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Accounting Policies of Xchanging Solutions Ltd. Company
Mar 31, 2025
2. Material Accounting Policies
2.1 Basis of preparation and presentation
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under
the Companies (Indian Accounting Standards) Rules, 2015 & relevant amendment rules issued thereafter and guidelines
issued by the Securities and Exchange Board of India (SEBI) under the historical cost convention on the accrual basis
except for certain financial instruments which are measured at fair values at the end of each reporting period as explained
in the accounting policies below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; regardless of whether that price is directly observable or estimated
using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account
the characteristics of the asset or liability if market participants would take those characteristics into account when
pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these
financial statements is determined on such a basis, except for share-bases payment transactions that are within the
scope of lnd AS 102, leasing transactions that are within the scope of Ind AS 116, and measurements that have some
similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
2.2 Revenue recognition
Revenue is recognised net of Goods and Services Tax (GST) to the extent that it is probable that economic benefit will
flow to the Company and that revenue can be reliably measured. Revenue is recognised upon transfer of control of
promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange
for those products or services. Arrangements with customers for software related services are either on a fixed-price or
on a time-and-material basis. Revenue towards satisfaction of a performance obligation is measured at the amount of
transaction price allocated to that performance obligation.
(i) Revenue on time-and-material contracts are recognised as the related services are performed and revenue from
the end of the last invoicing to the reporting date is recognised as unbilled revenue. Revenue from fixed-price
where the performance obligations are satisfied over time and where there is no uncertainty as to measurement or
collectability of consideration, is recognised as per the percentage-of-completion method. When there is uncertainty
as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved.
Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship
between input and productivity. Maintenance revenue is recognised ratably over the term of the underlying
maintenance arrangement.
(ii) In arrangements for software development and related services and maintenance services, the Company has
applied the guidance in Ind AS 115, Revenue from contract with customer, by applying the revenue recognition
criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for
considering software development and related services as distinct performance obligations. For allocating the
transaction price, the Company has measured the revenue in respect of each performance obligation of a contract
at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the
best evidence of its standalone selling price. In cases where the company is unable to determine the standalone
selling price, the company uses the expected cost plus margin approach in estimating the standalone selling price.
For software development and related services, the performance obligations are satisfied as and when the services
are rendered since the customer generally obtains control of the work as it progresses.
(iii) Contract modifications are accounted for when additions, deletions or changes are approved either to the contract
scope or contract price. The accounting for modifications of contracts involves assessing whether the services
added to an existing contract 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, either as a separate contract, if the additional services are priced at the standalone selling price, or
as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
(iv) Revenue from licenses where the customer obtains a âright to useâ the licenses is recognised at the time the
license is made available to the customer. Revenue from licenses where the customer obtains a âright to accessâ is
recognised over the access period. Arrangements to deliver software products generally have three elements:
license, implementation and Annual Maintenance Contracts (AMC). The company has applied the principles under
Ind AS 115 to account for revenues from these performance obligations.
When implementation services are provided in conjunction with the licensing arrangement and the license and
implementation have been identified as two separate performance obligations, the transaction price for such contracts
are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the
absence of standalone selling price for implementation, the performance obligation is estimated using the expected
cost plus margin approach. Where the license is required to be substantially customized as part of the implementation
service the entire arrangement fee for license and implementation is considered to be a single performance obligation
and the revenue is recognised using the percentage-of-completion method as the implementation is performed.
Revenue from support and other services arising due to the sale of software products is recognised as the
performance obligations are satisfied. AMC revenue is recognised ratably over the period in which the services are
rendered.
(v) Provision for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses
become probable based on the current contract estimates.
(vi) Deferred and unearned revenues represent the estimated unearned portion of fees derived from certain fixed-rate
service agreements. Unearned revenues for fixed fee contracts are recognised on a pro-rata basis over the term of
the underlying service contracts, which are generally one year.
(vii) Unbilled revenue represents costs and earnings in excess of billings as at the balance sheet date.
2.3 Other Income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably. Interest income is accounted on accrual basis and
recognised at effective interest rate wherever applicable. Dividend income is accounted for when the right to receive it is
established.
2.4 Leases
As a lessee:
The Companyâs lease asset classes primarily consist of leases for buildings. The Company assesses whether a contract
contains a lease, at inception of a contract. A contract is, or contains, a lease 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: (i) the contract involves the use of an
identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period
of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROUâ) and a corresponding
lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less
(short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease
payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU
assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The right-of-
use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives.
They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease
term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable. 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. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset
belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease
payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental
borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment
to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a
termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been
classified as financing cash flows.
2.5 Foreign currencies
(i) Functional and presentation currency
The functional currency of the Company is the Indian rupee.
(ii) Initial recognition:
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency at the date of the transaction.
(iii) Subsequent recognition:
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign
currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are
carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange
rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period other than those
monetary assets which are provided for being doubtful of recovery.
Exchange differences on restatement of all monetary items are recognised in the Statement of Profit and Loss.
2.6 Employee benefits
2.6.1 Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees
have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected
unit credit method, with actuarial valuations being carried out at the end of each annual reporting period.
Remeasurement, comprising actuarial gains and losses is reflected immediately in the balance sheet with a
charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement
recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified
to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest
is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or
asset. Defined benefit costs are categorised as follows:
⢠service cost (including current service cost, past service cost, as well as gains and losses on curtailments
and settlements);
⢠net interest expense or income; and
⢠remeasurement
The gratuity fund is recognised by the income tax authorities and is administered through trust set up by the
Company. The provision for gratuity recognised in the balance sheet represents the present value of the
defined benefit obligations reduced by the fair value of scheme assets.
The Company presents the first two components of defined benefit costs in profit or loss in the line item
âEmployee benefits expenseâ. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in
the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value
of any economic benefits available in the form of refunds from the plans or reductions in future contributions to
the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the
offer of the termination benefit and when the entity recognises any related restructuring costs.
2.6.2 Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries and annual leave
in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in
exchange for that service.
Liabilities recognised in respect of short-term employee benefits. are measured at the undiscounted amount
of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of
the estimated future cash outflows expected to be made by the Company in respect of services provided by
employees up to the reporting date.
The Company has a policy on compensated absences which are accumulating in nature. The expected cost
of accumulating compensated absences is determined by actuarial valuation performed by an independent
actuary at each Balance Sheet date using projected unit credit method on the additional amount expected to
be paid/availed as a result of the unused entitlement that has accumulated at the Balance Sheet date.
2.7 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.7.1 Current tax
Income tax expense or credit for the period is the tax payable on the current periodâs taxable income using the
tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The
Company periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
2.7.2 Deferred tax
Deferred income tax assets and liabilities are recognized for all temporary difference arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted
or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or
expense in the period that includes the enactment or the substantive enactment date. A deferred tax asset is
recognized to the extent that it is probable that future taxable profit will be available against which the deductible
temporary differences and tax losses can be utilised.
Deferred taxes and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets
and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on
a net basis, or to realise the asset and settle the liability simultaneously.
2.7.3 Current tax and deferred tax for the year
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized
in other comprehensive income or directly in equity, in which case, the tax is also recognized in other
comprehensive income or directly in equity, respectively.
2.8 Property, plant and equipment and depreciation
(i) Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment
losses. Cost comprises the purchase price and any directly attributable costs of bringing the assets to their working
condition for their intended use.
(ii) Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated
residual value. Depreciation on Property, plant & equipment has been provided on the straight-line method as per
the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of
assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into
(iii) Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at
cost are recognised in the Statement of Profit and Loss.
(iv) Leasehold improvements are amortised over the period of lease or five years (useful life), whichever is lower.
(v) Assets individually costing up to Rupees five thousand are fully depreciated in the year of purchase.
2.9 Intangible Assets and Amortisation
Intangible assets with finite useful lives are stated at cost of acquisition less accumulated amortisation and impairment
losses.
Intangible assets are recognised only if it is probable that future economic benefits that are attributable to the asset will
flow to the enterprise and the cost of the asset can be measured reliably. An intangible asset is derecognised on
disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from the
retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the
carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss. Intangible assets
comprise of computer software which is amortised on straight-line basis over an estimated useful life of upto seven
years.
The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial
year and the amortisation period is revised to reflect the changed pattern, if any.
2.10 Impairment of tangible and intangible assets
The carrying values of tangible and intangible assets at each balance sheet date are reviewed for impairment if any
indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there
is no indication that the asset is impaired:
(a) an intangible asset that is not yet available for use; and (b) an intangible asset with indefinate useful life.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such
excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset
is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation
decrease to the extent a revaluation reserve is available for that asset.
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 recognised for an asset (other than a revalued asset) in earlier accounting
periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of
Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued
assets such reversal is not recognised.
Mar 31, 2024
1. GENERAL INFORMATION
Xchanging Solutions Limited (âthe Companyâ), incorporated on February 1,2002 having CIN: L72200KA2002PLC030072, is an information technology (IT) services provider with operations in India and an international presence established through subsidiaries in USA and Singapore.
2. MATERIAL ACCOUNTING POLICIES
2.1 Basis of preparation and presentation
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 & relevant amendment rules issued thereafter and guidelines issued by the Securities and Exchange Board of India (SEBI) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values at the end of each reporting period as explained in the accounting policies below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-bases payment transactions that are within the scope of lnd AS 102, leasing transactions that are within the scope of Ind AS 116, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
2.2 Revenue recognition
Revenue is recognised net of Goods and Services Tax (GST) to the extent that it is probable that economic benefit will flow to the Company and that revenue can be reliably measured. Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Arrangements with customers for software related services are either on a fixed-price or on a time-and-material basis. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price allocated to that performance obligation.
(i) Revenue on time-and-material contracts are recognised as the related services are performed and revenue from the end of the last invoicing to the reporting date is recognised as unbilled revenue. Revenue from fixed-price where the performance obligations are satisfied over time and where there is no uncertainty as to measurement or collectability of consideration, is recognised as per the percentage-of-completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Maintenance revenue is recognised ratably over the term of the underlying maintenance arrangement.
