Resale Hardware & Software
Revenue from sales is recognized upon despatch of goods to customers.
C Other Income
Interest on bank deposits and rental income are recognized on accrual
basis.
III Fixed Assets and Depreciation
A Tangible Assets
Tangible Fixed Assets are capitalized at historical cost and includes
freight, installation cost, finance cost, net of taxes and duties
wherever applicable and other incidental expenses incurred during the
installation stage.
Depreciation is charged on a pro-rata basis on the Straight Line Method
as per the rates prescribed under Schedule XIV of the Companies Act,
1956.
Individual assets not exceeding Rs.5,000 are depreciated in full in the
year of purchase.
Assets acquired on Hire Purchase are capitalized at the gross value and
interest thereon charged to Statement of Profit and Loss.
In respect of Assets leased prior to April 1, 2001, the lease rentals
paid during the year are charged to Statement of Profit and Loss. In
respect of assets leased on or after April 1, 2001, the accounting
treatment prescribed by Accounting Standard 19 on "Leases" is
followed.
B Intangible Assets
a) Costs incurred in the development of ERP product, together with
repository of new business components, upon completion of the
development phase, have been classified and grouped as "Product
Software" under Fixed Assets.
Similarly, costs incurred in the development of technology platform
framework, which would enable the company to provide solutions - both
standard and customized - in an efficient manner, have been classified
and grouped as 'Technology Platform" under Fixed Assets, once the
same is available for use.
b) Company is filing patent applications and costs incurred for filing
the patent application like consultancy and filing fees are capitalized
upon grant of Patents.
The useful life of the above assets is estimated as ten years and
depreciation is charged accordingly.
c) Computer Software purchased for own use are grouped under Intangible
Assets. Depreciation is charged on a pro-rata basis on the Straight
Line Method as per the rates prescribed under Schedule XIV of the
Companies Act, 1956.
IV Investments
Long term investments are stated at cost and short term investments are
valued at lower of cost and net realizable value.
V Inventories
Inventories are valued at lower of cost and net realizable value. Cost
includes cost incurred in bringing the inventories to their present
location and condition and is determined based on FIFO method.
VI Foreign Currency Transactions
The functional currency of the Company is Indian Rupee.
Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transaction. The monetary
items denominated in the foreign currency at the year end are
translated at the exchange rates prevailing on the date of the balance
sheet or wherever forward contracts are booked, at the respective rates
as per such forward contracts and the loss or gain arising out of such
transactions is adjusted in the Statement of Profit and Loss. Exchange
difference in respect of foreign currency liabilities incurred for
acquiring fixed assets on or before accounting period commencing after
December 7,2006 is added to the cost of respective fixed assets.
VII Translation of Financial Statements of Foreign Branch
All income and expenditure transactions during the year are reported at
a monthly moving average exchange rate for the respective periods.
Monetary assets and liabilities are translated at the rate prevailing
on the balance sheet date. Non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction and
the balance in 'head office account' whether debit or credit, is
reported at the amount of the balance in the 'branch account' in
the books of the head office, after adjusting for un responded
transactions. Net gain / loss on foreign currency translation is
recognized in the Statement of Profit and Loss.
VIII Employee Benefits
Short-term employee benefits, salaries, wages and other benefits are
recognized as expenses at the actual value as per contractual terms and
such amounts are charged as expenses in the Statement of Profit and
Loss for the year in which the related service is rendered. Other
benefits are treated as below:
Gratuity
In accordance with the Indian law, the company provides for gratuity, a
defined benefit plan ("The Gratuity Plan"), covering all employees.
These employees are covered under the Group Gratuity Scheme of the Life
Insurance Corporation of India. The contribution to the said scheme are
charged to the Statement of Profit and Loss. The liability for Gratuity
is ascertained as at the Balance Sheet date based on independent
actuarial valuation in accordance with Accounting Standard 15(revised)
and the charge for current year arrived at. Accordingly, the difference
between such charge and contribution is provided in the accounts by a
debit to the Statement of Profit and Loss.
Superannuation
The senior officers of the Company have been given an option to
participate in a defined contribution plan ('The Superannuation
Plan") maintained by the Life Insurance Corporation of India. For
those who opt to participate, the company makes contributions not
exceeding Rupees one lakh per annum, based on a specified percentage of
the basic salary of each covered employee. For those who do not opt to
participate, an amount equivalent to the contribution determined at the
time of exercise of option is paid alongwith salary. The company has no
further obligation beyond its contributions / payments.
National Pension System
The employees of the Company have been given an option to participate
in a defined contribution plan ("National Pension System"), maintained
by the fund managers approved by the Pension Fund Regulatory and
Development Authority. For those who opt to participate, the company
makes contributions equal to 10% of the covered employee's basic
salary. For those who do not opt to participate, an amount equivalent
to the contribution determined at the time of exercise of option is
paid alongwith salary. The company has no further obligation beyond its
contributions / payments.
