Accounting Policies of Spanco Ltd. Company

Mar 31, 2013

1) Statement of Significant Accounting Policies

a. Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards prescribed by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention except for land and office premises which are revalued, on an accrual basis. The accounting policies applied by the Company are consistent with those used in the previous year.

b. Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates. The difference between the actual result and estimate are recognised in the period in which results are known or materialised.

c. Tangible Fixed Assets and Capital Work-in-Progress

Fixed assets are stated at cost except for land and office premises which are revalued, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.

Capital Work-in-Progress is carried at cost comprising of direct cost, attributable interest and related incidental expenditure.

d. Depreciation

Depreciation is provided on fixed assets (other than assets for the Build-Own-Operate-Transfer (BOOT) project, Leasehold Improvements and Intangible Assets) on written down value method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956, which is also in accordance with the management''s estimates of useful life of the assets.

Plant and Machinery acquired for BOOT projects is amortised over the life of projects. Leasehold Improvements are amortised over the un-expired period of leasehold premises on a straight-line basis.

e. Impairment

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

f. Intangible Assets and Amortisation Goodwill

Goodwill is amortised on a straight-line basis over a period of ten years.

Patent

Costs relating to patents, which are acquired, are capitalised and amortised on a straight-line basis over a period of five years (useful life as assessed by the management).

Software

Software is capitalised where it is expected to provide future enduring economic benefits. Capitalisation costs include license fees and costs of implementation / system integration services. The management estimates the useful lives of intangible assets to be five years and expects to derive economic benefits from such assets evenly over the period of its useful life. Accordingly, software is amortised over a period of five years on a straight- line basis.

g. Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.

If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

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

Assets subject to operating leases have been included under the head Fixed Assets. Lease income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Statement of Profit and Loss.

h. Borrowing Cost

Borrowing Cost that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. A qualifying asset is one that necessary takes substantial period of time to get ready for intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred.

i. Investments

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

j. Inventories

Inventories of Raw Materials and Consumables

Inventories are ascertained on First-in-First-out method, and are valued at lower of cost and net realisable value.

Inventories of Traded Goods

Inventories are ascertained on the specific identification of cost method, and are valued at lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs necessary to make the sale.

Software Developed and held for Sale

Software products developed / under development are stated at lower of cost and net realisable value.

Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Software development costs incurred on products ready for marketing are amortised equally over a period of four years or earlier, based on Management''s evaluation of expected sales volumes and duration of the products'' life cycles.

Work-in-progress

The work in process in case of network engineering services and other projects is valued based on the percentage of completion of work under respective contracts.

k. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of Goods

Revenue is recognised on delivery / dispatch of goods when the significant risks and rewards of ownership of the goods have passed to the buyer. Excise Duty, Service Tax, Sales Tax and VAT included in the amount of turnover are deducted from turnover (gross).

Income from Services

Revenues from maintenance contracts / network integration services are recognised pro-rata over the period of the contract as and when services are rendered. Revenue and costs associated with Network Engineering Services are recognised as revenue and expenses respectively by reference to the stage of completion of the project at the balance sheet date.

Software Sales

Software sales are recognised on customers'' acceptance of delivery.

Interest

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

Initial Recognition

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

Conversion

Foreign currency monetary items are reported using the rate prevailing at the year end.

Exchange Differences

Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long- term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" in the financial statements and amortised over the balance period of such long-term asset / liability.

Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of Company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise.

Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year. The Company does not enter into forward exchange contracts for trading or speculation purposes.

m. Employee Benefits

Short Term Employee Benefits

Short term employee benefits are recognised as expenses at the undiscounted amount in the Statement of Profit and Loss of the year in which the related services are rendered.

Retirement Benefits

i. Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due.

ii. Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method made at the end of each year. The gratuity liability is funded through group gratuity insurance scheme of Life Insurance Corporation of India.

iii. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method at the end of each year.

iv. Actuarial gains / losses are immediately taken to Statement of Profit and Loss.

n. Accounting for Taxes on Income

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

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

At each Balance Sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.