(ii) In arrangements for software development and related services and maintenance services, the Company has applied the guidance in Ind AS 115, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Company has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the company is unable to determine the standalone selling price, the company uses the expected cost plus margin approach in estimating the standalone selling price.
For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
(iii) Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract 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, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
(iv) Revenue from licenses where the customer obtains a âright to useâ the licenses is recognised at the time the license is made available to the customer. Revenue from licenses where the customer obtains a âright to accessâ is recognised over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Maintenance Contracts (AMC). The company has applied the principles under Ind AS 115 to account for revenues from these performance obligations.
When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognised using the percentage-of-completion method as the implementation is performed. Revenue from support and other services arising due to the sale of software products is recognised as the performance obligations are satisfied. AMC revenue is recognised ratably over the period in which the services are rendered.
(v) Provision for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses become probable based on the current contract estimates.
(vi) Deferred and unearned revenues represent the estimated unearned portion of fees derived from certain fixed-rate service agreements. Unearned revenues for fixed fee contracts are recognised on a pro-rata basis over the term of the underlying service contracts, which are generally one year.
(vii) Unbilled revenue represents costs and earnings in excess of billings as at the balance sheet date.
2.3 Other Income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accounted on accrual basis and recognised at effective interest rate wherever applicable. Dividend income is accounted for when the right to receive it is established.
2.4 Leases
As a lessee:
The Companyâs lease asset classes primarily consist of leases for buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease 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: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. 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. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
2.5 Foreign currencies
(i) Functional and presentation currency
The functional currency of the Company is the Indian rupee.
(ii) Initial recognition:
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
(iii) Subsequent recognition:
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period other than those monetary assets which are provided for being doubtful of recovery.
Exchange differences on restatement of all monetary items are recognised in the Statement of Profit and Loss.
2.6 Employee benefits
2.6.1 Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
⢠service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
⢠net interest expense or income; and
⢠remeasurement
The gratuity fund is recognised by the income tax authorities and is administered through trust set up by the Company.The provision for gratuity recognised in the balance sheet represents the present value of the defined benefit obligations reduced by the fair value of scheme assets.
The Company presents the first two components of defined benefit costs in profit or loss in the line item âEmployee benefits expenseâ. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
2.6.2 Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries and annual leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
The Company has a policy on compensated absences which are accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each Balance Sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the Balance Sheet date.
2.7 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.7.1 Current tax
Income tax expense or credit for the period is the tax payable on the current periodâs taxable income using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The Company periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
2.7.2 Deferred tax
Deferred income tax assets and liabilities are recognized for all temporary difference arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
Deferred taxes and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
2.7.3 Current tax and deferred tax for the year
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
2.8 Property, plant and equipment and depreciation
(i) Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses. Cost comprises the purchase price and any directly attributable costs of bringing the assets to their working condition for their intended use.
(ii) Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on Property, plant & equipment has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into
account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes etc:
|
Cateaorv of assets |
Estimated useful life |
|
Computers |
4 to 7 years |
(iii) Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.
(iv) Leasehold improvements are amortised over the period of lease or five years (useful life), whichever is lower.
(v) Assets individually costing up to Rupees five thousand are fully depreciated in the year of purchase.
2.9 Intangible Assets and Amortisation
Intangible assets with finite useful lives are stated at cost of acquisition less accumulated amortisation and impairment losses.
Intangible assets are recognised only if it is probable that future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss. Intangible assets comprise of computer software which is amortised on straight-line basis over an estimated useful life of upto seven years.
The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any.
2.10 Impairment of tangible and intangible assets
The carrying values of tangible and intangible assets at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired:
(a) an intangible asset that is not yet available for use; and (b) an intangible asset with indefinate useful life.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
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 recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognised.
2.11 Provisions and contingent liabilities
Provisions: A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the 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.
Provisions for onerous contracts (i.e., contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it) are recognised when it is probable that cash outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event based on a reliable estimate of such obligation.
Contingent liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability.
2.12 Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
2.13 Financial assets
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value depending on the classification of the Financial assets.
2.13.1 Classification of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost (except for financial assets that are designated at fair value through profit or loss on initial recognition):
⢠the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
⢠the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
For the impairment policy on financial assets measured at amortised cost, refer Note 2.13.3
Financial assets that meet the following conditions are subsequently measured at Fair Value Through Other Comprehensive Income (âFVTOCIâ) (except for financial assets that are designated as at fair value through profit or loss on initial recognition):
⢠the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
⢠the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in profit or loss for FVTOCI financial assets. For the purposes of recognising foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortised cost. Thus, the exchange differences on the amortised cost are recognised in profit or loss and other changes in the fair value of FVTOCI financial assets are recognised in other comprehensive income and accumulated under the heading of âReserve for financial assets through other comprehensive incomeâ. When the investment is disposed of, the cumulative gain or loss previously accumulated in this reserve is reclassified to profit or loss.
For the impairment policy on financial assets at FVTOCI, refer Note 2.13.3 All other financial assets are subsequently measured at fair value.
2.13.2 Financial assets at fair value through profit or loss (FVTPL)
Financial assets that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, financial assets that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item. Dividend on financial assets at FVTPL is recognised when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
2.13.3 Impairment of financial assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the Financial assets that are initially measured at fair value with subsequent measurement at amortised cost.
The Company follows âsimplified approachâ for recognition of impairment loss allowance for trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, twelve month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in the subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on a twelve month ECL.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original Effective Interest Rate (EIR).
Allowance for Trade receivables
The Company follows a âsimplified approachâ (i.e. based on lifetime ECL) for recognition of impairment loss allowance on Trade receivables. For the purpose of measuring lifetime ECL allowance for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances and historical experience. Individual trade receivables are written off when management deems them not to be collectible.
2.13.4 Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset.
2.13.5 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in profit or loss.
2.13.6 Investment in subsidiaries
Investment in subsidiaries is carried at cost less provision for diminution in the separate financial statements.
2.14 Financial liabilities
Classification as debt
Debt are classified as financial liabilities in accordance with the substance of the contractual arrangements and the definitions of a financial liability
Financial liabilities
2.14.1 Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL, are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the âFinance costsâ line item.
2.14.2 Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in profit or loss.
2.14.3 Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired, An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
2.15 Derivative financial instruments
The Company enters into derivative financial instruments to manage its exposure to foreign exchange rate risks through foreign exchange forward contracts.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately.
2.16 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
2.17 Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.18 Cash flow statement
Cash flows are reported using the 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. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.19 Investments
Long-term investments (excluding investment properties), are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at fair value. Cost of investments include acquisition charges such as brokerage, fees and duties.
2.20 Segment Reporting
Ind AS 108 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. Based on the âmanagement approachâ as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the Companyâs performance based on an analysis of various performance indicators by business segments and geographic segments.
The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, is included as âUnallocatedâ. Segment assets includes all the assets except for deferred tax assets which are treated as unallocable.
The dominant source of risk and returns of the enterprise is considered to be the business in which it operates, viz. -Information Technology (IT) Services. The sub businesses are fully aligned to IT Services business of the Company and the same are being viewed by the management as a single business segment. Being a single business segment company, no primary segment information is being provided.
2.21 Earnings per share
Basic earnings per share 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. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
2.22 Project work expenses
Project work expenses represents amounts charged by sub-contractors. These expenses are recognised on an accrual basis.
2.23 GST input credit
GST input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing/ utilising the credits.
2.24 Operating Cycle
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - non current classification of assets and liabilities.
2.25 Government grants
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss under respective head in the period in which they become receivable.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Companyâs accounting policies, which are described in note 2, the management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
3.1 Critical judgements in applying accounting policies
The following are the critical judgements, apart from those involving estimations, that the management have made in the process of applying the Companyâs accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
i) Impairment of investment in subsidiaries- Determining whether investment in subsidiaries is impaired requires an estimation of the value in use of the subsidiaries. The value in use calculation requires the management to estimate the future cash flows expected to arise from the subsidiaries operations and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. No impairment for investment in subsidiaries has been identified during the year.
ii) Income taxes- The Company has tax jurisdiction in India. Significant judgments are involved in determining the provision for income taxes, including the amount expected to be paid or recovered in connection with uncertain tax positions. Also refer to note 28.
iii) Estimation of defined benefit obligation and other employee obligations- Employee benefit obligations are measured using actuarial methods. This requires various assumptions including with respect to salary trends, attrition rate, discounting factor etc. The Company engages third party qualified valuers to perform the actuarial valuation.
Mar 31, 2023
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation and presentation
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 & relevant amendment rules issued thereafter and guidelines issued by the Securities and Exchange Board of India (SEBI) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values at the end of each reporting period as explained in the accounting policies below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-bases payment transactions that are within the scope of lnd AS 102, leasing transactions that are within the scope of Ind AS 116, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
2.2 Revenue recognition
Revenue is recognised net of Goods and Services Tax (GST) to the extent that it is probable that economic benefit will flow to the Company and that revenue can be reliably measured. Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Arrangements with customers for software related services are either on a fixed-price or on a time-and-material basis. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price allocated to that performance obligation.
(i) Revenue on time-and-material contracts are recognised as the related services are performed and revenue from the end of the last invoicing to the reporting date is recognised as unbilled revenue. Revenue from fixed-price where the performance obligations are satisfied over time and where there is no uncertainty as to measurement or collectability of consideration, is recognised as per the percentage-of-completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Maintenance revenue is recognised ratably over the term of the underlying maintenance arrangement.
(ii) In arrangements for software development and related services and maintenance services, the Company has applied the guidance in Ind AS 115, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Company has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the company is unable to determine the standalone selling price, the company uses the expected cost plus margin approach in estimating the standalone selling price.