Provident Fund
In addition to the above benefits, all employees receive benefits from
a Provident fund, which is a defined contribution plan. Both the
employee and employer each make monthly contributions to the plan equal
to 12% of the covered employee's basic salary. These contributions
are made to the employees' provident fund maintained by the
Government of India. The Company has no further obligations under the
plan beyond its monthly contributions.
Leave Encashment
Leave encashment liability is ascertained as at the Balance Sheet date
based on independent actuarial valuation in accordance with Accounting
Standard 15(revised) and is provided for in the books of accounts.
IX Earnings per share
Profit after tax is adjusted for prior period adjustments, if any and
divided by the weighted average number of equity shares outstanding
during the period.
X Taxes on income
Current Tax is determined as the amount of tax payable in respect of
the taxable income for the period. Deferred tax asset or deferred tax
liability is considered for timing differences in accordance with
Accounting Standard 22. Deferred tax asset arising on account of carry
forward of losses is not considered.
Minimum Alternative Tax (MAT) credit asset is recognized only when and
to the extent there is convincing evidence that the Company will pay
normal Income Tax during the specified period. The carrying amount of
MAT credit asset is reviewed at each Balance Sheet date.
XI Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction or production of qualifying assests are capitalised as
part of cost of those assests as per Accounting Standard 16. All other
borrowing costs are charged to Statement of Profit and Loss.
XII Impairment of assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, 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 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 Statement of Profit and Loss. 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.
Mar 31, 2011
I. basis of Preparation
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles (GAAP) and materially comply with the mandatory Accounting
Standards issued by the Institute of Chartered Accountants of India and
the provisions of the Companies Act, 1956. All income and expenditure
having a material bearing on the financial statements are recognized on
accrual basis.
ii. Revenue Recognition
a. Software and related services i) License fees
License Fee revenue is recognized on delivery of the software.
ii) Software development / implementation fees
Software development / Implementation Contracts are either fxed price
based or time and material based. In case of fxed price contracts,
revenue is recognized in accordance with percentage of completion
method of accounting. In case of time and material contracts, revenue
is recognized based on billable time spent in the project, priced at
the contractual rate.
iii) annual Maintenance Contract
Revenue from Maintenance services is recognized on a pro-rata basis
over the period of the contract.
b. Value added Resale hardware & Software
Revenue from sales is recognized upon despatch of goods to customers.
C. other income
Interest on bank deposits and rental income are recognized on accrual
basis.
iii. fixed assets and Depreciation
a. Tangible assets
Fixed Assets are capitalized at historical cost and includes freight,
installation cost, fnance cost, net of taxes and duties wherever
applicable and other incidental expenses incurred during the
installation stage.
Depreciation is charged on a pro-rata basis on the Straight Line Method
as per the rates prescribed under Schedule XIV of the Companies Act,
1956.
Individual assets not exceeding Rs.5,000/- are depreciated in full in
the year of purchase.
Assets acquired on Hire Purchase are capitalized at the gross value and
interest thereon charged to Proft & Loss Account.
In respect of Assets leased prior to 1st April, 2001, the lease rentals
paid during the year are charged to Proft & Loss Account. In respect of
assets leased on or after 1st April, 2001, the accounting treatment
prescribed by Accounting Standard 19 on ÃLeases" is followed.
b. intangible assets
a) Costs incurred in the development of ERP product, together with
repository of new business components, upon completion of the
development phase, have been classifed and grouped as ÃProduct
Software" under Fixed Assets.
Similarly, costs incurred in the development of technology platform
framework, which would enable the Company to provide solutions - both
standard and customized - in an effcient manner, have been classifed
and grouped as ÃTechnology Platform" under Fixed Assets, once the same
is available for use.
b) Costs incurred for fling the patent application like consultancy and
fling fees are capitalized upon grant of Patents.
The useful life of the above assets is estimated as ten years and
depreciation is charged accordingly.
iV. investments
Long term investments are stated at cost and short term investments are
valued at lower of cost and net realizable value.
V. inventories
Inventories are valued at lower of cost and net realizable value. Cost
includes cost incurred in bringing the inventories to their present
location and condition and is determined based on FIFO method.
Vi. foreign Currency Transactions
The functional currency of the Company is Indian Rupee.
Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transaction. The monetary
items denominated in the foreign currency at the year end are
translated at the exchange rates prevailing on the date of the balance
sheet or wherever forward contracts are booked, at the respective rates
as per such forward contracts and the loss or gain arising out of such
transactions is adjusted in the Proft & Loss Account. Exchange
difference in respect of foreign currency liabilities incurred for
acquiring fxed assets on or before accounting period commencing after
7th December, 2006 is added to the cost of respective fxed assets.