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

o. Expenditure on New Projects (including arrangements on BOOT basis)

Expenditure directly relating to setting up of projects is capitalised. Indirect expenditure incurred during setting-up period is capitalised as part of the indirect setting-up cost to the extent to which the expenditure is directly related to construction or is incidental thereto. Other indirect expenditure incurred during the setting-up period which is not related to the setting-up activity nor is incidental thereto is charged to the Statement of Profit and Loss. Income earned during setting-up phase is deducted from the total of the indirect expenditure.

p. Earnings Per Share (''EPS'')

Basic EPS is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted EPS, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

q. Provisions / Contingent Liabilities and Contingent Asset

A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are disclosed by way of Notes to Accounts. Contingent Assets are not recognised in the Financial Statements.

r. Prior Period Items

Prior Period Items are included in the respected heads of accounts and material items are disclosed by way of Notes to Accounts.

s. Other Accounting Policies

These are consistent with the Generally Accepted Accounting Principles.

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Mar 31, 2012

A. Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies applied by the Company are consistent with those used in the previous year.

b. Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. The difference between the actual result and estimate are recognised in the period in which results are known or materialised.

c. Fixed Assets and Capital Work-in-Progress

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

In respect of accounting periods commencing on or after December 7, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.

Capital Work-in-Progress is carried at cost comprising of direct cost, attributable interest and related incidental expenditure. The advances given for acquiring fixed assets are shown under Long-term loans and advances.

d. Depreciation / Amortisation

Depreciation is provided on fixed assets (other than assets for the Build-Own-Operate-Transfer (BOOT) project, leasehold improvements and intangible assets) on written down value method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956, which is also in accordance with the management's estimates of useful life of the assets.

Plant and Machinery acquired for BOOT projects is amortised over the life of projects. Leasehold Improvements are amortised over the un-expired period of leasehold premises on a straight-line basis.

e. Impairment

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

f. Intangible Assets and Amortisation

Goodwill

Goodwill is amortised on a straight-line basis over a period of 10 (ten) years.

Patent

Costs relating to patents, which are acquired, are capitalised and amortised on a straight-line basis over a period of 5 (five) years (useful life as assessed by the management).

Software

Software is capitalised where it is expected to provide future enduring economic benefits. Capitalisation costs include license fees and costs of implementation / system integration services. The management estimates the useful lives of intangible assets to be 5 (five) years and expects to derive economic benefits from such assets evenly over the period of its useful life. Accordingly, software is amortised over a period of 5 (five) years on a straight-line basis.

g. Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.

If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

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

Assets subject to operating leases have been included under the head 'Investment Property' and 'Fixed Assets'. Lease income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Statement of Profit and Loss.

h. Borrowing Cost

Borrowing Cost that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. A qualifying asset is one that necessary takes substantial period of time to get ready for intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred.

i. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. Investment property is amortised at the rate of 5% p.a. on written down value.

j. Inventories

Inventories of Raw Materials and Consumables

Inventories are ascertained on First-in-First-out method, and are valued at lower of cost and net realisable value.

Inventories of Traded Goods

Inventories are ascertained on the specific identification of cost method and are valued at lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

Software Developed and held for Sale

Software products developed / under development are stated at lower of cost and net realisable value.

Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Software development costs incurred on products ready for marketing are amortised equally over a period of 4 (four) years or earlier, based on Management's evaluation of expected sales volumes and duration of the products' life cycles.

Work-in-progress

The work in process in case of network engineering services and other projects is valued based on the percentage of completion of work under respective contracts.

k. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of Goods

Revenue is recognised on delivery / dispatch of goods when the significant risks and rewards of ownership of the goods have passed to the buyer. Excise Duty, Sales Tax and VAT included in the amount of turnover are deducted from turnover (gross).

Supply of Power

Revenue from sale of electrical energy is accounted for on the basis of billing to consumers and is inclusive of energy charges, fixed charges, fuel adjustment charges (FAC), adjustment charges and additional charges as per the relevant Tariff Regulation / Tariff orders notified by MERC and DF agreement with MSEDCL. Generally, all consumers are billed on the basis of recording of energy consumption by installed meters. Where meters have stopped working or are faulty, the bills are generated on the basis of average of the consumption recorded by installed meters for past 12 months.