For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
(iii) Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract 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, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
(iv) Revenue from licenses where the customer obtains a âright to useâ the licenses is recognised at the time the license is made available to the customer. Revenue from licenses where the customer obtains a âright to accessâ is recognised over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Maintenance Contracts (AMC). The company has applied the principles under Ind AS 115 to account for revenues from these performance obligations.
When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognised using the percentage-of-completion method as the implementation is performed. Revenue from support and other services arising due to the sale of software products is recognised as the performance obligations are satisfied. AMC revenue is recognised ratably over the period in which the services are rendered.
(v) Provision for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses become probable based on the current contract estimates.
(vi) Deferred and unearned revenues represent the estimated unearned portion of fees derived from certain fixed-rate service agreements. Unearned revenues for fixed fee contracts are recognised on a pro-rata basis over the term of the underlying service contracts, which are generally one year.
(vii) Unbilled revenue represents costs and earnings in excess of billings as at the balance sheet date.
2.3 Other Income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accounted on accrual basis and recognised at effective interest rate wherever applicable. Dividend income is accounted for when the right to receive it is established.
2.4 Leases
As a lessee:
The Companyâs lease asset classes primarily consist of leases for buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease 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: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. 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. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Sublease: In respect of premises let out on sub lease, the Company recognises the lease payments as income on a straight-line basis over the term of the lease.
2.5 Foreign currencies
(i) Functional and presentation currency
The functional currency of the Company is the Indian rupee.
(ii) Initial recognition:
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
(iii) Subsequent recognition:
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period other than those monetary assets which are provided for being doubtful of recovery.
Exchange differences on restatement of all monetary items are recognised in the Statement of Profit and Loss.
2.6 Employee benefits
2.6.1 Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
⢠service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
⢠net interest expense or income; and
⢠remeasurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item âEmployee benefits expenseâ. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
2.6.2 Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries and annual leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits. are measured at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
The Company has a policy on compensated absences which are accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each Balance Sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the Balance Sheet date.
2.7 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.7.1 Current tax
Income tax expense or credit for the period is the tax payable on the current periodâs taxable income using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The Company periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
2.7.2 Deferred tax
Deferred income tax assets and liabilities are recognized for all temporary difference arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
Deferred taxes and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
2.7.3 Current tax and deferred tax for the year
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
2.8 Property, plant and equipment and depreciation
(i) Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses. Cost comprises the purchase price and any directly attributable costs of bringing the assets to their working condition for their intended use.
(ii) Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on Property, plant & equipment has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes etc:
(iii) Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.
(iv) Leasehold improvements are amortised over the period of lease or five years (useful life), whichever is lower.
(v) Assets individually costing up to Rupees five thousand are fully depreciated in the year of purchase.
2.9 Intangible Assets and Amortisation
Intangible assets with finite useful lives are stated at cost of acquisition less accumulated amortisation and impairment losses.
Intangible assets are recognised only if it is probable that future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss. Intangible assets comprise of computer software which is amortised on straight-line basis over an estimated useful life of upto seven years.
The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any.
2.10 Impairment of tangible and intangible assets
The carrying values of tangible and intangible assets at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired:
(a) an intangible asset that is not yet available for use; and (b) an intangible asset with indefinate useful life.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
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 recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognised.
Mar 31, 2018
1. Significant Accounting Policies
1.1 Statement of compliance
The financial statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015.
Upto the year ended March 31, 2017, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. These are the Companyâs first Ind AS financial statements. The date of transition to Ind AS is January 1, 2016. Refer note 47 for the details of first-time adoption exemptions availed by the Company.
1.2 Basis of preparation and presentation
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values at the end of each reporting period as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-bases payment transactions that are within the scope of lnd AS 102, leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
1.3 Revenue recognition
Revenue is recognised net of Goods and Services Tax (GST) to the extent that it is probable that economic benefit will flow to the Company and that revenue can be reliably measured.
(i) Revenue from time and material contracts are recognised as related services are rendered.
(ii) Revenue from fixed price contracts for delivering services is recognised under the percentage of completion method wherein revenue is recognised based on services performed to date as a percentage of total services to be performed.
(iii) Revenue from maintenance contracts are recognised rateably over the term of the maintenance contract on a straight-line basis.
(iv) Revenue from certain services are recognised as the services are rendered, on the basis of an agreed amount in accordance with the agreement entered into by the Company.
(v) Revenue from sale of user licenses for software application is recognised on transfer of the title in the user license.
(vi) Provision for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses become probable based on the current contract estimates.
(vii) Deferred and unearned revenues represent the estimated unearned portion of fees derived from certain fixed-rate service agreements. Unearned revenues for fixed fee contracts are recognised on a pro-rata basis over the term of the underlying service contracts, which are generally one year.
(viii) Unbilled revenue represents costs and earnings in excess of billings as at the balance sheet date.
1.4 Other Income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established.
1.5 Leases
As a lessee:
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term.
Rental expense from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
1.6 Foreign currencies
(i) Functional and presentation currency
The functional currency of the Company is the Indian rupee.
(ii) Initial recognition:
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
(iii) Subsequent recognition:
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All nonmonetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period other than those monetary assets which are provided for being doubtful of recovery.
Exchange differences on restatement of all monetary items are recognised in the Statement of Profit and Loss.
(iv) Forward exchange contracts not intended for trading or speculation purposes:
The premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/liability, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract are recognised as income or as expense for the period.
(v) Forward exchange contracts outstanding as at the period end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognised in the Statement of Profit and Loss and gains are ignored in accordance with the Announcement of Institute of Chartered Accountants of India on âAccounting for Derivativesâ issued in March 2008.
1.7 Employee benefits
2.7.1 Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur.
Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest. is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
- net interest expense or income; and
- remeasurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item âEmployee benefits expenseâ. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
1.7.2 Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries and annual leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits. are measured at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
1.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
1.8.1 Current tax
Income tax expense or credit for the period is the tax payable on the current periodâs taxable income using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The Company periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
1.8.2 Deferred tax
Deferred income tax assets and liabilities are recognized for all temporary difference arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
Deferred taxes and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
1.8.3 Current tax and deferred tax for the year
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
1.9 Property, plant and equipment and depreciation
(i) Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses. Cost comprises the purchase price and any directly attributable costs of bringing the assets to their working condition for their intended use.
(ii) Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on Property, plant & equipment has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes etc:
(iii) Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.
(iv) Leasehold improvements are amortised over the period of lease or five years, whichever is lower.
(v) Assets individually costing up to Rupees five thousand are fully depreciated in the year of purchase.
(vi) Capital work-in-progress: Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as of January 1, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost of the property, plant and equipment as of the transition date.
1.10 Intangible Assets and Amortisation
Intangible assets with finite useful lives are stated at cost of acquisition less accumulated amortisation and impairment losses.
Intangible assets are recognised only if it is probable that future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as
income or expense in the Statement of Profit and Loss. Intangible assets comprise of computer software which is amortised on straight-line basis over an estimated useful life of one to six years.
The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognized as of January 1, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost of the Intangible assets as of the transition date.
1.11 Impairment of tangible and intangible assets other than goodwill
The carrying values of tangible and intangible assets at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired:
(a) an intangible asset that is not yet available for use; and (b) an intangible asset that is amortised over a period exceeding ten years from the date when the asset is available for use.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
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 recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognised.
1.12 Provisions and contingent liabilities
Provisions: A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the 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.
Provisions for onerous contracts (i.e., contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it) are recognised when it is probable that cash outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event based on a reliable estimate of such obligation.
Contingent liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability.
1.13 Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
1.14 Financial assets
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value depending on the classification of the Financial assets.
1.14.1 Classification of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost (except for financial assets that are designated at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
For the impairment policy on financial assets measured at amortised cost, refer Note 2.14.3
Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (except for financial assets that are designated as at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
- the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in profit or loss for FVTOCI financial assets. For the purposes of recognising foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortised cost. Thus, the exchange differences on the amortised cost are recognised in profit or loss and other changes in the fair value of FVTOCI financial assets are recognised in other comprehensive income and accumulated under the heading of âReserve for financial assets through other comprehensive incomeâ. When the investment is disposed of, the cumulative gain or loss previously accumulated in this reserve is reclassified to profit or loss.
For the impairment policy on financial assets at FVTOCI, refer Note 2.14.3 All other financial assets are subsequently measured at fair value.
1.14.2 Financial assets at fair value through profit or loss (FVTPL)
Financial assets that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, financial assets that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item. Dividend on financial assets at FVTPL is recognised when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
1.14.3 Impairment of financial assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the Financial assets that are initially measured at fair value with subsequent measurement at amortised cost e.g Trade receivables, unbilled revenue etc.
The Company follows âsimplified approachâ for recognition of impairment loss allowance for trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, twelve month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in the subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on a twelve month ECL.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original Effective Interest Rate (EIR).
Allowance for Trade receivables
The Company follows a âsimplified approachâ (i.e. based on lifetime ECL) for recognition of impairment loss allowance on Trade receivables. For the purpose of measuring lifetime ECL allowance for trade receivables, the Company estimates irrecoverable amounts based on the ageing of the receivable balances and historical experience. Individual trade receivables are written off when management deems them not to be collectible.
1.14.4 Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset.
1.14.5 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in profit or loss.
1.14.6 Investment in subsidiaries
Investment in subsidiaries is carried at cost in the separate financial statements.
1.15 Financial liabilities
Classification as debt
Debt are classified as financial liabilities in accordance with the substance of the contractual arrangements and the definitions of a financial liability
Financial liabilities
1.15.1 Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL, are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the âFinance costsâ line item.
1.15.2 Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in profit or loss.
1.15.3 Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired, An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
1.16 Derivative financial instruments
The Company enters into derivative financial instruments to manage its exposure to foreign exchange rate risks through foreign exchange forward contracts. Further details of derivative financial instruments are disclosed in note 34.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately.
1.17 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
1.18 Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
1.19 Cash flow statement
Cash flows are reported using the 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. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.20 Investments
Long-term investments (excluding investment properties), are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at fair value. Cost of investments include acquisition charges such as brokerage, fees and duties.