Vii. Translation of financial Statements of foreign branch
All income and expenditure transactions during the year are reported at
a monthly moving average exchange rate for the respective periods.
Monetary assets and liabilities are translated at the rate prevailing
on the balance sheet date. Non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction and
the balance in head offce accountà whether debit or credit, is
reported at the amount of the balance in the branch accountà in the
books of the head offce, after adjusting for un responded transactions.
Net gain / loss on foreign currency translation is recognized in the
Proft & Loss Account.
VIII. Employee Benefts
Short-term employee benefts, salaries, wages and other benefts are
recognized as expenses at the actual value as per contractual terms and
such amounts are charged as expenses in the Proft and Loss Account for
the year in which the related service is rendered. Other benefts are
treated as below :
gratuity
In accordance with the Indian law, the Company provides for gratuity, a
defned beneft plan (ÃThe Gratuity Plan"), covering all employees. These
employees are covered under the Group Gratuity Scheme of the Life
Insurance Corporation of India. The contribution to the said scheme are
charged to the Proft and Loss Account. The liability for Gratuity is
ascertained as at the Balance Sheet date based on independent actuarial
valuation in accordance with Accounting Standard 15 (revised) and the
charge for current year arrived at. Accordingly, the difference between
such charge and contribution is provided in the accounts by a debit to
the Proft and Loss Account.
Superannuation
Apart from being covered under the Gratuity Plan described above, the
senior offcers of the Company have been given an option to participate
in a defned contribution plan (ÃThe Superannuation Plan") maintained by
the Life Insurance Corporation of India. For those who opt to
participate, the Company makes contributions not exceeding Rupees one
lakh per annum, based on a specifed percentage of the basic salary of
each covered employee. For those who do not opt to participate, an
amount equivalent to the contribution determined at the time of
exercise of option is paid alongwith salary. The Company has no further
obligation beyond its contribution / payments.
Provident fund
In addition to the above benefts, all employees receive benefts from a
Provident Fund, which is a defned contribution plan. Both the employee
and employer each make monthly contributions to the plan equal to 12%
of the covered employeeÃs basic salary. These contributions are made to
the employeesà provident fund maintained by the Government of India.
The Company has no further obligations under the plan beyond its
monthly contributions.
Leave Encashment
Leave encashment liability is ascertained as at the Balance Sheet date
based on independent actuarial valuation in accordance with Accounting
Standard 15 (revised) and is provided for in the books of accounts.
ix. Earnings per share
Proft after tax is adjusted for prior period adjustments, if any and
divided by the weighted average number of equity shares outstanding
during the period.
x. Taxes on income
Current Tax is determined as the amount of tax payable in respect of
the taxable income for the period. Deferred tax asset or deferred tax
liability is considered for timing differences in accordance with
Accounting Standard 22. Deferred tax asset arising on account of carry
forward of losses is not considered.
Minimum Alternative Tax (MAT) credit asset is recognised only when and
to the extent there is convincing evidence that the Company will pay
normal Income Tax during the specifed period. The carrying amount of
MAT credit asset is reviewed at each Balance Sheet date.
xi. impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, 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 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 proft 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.
Mar 31, 2010
I. Basis of Preparation
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles (GAAP) and materially comply with the mandatory Accounting
Standards issued by the Institute of Chartered Accountants of India and
the provisions of the Companies Act, 1956. All income and expenditure
having a material bearing on the financial statements are recognized on
accrual basis.
II. Revenue Recognition
A. Software and related services
i) License Fees
License Fee revenue is recognized on delivery of the software.
ii) Software development / Implementation Fees
Software development / Implementation Contracts are either fixed price
based or time and material based. In case of fixed price contracts,
revenue is recognized in accordance with percentage of completion
method of accounting. In case of time and material contracts, revenue
is recognized based on billable time spent in the project, priced at
the contractual rate.
iii) Annual Maintenance Contract
Revenue from Maintenance services is recognized on a pro-rata basis
over the period of the contract.
B. Value Added Resale Hardware & Software
Revenue from sales is recognized upon despatch of goods to customers.
C. Other Income
Interest on bank deposits and rental income are recognized on accrual
basis.
III. Fixed Assets and Depreciation
A. Tangible Assets
Fixed Assets are capitalized at historical cost and includes freight,
installation cost, finance cost, net of taxes and duties wherever
applicable and other incidental expenses incurred during the
installation stage.
Depreciation is charged on a pro-rata basis on the Straight Line Method
as per the rates prescribed under Schedule XIV of the Companies Act,
1956.