Interest on overdue receivables of energy bills is accounted for as and when recovered as PF penalty and incentive.

Income from Services

Revenues from maintenance contracts / network integration services are recognised pro-rata over the period of the contract as and when services are rendered. Revenue and costs associated with network engineering services are recognised as revenue and expenses respectively by reference to the stage of completion of the project at the balance sheet date.

Software Sales

Software sales are recognised on customers' acceptance of delivery.

Interest

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

l. Foreign Currency Translation

Initial Recognition

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

Conversion

Foreign currency monetary items are reported using the rate prevailing at the year end.

Exchange Differences

Exchange differences, in respect of accounting periods commencing on or after December 7, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" in the enterprise's financial statements and amortised over the balance period of such long-term asset / liability.

Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise.

Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.

The Company does not enter into forward exchange contracts for trading or speculation purposes. m. Employee Benefits

Short Term Employee Benefits

Short term employee benefits are recognised as expenses at the undiscounted amount in the Statement of Profit and Loss of the year in which the related services are rendered.

Retirement Benefits

i. Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due.

ii. Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method made at the end of each year. The gratuity liability is funded through group gratuity insurance scheme of Life Insurance Corporation of India.

iii. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method at the end of each year.

iv. Actuarial gains / losses are immediately taken to Statement of Profit and Loss.

n. Accounting for Taxes on Income

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

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

At each Balance Sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.

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

o. Expenditure on New Projects (including arrangements on BOOT basis)

Expenditure directly relating to setting up of projects is capitalised. Indirect expenditure incurred during setting-up period is capitalised as part of the indirect setting-up cost to the extent to which the expenditure is directly related to construction or is incidental thereto. Other indirect expenditure incurred during the setting-up period which is not related to the setting-up activity nor is incidental thereto is charged to the Statement of Profit and Loss. Income earned during setting-up phase is deducted from the total of the indirect expenditure.

p. Earnings Per Share ('EPS')

Basic EPS is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted EPS, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

q. Provisions / Contingent Liabilities and Contingent Assets

A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are disclosed by way of Notes to Accounts. Contingent Assets are not recognised in the Financial Statements.

r. Prior Period Items

Prior Period Items are included in the respected heads of accounts and material items are disclosed by way of Notes to Accounts.

s. Other Accounting Policies

These are consistent with the Generally Accepted Accounting Principles (GAAP).

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Mar 31, 2010

A. Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 As amended and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of Building which is revalued or provision for impairment is made. The accounting policies applied by the Company are consistent with those used in the previous year.

b. Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon managements best knowledge of current events and actions, actual results could differ from these estimates. The difference between the actual result and estimate are recognised in the period in which results are known or materialised.

c. Fixed Assets and Capital Work-in-Progress

Fixed assets are stated at cost except for building which is stated at revalued amount, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

In respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.

Capital Work-in-Progress is carried at cost comprising of direct cost, attributable interest and related incidental expenditure. The advances given for acquiring fixed assets are shown under Capital Work-in-Progress.

d. Depreciation / Amortisation

Depreciation is provided on fixed assets (other than assets for the Build-Own-Operate-Transfer (BOOT) project, leasehold improvements and intangible assets) on written down value method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956, which is also in accordance with the managements estimates of useful life of the assets.

Plant and Machinery acquired for BOOT projects is amortised over the life of projects. Leasehold Improvements are amortised over the un-expired period of leasehold premises on a straight-line basis.

e. Impairment

i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

ii. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

f. Intangible Assets

Goodwill

Goodwill is amortised on a straight-line basis over a period of ten years.

Patent

Costs relating to patents, which are acquired, are capitalised and amortised on a straight-line basis over a period of five years (useful life as assessed by the management).

Software

Software is capitalised where it is expected to provide future enduring economic benefits. Capitalisation costs include license fees and costs of implementation / system integration services. The management estimates the useful lives of intangible assets to be five years and expects to derive economic benefits from such assets evenly over the period of its useful life. Accordingly, software is amortised over a period of five years on a straight- line basis.

g. Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.