1.21 Segment Reporting
Ind AS 108 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. Based on the âmanagement approachâ as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the Companyâs performance based on an analysis of various performance indicators by business segments and geographic segments.
The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, is included as âUnallocatedâ. Segment assets includes all the assets except for deferred tax assets which are treated as unallocable.
The dominant source of risk and returns of the enterprise is considered to be the business in which it operates, viz. - Information Technology (IT) Services. The sub businesses are fully aligned to IT Services business of the Company and the same are being viewed by the management as a single business segment. Being a single business segment company, no primary segment information is being provided.
1.22 Earnings per share
Basic earnings per share 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. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
1.23 Project work expenses
Project work expenses represents amounts charged by sub-contractors. These expenses are recognised on an accrual basis.
1.24 GST/Service tax input credit
GST/ Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing/ utilising the credits.
1.25 Operating Cycle
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - non current classification of assets and liabilities.
1.26 Recent accounting pronouncements
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company is in process of evaluating the effect of this on the financial statements and the impact is expected to be insignificant.
Ind AS 115- Revenue from Contract with Customers: On March 28, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors
- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.
The Company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is expected to be insignificant.
Dec 31, 2014
1.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to circular 15/2013 dated
September 13, 2013 read with circular 08/2014 dated April 4, 2014, till
the Standards of Accounting or any addendum thereto are prescribed by
Central Government in consultation and recommendation of the National
Financial Reporting Authority, the existing Accounting Standards
notified under the Companies Act, 1956 shall continue to apply.
Consequently these financial statements have been prepared to comply in
all material aspects with the accounting standards notified under
Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as
amended] and the other relevant provisions of the Companies Act, 1956.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of services and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current - non current classification of
assets and liabilities.
1.2 Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates. Any revision in accounting estimates is
recognised prospectively in current and future periods.
1.3 Tangible Assets and Depreciation
(i) Tangible assets are stated at cost of acquisition less accumulated
depreciation and impairment losses. Cost comprises the purchase price
and any directly attributable costs of bringing the assets to their
working condition for their intended use.
(ii) Losses arising from the retirement of, and gains or losses arising
from disposal of fixed assets which are carried at cost are recognised
in the Statement of Profit and Loss.
(iii) Depreciation is provided on a pro-rata basis on the straight-line
method (SLM) based on estimated useful life of fixed assets determined
by management (which are higher than the rates prescribed under
Schedule XIV to the Companies Act, 1956) as follows:
(iv) Leasehold improvements are amortised over the period of lease or
five years, whichever is lower.
(v) Assets individually costing up to Rupees five thousand are fully
depreciated in the year of purchase.
1.4 Intangible Assets and Amortisation
Intangible assets are stated at cost of acquisition less accumulated
depreciation and impairment losses.
Intangible assets are recognised only if it is probable that future
economic benefits that are attributable to the asset will flow to the
enterprise and the cost of the asset can be measured reliably.
Intangible assets comprise of computer software which is amortised on
straight-line basis over an estimated useful life of one to six
years.Gains or losses arising from the retirement or disposal of an
intangible asset are determined as the difference between the net
disposal proceeds and the carrying amount of the asset and recognised
as income or expense in the Statement of Profit and Loss.
The amortisation period and method used for intangible assets are
reviewed at each financial year end.
1.5 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready
for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit and Loss in the period in which they are incurred.
1.6 Lease accounting
As a lessee:
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit and Loss on a straight-line basis over the period
of the lease.
1.7 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried at
cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
1.8 Impairment of assets
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the
asset/cash generating unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.9 Revenue recognition
Revenue is recognised net of service tax to the extent that it is
probable that economic benefit will flow to the Company and that
revenue can be reliably measured.
(i) Revenue from time and material contracts are recognised as related
services are performed.
(ii) Revenue from fixed price contracts for delivering services is
recognised under the proportionate completion method wherein revenue is
recognised based on services performed to date as a percentage of total
services to be performed.
(iii) Revenue from maintenance contracts are recognised rateably over
the term of the maintenance contract on a straight-line basis.
(iv) Revenue from certain services are recognised as the services are
rendered, on the basis of an agreed amount in accordance with the
agreement entered into by the Company.
(v) Revenue from sale of user licenses for software application is
recognised on transfer of the title in the user license.
(vi) Provision for estimated losses, if any, on incomplete contracts
are recorded in the period in which such losses become probable based
on the current contract estimates.
(vii) Deferred and unearned revenues represent the estimated unearned
portion of fees derived from certain fixed-rate service agreements.
Unearned revenues for fixed fee contracts are recognised on a pro-rata
basis over the term of the underlying service contracts, which are
generally one year.
(viii) Unbilled revenue represents costs and earnings in excess of
billings as at the balance sheet date.
1.10 Other Income
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
1.11 Foreign currency transactions
(i) Initial recognition:
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Subsequent recognition:
As at the reporting date, non-monetary items which are carried in terms
of historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period other than those monetary assets which are
provided for being doubtful of recovery.
Exchange differences on restatement of all monetary items are
recognised in the Statement of Profit and Loss.
(iii) Forward exchange contracts not intended for trading or
speculation purposes:
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
(iv) Forward exchange contracts outstanding as at the year end on
account of firm commitment / highly probable forecast transactions are
marked to market and the losses, if any, are recognised in the
Statement of Profit and Loss and gains are ignored in accordance with
the Announcement of Institute of Chartered Accountants of India on
''Accounting for Derivatives'' issued in March 2008.
1.12 Employee benefits
(a) Provident Fund, Employee State Insurance and Employee Pension
Scheme: Contribution towards provident fund, employee state insurance
and employee pension scheme is made to the regulatory authorities,
where the Company has no further obligations. Such benefits are
classified as Defined Contribution Schemes as the Company does not
carry any further obligations, apart from the contributions made on a
monthly basis.
(b) Gratuity: The Company provides for gratuity, a defined benefit plan
(the "gratuity plan") covering eligible employees in accordance with
the Payment of Gratuity Act, 1972. The gratuity plan provides a lump
sum payment to vested employees at retirement or termination of
employment based on the respective employee''s last drawn salary and
years of employment with the Company. The Company''s liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses/ gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
(c) Compensated absences: Accumulated compensated absences, which are
expected to be availed or encashed within 12 months from the end of the
year are treated as short term employee benefits. The obligation
towards the same is measured at the expected cost of accumulating
compensated absences as the additional amount expected to be paid as a
result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year end are treated as
other long term employee benefits. The Company''s liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses/ gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
(d) Employee Share-based Payments: Equity settled stock options granted
to the employees under Employee Stock Option Plans are accounted for as
per the accounting treatment prescribed by Employee Stock Option Scheme
and Employee Stock Purchase Guidelines, 1999, issued by Securities and
Exchange Board of India and the Guidance Note on Employee Share based
Payments issued by the Institute of Chartered Accountants of India. The
intrinsic value of the option being excess of market value of the
underlying share immediately on the date of grant over its exercise
price is recognised as deferred employee compensation with a credit to
employee stock option outstanding account. The deferred employee
compensation is charged to Statement of Profit and Loss on straight
line basis over the vesting period of the option. The options that
lapse are reversed by a credit to employee compensation expense, equal
to the amortised portion of value of lapsed portion and to deferred
employee compensation expense equal to the un-amortised portion.
(e) Other Long Term Employee Benefits - Long Service Award/Long Term
Incentive Plan/Long Term Retention Bonus. The Company''s liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses/ gains are recognized in the
Statement of Profit and Loss in the year in which they arise.
1.13 Taxes on income
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the taxation laws prevailing in
the respective jurisdictions.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty/ virtual certainty, as may
be applicable, that sufficient future taxable income will be available
against which such deferred tax assets can be realised. Deferred tax
assets and liabilities are measured using the tax rates and tax laws
that have been enacted or substantively enacted by the Balance Sheet
date. At each Balance Sheet date, the Company reassesses unrecognised
deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period. Such asset is reviewed
at each Balance Sheet date and the carrying amount of the MAT credit
asset is written down to the extent there is no longer a convincing
evidence to the effect that the Company will pay normal income tax
during the specified period.
1.14 Earnings per share
Basic earnings per share 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. The
weighted average number of equity shares outstanding during the period
and for all periods presented is adjusted for events, such as bonus
shares, other than the conversion of potential equity shares, that have
changed the number of equity shares outstanding, without a
corresponding change in resources. For the purpose of calculating
diluted earnings per share, the net profit or loss for the period
attributable to equity shareholders and the weighted average number of
shares outstanding during the period is adjusted for the effects of all
dilutive potential equity shares.
1.15 Provisions and contingent liabilities
Provisions: Provisions are recognised when there is a present
obligation 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 there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Provisions for onerous contracts (i.e., contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it) are recognised
when it is probable that cash outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event based on a reliable estimate of such obligation.
Contingent liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made, is termed
as a contingent liability."
1.16 Exceptional items
Exceptional items are generally non-recurring items of income and
expense within profit or loss from ordinary activities, which are of
such size, nature or incidence that their disclosure is relevant to
explain the performance of the Company for the year.
1.17 Project work expenses
Project work expenses represents amounts charged by sub-contractors.
These expenses are recognised on an accrual basis.
1.18 Cash and cash equivalents
In the cash flow statement, cash and cash equivalents includes cash in
hand, demand deposits with banks, other short-term highly liquid
investment with original maturities of three months or less.
Dec 31, 2013
1. GENERAL INFORMATION
Xchanging Solutions Limited (''the Company''), incorporated on February
1, 2002, is an information technology (IT) services provider with
operations in India and an international presence established through
subsidiaries in several countries including the USA, Singapore and the
UK.
Pursuant to agreements, arrangements, amalgamations, etc. (with
requisite approvals from various High Courts in India, wherever
applicable), the Company has, during earlier years, acquired the IT
services businesses (including assets and liabilities) of / from the
following entities:
SSI Limited (Information Technology division with operations in
India, USA and several other countries).