Individual assets not exceeding Rs.5,000/- are depreciated in full in
the year of purchase.
Assets acquired on Hire Purchase are capitalized at the gross value and
interest thereon charged to Profit & Loss A/c.
In respect of Assets leased prior to 1st April 2001, the lease rentals
paid during the year are charged to Profit & Loss A/c. In respect of
assets leased on or after 1 st April 2001, the accounting treatment
prescribed by Accounting Standard 19 on "Leases" is followed.
B. Intangible Assets
a) Costs incurred in the development of ERP product, together with
repository of new business components, upon completion of the
development phase, have been classified and grouped as "Product
Software" under Fixed Assets.
Similarly, costs incurred in the development of technology platform
framework, which would enable the company to provide solutions - both
standard and customized - in an efficient manner, have been classified
and grouped as "Technology Platform" under Fixed Assets, once the same
is available for use.
b) Costs incurred for filing the patent application like consultancy
and filing fees are capitalized upon grant of Patents.
The useful life of the above assets is estimated as ten years and
depreciation is charged accordingly.
IV. Investments
Long term investments are stated at cost and short term investments are
valued at lower of cost and net realizable value.
V. Inventories
Inventories are valued at lower of cost and net realizable value. Cost
includes cost incurred in bringing the inventories to their present
location and condition and is determined based on FIFO method.
VI. Foreign Currency Transactions
The functional currency of the Company is Indian Rupee.
Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transaction. The monetary items
denominated in the foreign currency at the year end are translated at
the exchange rates prevailing on the date of the balance sheet or
wherever forward contracts are booked, at the respective rates as per
such forward contracts and the loss or gain arising out of such
transactions is adjusted in the Profit & Loss A/c. Exchange difference
in respect of foreign currency liabilities incurred for acquiring fixed
assets on or before accounting period commencing after December 7, 2006
is added to the cost of respective fixed assets.
VII. Translation of Financial Statements of Foreign Branch
All income and expenditure transactions during the year are reported at
a monthly moving average exchange rate for the respective periods.
Monetary assets and liabilities are translated at the rate prevailing
on the balance sheet date. Non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction and
the balance in head office account whether debit or credit, is
reported at the amount of the balance in the branch account in the
books of the head office, after adjusting for un-responded
transactions. Net gain / loss on foreign currency translation is
recognized in the Profit & Loss A/c.
VIII. Employee Benefits
Short-term employee benefits, salaries, wages and other benefits are
recognized as expenses at the actual value as per contractual terms and
such amounts are charged as expenses in the profit and Loss Account for
the year in which the related service is rendered. Other benefits are
treated as below:
Gratuity
In accordance with the Indian law, the company provides for gratuity, a
defined benefit plan ("The Gratuity Plan"), covering all employees.
These employees are covered under the Group Gratuity Scheme of the Life
Insurance Corporation of India. The contribution to the said scheme are
charged to the Profit and Loss account. The liability for Gratuity is
ascertained as at the Balance Sheet date based on independent actuarial
valuation in accordance with Accounting Standard 15(revised) and the
charge for current year arrived at. Accordingly, the difference between
such charge and contribution is provided in the accounts by a debit to
the Profit and Loss Account.
Superannuation
Apart from being covered under the Gratuity Plan described above, the
senior officers of the Company have been given an option to participate
in a defined contribution plan ("The Superannuation Plan") maintained
by the Life Insurance Corporation of India. For those who opt to
participate, the company makes contributions not exceeding Rupees one
lakh per annum, based on a specified percentage of the basic salary of
each covered employee. For those who do not opt to participate, an
amount equivalent to the contribution determined at the time of
exercise of option is paid alongwith salary. The company has no further
obligation beyond its contributions / payments.
Provident Fund
In addition to the above benefits, all employees receive benefits from
a Provident fund, which is a defined contribution plan. Both the
employee and employer each make monthly contributions to the plan equal
to 12% of the covered employees basic salary. These contributions are
made to the employees provident fund maintained by the Government of
India. The Company has no further obligations under the plan beyond its
monthly contributions.
Leave Encashment
Leave encashment liability is ascertained as at the Balance Sheet date
based on independent actuarial valuation in accordance with Accounting
Standard 15(revised) and is provided for in the books of accounts.
IX. Earnings per share
Profit after tax is adjusted for prior period adjustments, if any and
divided by the weighted average number of equity shares outstanding
during the period.
X. Taxes on income:
Current Tax is determined as the amount of tax payable in respect of
the taxable income for the period. Deferred tax asset or deferred tax
liability is considered for timing differences in accordance with
Accounting Standard 22. Defered tax asset arising on account of carry
forward of losses is not considered.
XI. Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, 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 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 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.
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