If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

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

Assets subject to operating leases have been included under the head Investment Property and Fixed Assets. Lease income is recognised in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account.

h. Borrowing Cost

Borrowing Cost that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. A qualifying asset is one that necessary takes substantial period of time to get ready for intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred.

i. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long- term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. Investment property is amortised at the rate of 5% p.a. on written down value.

j. Inventories

Inventories of Raw Materials and Consumables:

Inventories are ascertained on First-in-First-out method, and are valued at lower of cost and net realisable value.

Inventories of Manufactured Finished Goods:

Inventories are valued at lower of cost and net realisable value. Cost includes cost of conversion of raw material into finished goods.

Inventories of Traded Goods:

Inventories are ascertained on the specific identification of cost method, and are valued at lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

Software Developed and held for Sale:

Software products developed / under development are stated at lower of cost and net realisable value.

Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Software development costs incurred on products ready for marketing are amortised equally over a period of four years or earlier, based on Managements evaluation of expected sales volumes and duration of the products life cycles.

Work-in-progress of NED division:

The work in process in case of network engineering services is valued based on the percentage of completion of work under respective contracts.

k. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of Goods:

Revenue is recognised on delivery / dispatch of goods when the significant risks and rewards of ownership of the goods have passed to the buyer. Excise Duty, Sales Tax and VAT included in the amount of turnover are deducted from turnover (gross).

Income from Services:

Revenues from maintenance contracts / network integration services are recognised pro-rata over the period of the contract as and when services are rendered. Revenue and costs associated with network engineering services are recognised as revenue and expenses respectively by reference to the stage of completion of the project at the balance sheet date.

Software Sales:

Software sales are recognised on customers acceptance of delivery.

Interest:

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

I. Foreign Currency Translation

(i) Initial Recognition

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

(ii) Conversion

Foreign currency monetary items are reported using the rate prevailing at the year end.

(Hi) Exchange Differences

Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" in the enterprises financial statements and amortised over the balance period of such long-term asset / liability but not beyond accounting period ending on or before 31st March, 2011.

Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise.

(iv) Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.

The Company does not enter into forward exchange contracts for trading or speculation purposes.

m. Employee Benefits

Short Term Employee Benefits

Short term employee benefits are recognised as expenses at the undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

Retirement Benefits

i. Provident Fund is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due.

ii. Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method made at the end of each year. The gratuity liability is funded through group gratuity insurance scheme of Life Insurance Corporation of India.

iii. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method at the end of each year.

iv. Actuarial gains / losses are immediately taken to Profit and Loss Account.

n. Accounting for Taxes on Income

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

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

At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.

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

o. Expenditure on New Projects (including arrangements on BOOT basis)

Expenditure directly relating to setting up of projects is capitalised. Indirect expenditure incurred during setting- up period is capitalised as part of the indirect setting-up cost to the extent to which the expenditure is directly related to construction or is incidental thereto. Other indirect expenditure incurred during the setting-up period which is not related to the setting-up activity nor is incidental thereto is charged to the Profit and Loss Account. Income earned during setting-up phase is deducted from the total of the indirect expenditure.

p. Earnings Per Share (EPS)

Basic EPS is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted EPS, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

q. Provisions / Contingent Liabilities and Contingent Asset

A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are disclosed by way of Notes to Accounts. Contingent Assets are not recognised in the Financial Statements.

r. Cash and Cash Equivalents

Cash and Cash Equivalents in the balance sheet comprise cash at bank and in hand.

s. Prior Period Items

Prior Period Items are included in the respected heads of accounts and material items are disclosed by way of Notes to Accounts.

t. Other Accounting Policies

These are consistent with the Generally Accepted Accounting Principles.

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Mar 31, 2000

A. Basis of Accounting :

The financial statements are prepared under historical cost convention on accrual basis.

b. Fixed Assets :

Fixed Assets are accounted at cost less depreciation.

c. Depreciation :

Depreciation is provided on Written Down Value Method at the rules specified in Schedule XIV to the Companies Act, 1956.

d. Inventories :

Inventories are valued at lower of Cost or Market Value.

e. Deferred Revenue Expenditure :

The Share issue expenses are amortised over a period of 10 years.

f. Investment :

Investments are valued at cost.