Scandent Group Limited, Mauritius (with operations in USA, Singapore,
Germany, etc.).
Matrix One India Limited (with operations in India).
Pursuant to share purchase agreements between Xchanging (Mauritius)
Limited (XML), a wholly owned subsidiary of Xchanging Plc, a listed
company incorporated in UK, and the erstwhile principal shareholders of
the Company, and consequent open offer to public, XML now owns 75.00%
(2012: 75.00%) of the outstanding share capital of the Company. Though
the open offer process was completed on April 9, 2009, XML obtained the
power of operational control of the Company effective January 1, 2009.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. These financial statements have been
prepared to comply in all material aspects with the accounting
standards notified under Section 211(3C) [Companies (Accounting
Standards) Rules, 2006, as amended] and the other relevant provisions
of the Companies Act, 1956.
All assets and liabilities have been classified as current and non
current as per the Company''s normal operating cycle and other criteria
set out in the revised Schedule VI to the Companies Act, 1956. Based on
the nature of services and the time between the acquisition of assets
for processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current - noncurrent classification of assets and
liabilities.
2.2 Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates. Any revision in accounting estimates is
recognised prospectively in current and future periods.
2.3 Tangible Assets and Depreciation
(i) Tangible assets are stated at cost of acquisition less accumulated
depreciation and impairment losses.
Cost comprises the purchase price and any directly attributable costs
of bringing the assets to their working condition for their intended
use. (ii) Losses arising from the retirement of, and gains or losses
arising from disposal of fixed assets which are carried at cost are
recognised in the Statement of Profit and Loss.
(iv) Leasehold improvements are amortised over the period of lease or
five years, whichever is lower.
(v) Assets individually costing up to Rupees five thousand are fully
depreciated in the year of purchase.
2.4 Intangible Assets and Amortisation
Intangible assets are recognised only if it is probable that future
economic benefits that are attributable to the asset will flow to the
enterprise and the cost of the asset can be measured reliably.
Intangible assets comprise of computer software which is amortised on
straight-line basis over an estimated useful life of two to six years.
The amortisation period and method used for intangible assets are
reviewed at each financial year end.
2.5 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready
for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit and Loss in the period in which they are incurred.
2.6 Lease accounting
As a lessee:
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases are charged to the Statement of
Proft and Loss on a straight-line basis over the period of the lease.
2.7 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried at
cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
2.8 Impairment of assets
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable group
of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows from other assets or groups of
assets, is considered as a cash generating unit. If any such indication
exists, an estimate of the recoverable amount of the asset/cash
generating unit is made. Assets whose carrying value exceeds their
recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
2.9 Revenue recognition
Revenue is recognised to the extent that it is probable that economic
benefit will flow to the Company and that revenue can be reliably
measured.
(i) Revenue from time and material contracts are recognised as related
services are performed.
(ii) Revenue from fixed price contracts for delivering services is
recognised under the proportionate completion method wherein revenue is
recognised based on services performed to date as a percentage of total
services to be performed.
(iii) Revenue from maintenance contracts are recognised ratably over
the term of the maintenance contract on a straight-line basis.
(iv) Revenue from certain services are recognised as the services are
rendered, on the basis of an agreed amount in accordance with the
agreement entered into by the Company.
(v) Revenue from sale of user licenses for software application is
recognised on transfer of the title in the user license.
(vi) Interest income is recognised on a time proportion basis taking
into account the amount outstanding and the rate applicable.
(vii) Provision for estimated losses, if any, on incomplete contracts
are recorded in the period in which such losses become probable based
on the current contract estimates.
(viii) Deferred and unearned revenues represent the estimated unearned
portion of fees derived from certain fixed-rate service agreements.
Unearned revenues for fixed fee contracts are recognised on a pro-rata
basis over the term of the underlying service contracts, which are
generally one year.
(ix) Unbilled revenue represents costs and earnings in excess of
billings as at the balance sheet date.
2.10 Foreign currency transactions
(i) Initial recognition:
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Subsequent recognition:
As at the reporting date, non-monetary items which are carried in terms
of historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period other than those monetary assets which are
provided for being doubtful of recovery.
Exchange differences on restatement of all monetary items are
recognised in the Statement of Profit and Loss.
(iii) Forward exchange contracts not intended for trading or
speculation purposes:
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of Profit
and Loss in the reporting period in which the exchange rates change.
Any profit or loss arising on cancellation or renewal of such a forward
exchange contract are recognised as income or as expense for the
period.
2.11 Employee benefits
(a) Provident Fund, Employee State Insurance and Employee Pension
Scheme: Contribution towards provident fund, employee state insurance
and employee pension scheme is made to the regulatory authorities,
where the Company has no further obligations. Such benefits are
classified as Defend Contribution Schemes as the Company does not carry
any further obligations, apart from the contributions made on a monthly
basis.
(b) Gratuity: The Company provides for gratuity, a defend benefit plan
(the "gratuity plan") covering eligible employees in accordance with
the Payment of Gratuity Act, 1972. The gratuity plan provides a lump
sum payment to vested employees at retirement or termination of
employment based on the respective employee''s last drawn salary and
years of employment with the Company. The Company''s liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses/ gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
(c) Compensated absences and Long service award: Accumulated
compensated absences and Long service award, which are expected to be
availed or encased within 12 months from the end of the year end are
treated as short term employee benefits. The obligation towards the same
is measured at the expected cost of accumulating compensated absences
as the additional amount expected to be paid as a result of the unused
entitlement as at the year end.
Accumulated compensated absences and Long service award, which are
expected to be availed or encased beyond 12 months from the end of the
year end are treated as other long term employee benefits. The Company''s
liability is actuarially determined (using the Projected Unit Credit
method) at the end of each year. Actuarial losses/ gains are recognised
in the Statement of Profit and Loss in the year in which they arise.
(d) Employee Share-based Payments: Equity settled stock options granted
to the employees under Employee Stock Option Plans are accounted for as
per the accounting treatment prescribed by Employee Stock Option Scheme
and Employee Stock Purchase Guidelines, 1999, issued by Securities and
Exchange Board of India and the Guidance Note on Employee Share based
Payments issued by the Institute of Chartered Accountants of India. The
intrinsic value of the option being excess of market value of the
underlying share immediately prior to date of grant over its exercise
price is recognised as deferred employee compensation with a credit to
employee stock option outstanding account. The deferred employee
compensation is charged to Statement of Profit and Loss on straight line
basis over the vesting period of the option. The options that lapse are
reversed by a credit to employee compensation expense, equal to the
amortised portion of value of lapsed portion and to deferred employee
compensation expense equal to the un-amortised portion.
2.12 Taxes on income
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the taxation laws prevailing in
the respective jurisdictions.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty/ virtual certainty, as may
be applicable, that sufficient future taxable income will be available
against which such deferred tax assets can be realised. Deferred tax
assets and liabilities are measured using the tax rates and tax laws
that have been enacted or substantively enacted by the Balance Sheet
date. At each Balance Sheet date, the Company reassesses unrecognised
deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period. Such asset is reviewed at
each Balance Sheet date and the carrying amount of the MAT credit asset
is written down to the extent there is no longer a convincing evidence
to the effect that the Company will pay normal income tax during the
specifed period.
2.13 Earnings per share
Basic earnings per share 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. The
weighted average number of equity shares outstanding during the period
and for all periods presented is adjusted for events, such as bonus
shares, other than the conversion of potential equity shares, that have
changed the number of equity shares outstanding, without a
corresponding change in resources. For the purpose of calculating
diluted earnings per share, the net profit or loss for the period
attributable to equity shareholders and the weighted average number of
shares outstanding during the period is adjusted for the effects of all
dilutive potential equity shares.
2.14 Provisions and contingent liabilities
Provisions: Provisions are recognised when there is a present
obligation 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 there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Provisions for onerous contracts (i.e., contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it) are recognised
when it is probable that cash outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event based on a reliable estimate of such obligation.
Contingent liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made, is termed
as a contingent liability.
2.15 Exceptional items
Exceptional items are generally non-recurring items of income and
expense within profit or loss from ordinary activities, which are of
such size, nature or incidence that their disclosure is relevant to
explain the performance of the Company for the year.
2.16 Project work expenses
Project work expenses represents amounts charged by sub-contractors and
cost of hardware and software incurred for execution of projects. These
expenses are recognised on an accrual basis.
2.17 Cash and cash equivalents
In the cash fow statement, cash and cash equivalents includes cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.
(a) Defend Contribution Plan
Provident Fund and Other Funds: During the year, the Company has
recognised Rs.284 (2012: Rs.253) in the Statement of Profit and Loss
relating to provident fund and other funds, which is included in the
''Contribution to provident and other funds''.
(b) Defend Benefit Plan
Gratuity (unfunded): The Company provides for gratuity, a defend benefit
plan (the "gratuity plan") covering eligible employees in accordance
with the Payment of Gratuity Act, 1972. The gratuity plan provides a
lump sum payment to vested employees at retirement or termination of
employment based on the respective employee''s last drawn salary and
years of employment with the Company.
Dec 31, 2012
1.1 Basisofpreparation
The financial statements have been prepared to comply in all material
respects with the notified Accounting Standards (AS) under the
Companies (Accounting Standards) Rules, 2006 and the relevant
provisions of the Companies Act, 1956 (''the Act''). The financial
statements have been prepared under the historical cost convention on
an accrual basis. The accounting policies have been consistently
applied by the Company and are consistent with those used in the prior
year.
All assets and liabilities have been clasified as current and non
current as per the Company''s normal operating cycle and other criteria
set out in the revised Schedule VI to the Companies Act, 1956. Based on
the nature of services and the time between the acquisition ofassets
for processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current - non current classification ofassets and
liabilities.
1.2 Use ofEstimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates. Any revision in accounting estimates is
recognised prospectively in current and future periods.
1.3 Tangible Assets and Depreciation
(i) Tangible assets are stated at cost of acquisition less accumulated
depreciation and impairment losses. Cost comprises the purchase price
and any directly attributable costs of bringing the assets to their
working condition for their intended use.
(ii) Depreciation is provided on a straight line method (SLM) based on
estimated useful life of fixed assets determined by management (which
are higher than the rates prescribed under Schedule XIV to the Act) as
follows:
(iii) Leasehold improvements are amortised over the period of lease or
five years, whichever is lower. Assets acquired on finance lease are
depreciated at the lower of lease term and estimated useful life as
stated above. Assets individually costing up to Rupees five thousand
are fully depreciated in the year of purchase.
1.4 Intangible Assets
Intangible assets are recognised only if it is probable that future
economic benefits that are attributable to the asset will flow to the
enterprise and the cost ofthe asset can be measured reliably.
Intangible assets comprise of goodwill, computer software, computer
software license rights, license to use intellectual property and
software development costs.
(i) Goodwill arising on acquisition is the difference between the cost
of an acquired business and the aggregate ofthe fairvalue ofthat
entity''s identifiable assets and liabilities and the same is amortised
on a straight line basis over its economic life or the period defined
in the Court scheme.
(ii) Costs incurred towards development of computer software meant for
internal use are capitalised subsequent to establishing technological
feasibility. Computer software is amortised over an estimated useful
life of two to six years.
(iii) Computer software licences are capitalised on the basis of costs
incurred to acquire and bring to use the specific software, and are
amortised on straight line basis over an estimated useful life oftwo to
four years.
(iv) License to use intellectual property rights are amortised on
straight line basis over an estimated useful life ofsix years.
(v) The amortisation period and method used for intangible assets are
reviewed at each financial year end.
1.5 Borrowing Costs
Borrowing costs that are directly attributable to the acquisition or
construction of a qualifying asset are capitalised as part of the cost
of that asset till such time the asset is ready for its intended use. A
qualifying asset is an asset that necessarily takes a substantial
period oftime to get ready for its intended use.
1.6 Lease accounting Finance lease:
Assets acquired under lease where the Company has substantially all the
risks and rewards of ownership are classified as finance lease. Such
lease is capitalised at the inception of the lease at lower of the fair
value or the present value of the minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period. Lease management fees, legal charges and
other initial direct costs are capitalised.
Operating lease:
Assets acquired on lease where a significant portion ofthe risks and
rewards of ownership are retained by the lessor are classified as
operating lease. Lease rentals on assets taken on operating lease are
recognised as an expense in the Statement of Profit and Loss on a
straight line basis over the lease term.
1.7 Investment
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 the value is made to
recognise a decline, other than temporary, in the value ofthe
investments.
1.8 Inventories
Inventories comprise licenses purchased by the Company for resale to
customers and are stated at the lower of cost and net realisable value.
Cost of licenses is determined using the first-in-first-out method.
1.9 Impairment of assets
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the 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. If the carrying amount ofthe asset exceeds its recoverable
amount, an impairment loss is recognised in the Statement of Profit and
Loss to the extent the carrying amount exceeds the recoverable amount.
1.10 Revenuerecognition
Revenue is recognised to the extent that it is probable that economic
benefit will flow to the Company and that revenue can be reliably
measured.
(i) Revenue from time and material contracts are recognised as related
services are performed.
(ii) Revenue from fixed price contracts for delivering services is
recognised under the proportionate- completion method wherein revenue
is recognised based on services performed to date as a percentage of
total services to be performed.
(iii) Revenue from maintenance contracts are recognised rateably over
the term of the maintenance contract on a straight-line basis.
(iv) Revenue from certain services are recognised as the services are
rendered, on the basis of an agreed amount in accordance with the
agreement entered into by the Company.
(v) Revenue from sale of user licenses for software application is
recognised on transfer of the title in the user license.
(vi) Interest income is recognised on a time proportion basis taking
into account the amount outstanding and the rate applicable.
(vii) Provision for estimated losses, if any, on incomplete contracts
are recorded in the period in which such losses become probable based
on the current contract estimates.
(viii) Deferred and unearned revenues represent the estimated unearned
portion offees derived from certain fixed-rate claim service
agreements. Deferred revenues are recognised based on the estimated
rate at which the services are provided. These rates are primarily
based on a historical evaluation of actual claim closing rates.
Unearned revenues for fixed fee contracts are recognised on a pro-rata
basis over the term of the underlying service contracts, which are
generally one year.
(ix) Unbilled revenue represents costs and earnings in excess of
billings as at the balance sheet date.
1.11 Foreign currency transactions
(i) Initial recognition:
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion:
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange differences:
Exchange differences arising on the settlement of monetary items or on
reporting the Company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
prior year financial statements, are recognised as income or as expense
in the year in which they arise except those arising from investments
in non-integral operations. Exchange differences arising on a monetary
item that, in substance, forms part of the Company''s net investment in
a non-integral foreign operation is accumulated in a foreign currency
translation reserve in the financial statements until the disposal
ofthe net investment, at which time they are recognised as income or as
expense.
(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 period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
period.
1.12 Employeebenefits
(a) Short term employee benefits:
All employee benefits falling due wholly within twelve months of
rendering the service are classified as short term employee benefits,
which include benefits like salaries, short term compensated absences,
performance incentives, etc. and are recognised as expense in the
period in which the employee renders the related service.
(b) Defined-contribution plans:
The Company''s contribution towards defined contribution plans (where
Company pays pre-defined amounts and does not have any legal or
informal obligation to pay additional sums) for post employment
benefits, namely, Provident Fund, Employee Pension Scheme, etc. are
charged to Statement of Profit and Loss as expense during the period in
which the employees perform the service.
(c) Defined-benefit plans:
The Company has a defined benefit plan for employees in form of
Gratuity, the liability in respect of which is determined on the basis
of valuation carried out by an independent actuary (using the projected
unit credit method) at the balance sheet date.
(d) Other long term employee benefits:
Other long-term employee benefits including compensated absences that
are not expected to occur within twelve months after the end of the
period in which the employee renders related services are recognised as
a liability at the present value of the defined benefit obligation
based on actuarial valuation (under projected unit credit method)
carried out at the balance sheet date.
(e) Actuarial gains and losses:
Actuarial gains and losses comprise experience adjustments and the
effect of changes in the actuarial assumptions, and are recognised
immediately in the Statement of Profit and Loss as income or expense.
(f) Deferred employee stock compensation costs:
Stock options granted to the employees under employee stock option
plans (ESOP''s) are recognised in accordance with the accounting
treatment prescribed by "Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999". Accordingly, the excess of market value of the
stock options, as on the date of grant, over the exercise price of the
options, is recognised as deferred employee stock compensation
expenses, and is charged to Statement of Profit and Loss on ''graded
vesting'' basis over the vesting period of the options. The fair value
of the options is measured on the basis of an independent valuation
performed or the market price in respect of stock options granted.
1.13 Taxesonincome
Tax expense comprises current and deferred taxes. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with local tax laws applicable in the respective countries.
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 and deferred tax liabilities across various countries of
operation are not set-off against each other as the Company does not
have a legal right to do so. 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.
Minimum Alternative Tax (''MAT'') credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in the Guidance Note on
Accounting in respect of Minimum Alternative Tax issued by the
Institute of Chartered Accountants of India, the said asset is created
by way of a credit to the Statement of Profit and Loss and disclosed as
MAT Credit Entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal income tax during the specified
period.
1.14 Earnings/ (loss) per share
Basic earnings/ (loss) per share is calculated by dividing the net
profit/ (loss) for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during all the
years presented is adjusted for capital reduction.
For the purpose of calculating diluted earnings/ (loss) per share, the
net profit/ (loss) for the year attributable to equity shareholders and
the weighted average numberofshares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
1.15 Provisions and contingent liabilities
Provisions are recognised when the Company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Provisions are reviewed regularly and are adjusted where necessary to
reflect the current best estimates of the obligation. When the Company
expects a provision to be reimbursed, the reimbursement is recognised
as a separate asset, only when such reimbursement is virtually certain.
Provisions for onerous contracts (i.e., contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it), are recognised
when it is probable that cash outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event based on a reliable estimate of such obligation.
Contingent liabilities are disclosed when there is a possible
obligation or a present obligation that may (but probably will not)
require an outflow of resources.
1.16 Segmentreporting
Identification of segments: The Company''s operating businesses are
organised and managed separately according to the nature of services
rendered. The analysis of geographical segments is based on the
geographical location ofthe Company''s customer.
Intersegment transfers: The Company generally accounts for inter
segment sales and transfers as if the sales or transfers were to third
parties at current market prices.
Allocation of common costs: Common allocable costs are allocated to
each segment according to the relative contribution of each segment to
the total common costs.
Unallocated items: The unallocated items include general corporate
income and expense items which are not allocated to any business
segment.
1.17 Exceptionalltems
Exceptional items are generally non-recurring items of income and
expense within profit or loss from ordinary activities, which are of
such size, nature or incidence that their disclosure is relevant to
explain the performance of the Company for the year.
1.18 Project workExpenses
Project work expenses represents amounts charged by sub-contractors and
cost of hardware and software incurred for execution of projects. These
expenses are recognised on an accrual basis.
1.19 Cashandcashequivalents
Cash and cash equivalents in the balance sheet comprise of cash at bank
and on hand, demand deposits and short-term investments with an
original maturity ofthree months or less.
1.20 Derivative instruments
With respect to derivative instruments (foreign currency forward
contracts) to hedge the risks associated with highly probable forecast
transactions, the (gain)/ loss arising on forward exchange contracts in
foreign currency, entered into to hedge highly probable forecast
transactions, which qualify for hedge accounting, are accounted for
under Hedging Reserve to be ultimately recognised in the Statement of
Profit and Loss when the forecasted transactions arise, as per the
principles of hedge accounting enunciated in Accounting Standard 30,
"Financial Instruments: Recognition and Measurement issued by the
Institute of Chartered Accountants of India".
Dec 31, 2010
1.1 Basis of preparation
The financial statements have been prepared to comply in all material
respects with the notified Accounting Standards under the Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956 (the Act). The financial statements have been
prepared under the historical cost convention on an accrual basis. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year.
1.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates. Any revision in accounting estimates is
recognised prospectively in current and future periods.
1.3 Fixed assets and depreciation
(i) Fixed assets are stated at cost of acquisition less accumulated
depreciation and impairment losses. Cost comprises the purchase price
and any directly attributable costs of bringing the assets to their
working condition for its intended use.
(iii) Leasehold improvements are amortised over the period of lease or
five years, whichever is lower. Assets acquired on finance lease are
depreciated at the lower of lease term and estimated useful life as
stated above. Assets individually costing up to Rs.5 are fully
depreciated in the year of purchase.
1.4 Intangible assets
Intangible assets are recognised only if it is probable that future
economic benefits that are attributable to the asset will flow to the
enterprise and the cost of the asset can be measured reliably.
Intangible assets comprise of goodwill, computer software, computer
software license rights, license to use intellectual property and
software development costs.
(i) Goodwill arising on acquisition is the difference between the cost
of an acquired business and the aggregate of the fair value of that
entitys identifiable assets and liabilities and the same is amortised
on a straight line basis over its economic life or the period defined
in the Court scheme.
(ii) Costs incurred towards development of computer software meant for
internal use are capitalised subsequent to establishing technological
feasibility. Computer software is amortised over an estimated useful
life of two to six years.
(iii) Computer software licences are capitalised on the basis of costs
incurred to acquire and bring to use the specific software, and are
amortised on straight line basis over an estimated useful life of four
years.
(iv) License to use intellectual property rights are amortised on
straight line basis over an estimated useful life of six years.
(v) The amortisation period and method used for intangible assets are
reviewed at each financial year end.
1.5 Borrowing costs
Borrowing costs that are directly attributable to the acquisition or
construction of a qualifying asset are capitalised as part of the cost
of that asset till such time the asset is ready for its intended use. A
qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use.
1.6 Lease accounting
Finance lease
Assets acquired under lease where the Company has substantially all the
risks and rewards of ownership are classified as finance lease. Such
lease is capitalised at the inception of the lease at lower of the fair
value or the present value of the minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period. Lease management fees, legal charges and
other initial direct costs are capitalised.
Operating lease
Assets acquired on lease where a significant portion of the risks and
rewards of ownership are retained by the lessor are classified as
operating lease. Lease rentals on assets taken on operating lease are
recognised as an expense in the Profit and Loss Account on a straight
line basis over the lease term. Operating leases, which are renewed,
after the primary lease period and have not been opted for transfer of
ownership, are reclassified to finance lease prospectively.
1.7 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 the value is made to
recognise a decline, other than temporary, in the value of the
investments.
1.8 Inventories
Inventories comprise licenses purchased by the Company for resale to a
customer and are stated at the lower of cost and net realisable value.
Cost of licenses is determined using the first-in-first-out method.
1.9 Impairment of assets
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the 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. If the carrying amount of the asset exceeds its recoverable
amount, an impairment loss is recognised in the Profit and Loss Account
to the extent the carrying amount exceeds the recoverable amount.
1.10 Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefit will flow to the Company and that the revenue can be
reliably measured.
(i) Revenue from time and material contracts are recognised as related
services are performed. Revenue from fixed price contracts for
delivering services is recognised under the proportionate-completion
method wherein revenue is recognised based on services performed to
date as a percentage of total services to be performed.
(ii) Revenue from maintenance contracts are recognised rateably over
the term of the maintenance contract on a straight-line basis.
(iii) Revenue from certain services are recognised as the services are
rendered, on the basis of an agreed amount in accordance with the
agreement entered into by the Company.
(iv) Revenue from sale of user licenses for software application is
recognised on transfer of the title in the user license.
(v) Interest income is recognised on a time proportion basis taking
into account the amount outstanding and the rate applicable.
(vi) Provision for estimated losses, if any, on incomplete contracts
are recorded in the period in which such losses become probable based
on the current contract estimates.
(vii) Deferred and unearned revenues represent the estimated unearned
portion of fees derived from certain fixed-rate claim service
agreements. Deferred revenues are recognised based on the estimated
rate at which the services are provided. These rates are primarily
based on a historical evaluation of actual claim closing rates.
Unearned revenues for fixed fee contracts are recognised on a pro-rata
basis over the terms of the underlying service contracts, which are
generally one year.
(viii) Unbilled revenue represents costs and earnings in excess of
billings as at the balance sheet date.
1.11 Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting the Companys monetary items 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 expense
in the year in which they arise except those arising from investments
in non-integral operations.
Exchange differences arising on a monetary item that, in substance,
forms part of the Companys net investment in a non-integral foreign
operation is accumulated in a foreign currency translation reserve in
the financial statements until the disposal of the net investment, at
which time they are recognised as income or as expense.
(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 period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
period.
1.12 Employee benefits
(a) Short term employee benefits:
All employee benefits falling due wholly within twelve months of
rendering the service are classified as short term employee benefits,
which include benefits like salaries, short term compensated absences,
performance incentives, etc. and are recognised as expense in the
period in which the employee renders the related service.
(b) Defined-contribution plans:
The Company has defined contribution plans (where Company pays
pre-defined amounts and does not have any legal or informal obligation
to pay additional sums) for post employment benefits, and the Companys
contributions thereto are charged to Profit and Loss Account every
year. The Companys contributions to State plans are also charged to
Profit and Loss Account as expense during the period in which the
employees perform the service.
(c) Defined-benefit plan:
The Company has a defined benefit plan (viz., Gratuity in India) for
employees, the liability for which is determined on the basis of
valuation carried out by an independent actuary (under projected unit
credit method) at the balance sheet date.
(d) Other long term employee benefits:
Compensated absences that are not expected to occur within twelve
months after the end of the period in which the employee renders
related services are recognised as a liability at the present value of
the defined benefit obligation based on actuarial valuation (under
projected unit credit method) carried out at the balance sheet date.
(e) Actuarial gains and losses:
Actuarial gains and losses comprise experience adjustments and the
effect of changes in the actuarial assumptions, and are recognised
immediately in the Profit and Loss Account as income or expense.
(f) Deferred employee stock compensation costs
Stock options granted to the employees under employee stock option
plans (ESOPs) are recognised in accordance with the accounting
treatment prescribed by ÃSecurities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999Ã. Accordingly, the excess of market value of the stock
options, as on the date of grant, over the exercise price of the
options, is recognised as deferred employee stock compensation
expenses, and is charged to profit and loss account on graded vesting
basis over the vesting period of the options. The fair value of the
options is measured on the basis of an independent valuation performed
or the market price in respect of stock options granted.
1.13 Taxes on Income
Tax expense comprises current, deferred and fringe benefit taxes.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with local tax
laws applicable in the respective countries. 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 and deferred tax liabilities across various countries of
operation are not set-off against each other as the Company does not
have a legal right to do so. 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.
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in the Guidance Note on
Accounting in respect of Minimum Alternative Tax issued by the
Institute of Chartered Accountants of India, the said asset is created
by way of a credit to the profit and loss account and disclosed as MAT
Credit Entitlement. The Company reviews the same at each balance sheet
date and writes down the carrying amount of MAT Credit Entitlement to
the extent there is no longer convincing evidence to the effect that
Company will pay normal income tax during the specified period.
1.14 Earnings per share
Basic earnings/ (loss) per share is calculated by dividing the net
profit/ (loss) for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during all the
years presented is adjusted for capital reduction.
For the purpose of calculating diluted earnings/ (loss) per share, the
net profit/ (loss) for the year attributable to equity shareholders and
the weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
1.15 Provisions and Contingent Liabilities
Provisions are recognised when the Company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Provisions are reviewed regularly and are adjusted where necessary to
reflect the current best estimates of the obligation. When the Company
expects a provision to be reimbursed, the reimbursement is recognised
as a separate asset, only when such reimbursement is virtually certain.
Provisions for onerous contracts (i.e., contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it), are recognised
when it is probable that cash outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event based on a reliable estimate of such obligation.
Contingent liabilities are disclosed when there is a possible
obligation or a present obligation that may (but probably will not)
require an outflow of resources.
1.16 Segment reporting
Identification of segments: The Companys operating businesses are
organised and managed separately according to the nature of services
rendered. The analysis of geographical segments is based on the
geographical location of the Companys customer.
Inter segment transfers: The Company generally accounts for inter
segment sales and transfers as if the sales or transfers were to third
parties at current market prices.
Allocation of common costs: Common allocable costs are allocated to
each segment according to the relative contribution of each segment to
the total common costs.
Unallocated items: The unallocated items include general corporate
income and expense items which are not allocated to any business
segment.
1.17 Exceptional items
Exceptional items are generally non-recurring items of income and
expense within profit or loss from ordinary activities, which are of
such size, nature or incidence that their disclosure is relevant to
explain the performance of the Company for the year.
1.18 Project work expenses
Project work expenses represents amounts charged by sub-contractors and
cost of hardware and software incurred for execution of projects. These
expenses are recognised on an accrual basis.
1.19 Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and on hand and short-term investments with an original maturity of
three months or less.
1.20 Derivative instruments
With respect to derivative instruments (foreign currency forward
contracts) to hedge the risks associated with highly probable forecast
transactions, the (gain)/loss arising on forward exchange contracts in
foreign currency, entered into to hedge highly probable forecast
transactions, which qualify for hedge accounting, are accounted for
under Hedging Reserve to be ultimately recognised in the profit and
loss account when the forecasted transactions arise, as per the
principles of hedge accounting enunciated in Accounting Standard 30,
"Financial Instruments: Recognition and Measurement", issued by the
Institute of Chartered Accountants of India adopted by the Company with
effect from April 1, 2010.
Dec 31, 2009
1.1 Basis of preparation
The financial statements have been prepared to comply in all material
respects with the notified Accounting Standards under the Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956 (Ãthe ActÃ). The financial statements have been
prepared under the historical cost convention on an accrual basis. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year.
1.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon managementÃs best
knowledge of current events and actions, actual results could differ
from these estimates. Any revision in accounting estimates is
recognised prospectively in current and future periods.
1.3 Fixed assets and depreciation
(i) Fixed assets are stated at cost of acquisition less accumulated
depreciation and impairment losses. Cost comprises the purchase price
and any directly attributable costs of bringing the assets to their
working condition for its intended use.
(iii) Leasehold improvements are amortised over the period of lease or
five years, whichever is lower. Assets acquired on finance lease are
depreciated at the lower of lease term and estimated useful life as
stated above. Assets individually costing up to Rs.5 are fully
depreciated in the year of purchase.
1.4 Intangible assets
Intangible assets are recognised only if it is probable that future
economic benefits that are attributable to the asset will flow to the
enterprise and the cost of the asset can be measured reliably.
Intangible assets comprise of goodwill, computer software, computer
software license rights, license to use intellectual property and
software development costs.
(i) Goodwill arising on acquisition is the difference between the cost
of an acquired business and the aggregate of the fair value of that
entitys identifiable assets and liabilities and the same is amortised
on a straight line basis over its economic life or the period defined
in the Court scheme.
(ii) Costs incurred towards development of computer software meant for
internal use are capitalised subsequent to establishing technological
feasibility. Computer software is amortised over an estimated useful
life of two to six years.
(iii) Computer software licences are capitalised on the basis of costs
incurred to acquire and bring to use the specific software, and are
amortised on straight line basis over an estimated useful life of four
years.
(iv) License to use intellectual property rights are amortised on
straight line basis over an estimated useful life of six years.
(v) The amortisation period and method used for intangible assets are
reviewed at each financial year end.
1.5 Borrowing costs
Borrowing costs that are directly attributable to the acquisition or
construction of a qualifying asset are capitalised as part of the cost
of that asset till such time the asset is ready for its intended use. A
qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use.
1.6 Lease accounting
Finance lease
Assets acquired under lease where the Company has substantially all the
risks and rewards of ownership are classified as finance lease. Such
lease is capitalised at the inception of the lease at lower of the fair
value or the present value of the minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period. Lease management fees, legal charges and
other initial direct costs are capitalised.
Operating lease
Assets acquired on lease where a significant portion of the risks and
rewards of ownership are retained by the lessor are classified as
operating lease. Lease rentals on assets taken on operating lease are
recognised as an expense in the Profit and Loss Account on a straight
line basis over the lease term. Operating leases, which are renewed,
after the primary lease period and have not been opted for transfer of
ownership, are reclassified to finance lease prospectively.
1.7 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 the value is made to
recognise a decline, other than temporary, in the value of the
investments.
1.8 Inventories
Inventories comprise licenses purchased by the Company for resale to a
customer and are stated at the lower of cost and net realisable value.
Cost of licenses is determined using the first-in-first-out method.
1.9 Impairment of assets
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. The recoverable
amount is the greater of the assetÃs 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. If the carrying amount of the asset exceeds its recoverable
amount, an impairment loss is recognised in the Profit and Loss Account
to the extent the carrying amount exceeds the recoverable amount.
1.10 Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefit will flow to the Company and that the revenue can be
reliably measured.
(i) Revenue from software services includes revenue from time and
material and fixed price contracts. Revenue from time and material
contracts are recognised as related services are performed. Revenue
from fixed price contracts for delivering services is recognised under
the proportionate-completion method wherein revenue is recognised based
on services performed to date as a percentage of total services to be
performed.
(ii) Revenue from maintenance contracts are recognised rateably over
the term of the maintenance contract on a straight- line basis.
(iii) Revenue from Information Technology enabled Services (ITeS) is
recognised as services are rendered, on the basis of an agreed amount
in accordance with the agreement entered into by the Company.
(iv) Revenue from sale of user licenses for software application is
recognised on transfer of the title in the user license.
(v) Interest income is recognised on a time proportion basis taking
into account the amount outstanding and the rate applicable.
(vi) Provision for estimated losses, if any, on incomplete contracts
are recorded in the period in which such losses become probable based
on the current contract estimates.
(vii) Deferred and unearned revenues represent the estimated unearned
portion of fees derived from certain fixed-rate claim service
agreements. Deferred revenues are recognised based on the estimated
rate at which the services are provided. These rates are primarily
based on a historical evaluation of actual claim closing rates.
Unearned revenues for fixed fee contracts are recognised on a pro-rata
basis over the terms of the underlying service contracts, which are
generally one year.
(viii) Unbilled revenue represents costs and earnings in excess of
billings as at the balance sheet date.
1.11 Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting the CompanyÃs monetary items 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 expense
in the year in which they arise except those arising from investments
in non-integral operations.
Exchange differences arising on a monetary item that, in substance,
forms part of the CompanyÃs net investment in a non-integral foreign
operation is accumulated in a foreign currency translation reserve in
the financial statements until the disposal of the net investment, at
which time they are recognised as income or as expense.
(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 period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
period.
1.12 Employee benefits
(a) Short term employee benefits:
All employee benefits falling due wholly within twelve months of
rendering the service are classified as short term employee benefits,
which include benefits like salaries, short term compensated absences,
performance incentives, etc. and are recognised as expense in the
period in which the employee renders the related service.
(b) Defined-contribution plans:
The Company has defined contribution plans (where Company pays
pre-defined amounts and does not have any legal or informal obligation
to pay additional sums) for post employment benefits, and the Companys
contributions thereto are charged to Profit and Loss Account every
year. The Companys contributions to State plans are also charged to
Profit and Loss Account as expense during the period in which the
employees perform the service.
(c) Defined-benefit plan:
The Company has a defined benefit plan (viz., Gratuity in India) for
employees, the liability for which is determined on the basis of
valuation carried out by an independent actuary (under projected unit
credit method) at the balance sheet date.
(d) Other long term employee benefits:
Compensated absences that are not expected to occur within twelve
months after the end of the period in which the employee renders
related services are recognised as a liability at the present value of
the defined benefit obligation based on actuarial valuation (under
projected unit credit method) carried out at the balance sheet date.
(e) Actuarial gains and losses:
Actuarial gains and losses comprise experience adjustments and the
effect of changes in the actuarial assumptions, and are recognised
immediately in the Profit and Loss Account as income or expense.
(f) Deferred employee stock compensation costs
Stock options granted to the employees under employee stock option
plans (ESOPÃs) are recognised in accordance with the accounting
treatment prescribed by ÃSecurities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999Ã. Accordingly, the excess of market value of the stock
options, as on the date of grant, over the exercise price of the
options, is recognised as deferred employee stock compensation
expenses, and is charged to profit and loss account on graded vesting
basis over the vesting period of the options. The fair value of the
options is measured on the basis of an independent valuation performed
or the market price in respect of stock options granted.
1.13 Taxes on Income
Tax expense comprises current, deferred and fringe benefit taxes.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with local tax
laws applicable in the respective countries. 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 and deferred tax liabilities across various countries of
operation are not set-off against each other as the Company does not
have a legal right to do so. 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.
Minimum Alternative Tax (ÃMATÃ) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in the Guidance Note on
Accounting in respect of Minimum Alternative Tax issued by the
Institute of Chartered Accountants of India, the said asset is created
by way of a credit to the profit and loss account and disclosed as MAT
Credit Entitlement. The Company reviews the same at each balance sheet
date and writes down the carrying amount of MAT Credit Entitlement to
the extent there is no longer convincing evidence to the effect that
Company will pay normal income tax during the specified period.
1.14 Earnings per share
Basic earnings/ (loss) per share is calculated by dividing the net
profit/ (loss) for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during all the
years presented is adjusted for capital reduction.
For the purpose of calculating diluted earnings/ (loss) per share, the
net profit/ (loss) for the year attributable to equity shareholders and
the weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
1.15 Provisions and Contingent Liabilities
Provisions are recognised when the Company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Provisions are reviewed regularly and are adjusted where necessary to
reflect the current best estimates of the obligation. When the Company
expects a provision to be reimbursed, the reimbursement is recognised
as a separate asset, only when such reimbursement is virtually certain.
Provisions for onerous contracts (i.e., contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it), are recognised
when it is probable that cash outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event based on a reliable estimate of such obligation.
Contingent liabilities are disclosed when there is a possible
obligation or a present obligation that may (but probably will not)
require an outflow of resources.
1.16 Segment reporting
Identification of segments: The CompanyÃs operating businesses are
organised and managed separately according to the nature of services
rendered. The analysis of geographical segments is based on the
geographical location of the CompanyÃs customer.
Inter segment transfers: The Company generally accounts for inter
segment sales and transfers as if the sales or transfers were to third
parties at current market prices.
Allocation of common costs: Common allocable costs are allocated to
each segment according to the relative contribution of each segment to
the total common costs.
Unallocated items: The unallocated items include general corporate
income and expense items which are not allocated to any business
segment.
1.17 Exceptional items
Exceptional items are generally non-recurring items of income and
expense within profit or loss from ordinary activities, which are of
such size, nature or incidence that their disclosure is relevant to
explain the performance of the Company for the year.
1.18 Project work expenses
Project work expenses represents amounts charged by sub-contractors and
cost of hardware and software incurred for execution of projects. These
expenses are recognised on an accrual basis.
1.19 Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and on hand and short-term investments with an original maturity of
three months or less.
1.20 Derivative instruments
As per The Institute of Chartered Accountants of India (ÃICAIÃ)
Announcement, accounting for derivative contracts, derivative contract
other than those covered under AS - 11, ÃThe effects of changes in the
foreign exchange ratesÃ, are marked to market on a portfolio basis, and
the net loss after considering the offsetting effect on the underlying
hedge item is charged to the income statement. Net gains are ignored.
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