Home  »  Company  »  3i Infotech  »  Quotes  »  Accounting Policy
Enter the first few characters of Company and click 'Go'

Accounting Policies of 3i Infotech Ltd. Company

Mar 31, 2016

1.1 Basis of preparation of financial statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (“GAAP”) under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (''the Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting Policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

1.2 Use of estimates

The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities as on the date of the financial statements. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates. Any revision to these accounting estimates is recognized prospectively.

1.3 Revenue Recognition

a) Revenue from IT solutions:

Revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.

Revenue from Software Products is recognized on delivery/installation, as per the predetermined/laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provisions for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/Term License/Other Materials incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

b) Revenue from Transaction Services:

Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.

c) Interest / Dividend Income:

Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable. Dividend Income is recognized as and when right to receive the same is established.

1.4 Unbilled and unearned revenue

Revenue recognized over and above the billings on a customer is classified as “unbilled revenue” and advance billing to customer is classified as “advance from customer/unearned revenue” and included in other liabilities.

1.5 Fixed assets and depreciation/ amortization Tangible assets:

Fixed assets except leasehold building are stated at cost, which comprises the purchase consideration and other directly attributable costs of bringing an asset to its working condition for the intended use.

Leasehold Building has been revalued and is reinstated at updated revalued amount.

Advances given towards acquisition of fixed assets are disclosed as capital advances under “Long Term Loans and Advances” and the costs incurred on assets not ready for use as at the balance sheet date are disclosed as “Capital work in progress”.

Intangible assets:

“Software products (meant for sale)” are products licensed to customers. Costs that are directly associated with such products whether acquired or developed or upgraded in partnership with others, and have a probable economic benefit exceeding one year are recognized as software products (meant for sale).

Costs related to further development of existing “software products meant for sale” are capitalized only if the costs result in a software product, whose life and value in use is in excess of its originally assessed standard of performance, which can be measured reliably, technological feasibility thereof has been established, future economic benefits of each of such products are probable and the Company intends to complete development and to use the software.

Software Products-Others: Purchased software meant for in house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.

Business and Commercial Rights are capitalized at the acquisition price.

Depreciation/Amortization:

Leasehold land and Leasehold building and improvements thereon and other leased assets are amortized over the primary period of lease or its life, whichever is lower.

Business and Commercial Rights are amortized over their estimated useful life or ten years, whichever is lower while Software Products-Others are amortized over a period of five years.

Software Products (meant for sale) are amortized over a period of 10 years after taking into consideration the residual value.

Depreciation on other fixed assets is systematic allocation of the depreciable amount over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset.

Depreciation on Tangible assets is provided on Straight Line Method (SLM) over the useful lives of assets determined based on internal technical assessments which are as follows :

1.6 Investments

Trade investments are the investments made to enhance the Company''s business interest. Investments are either classified as current or long-term based on the management''s intention at the time of purchase. Long-term investments are carried at cost and a provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at lower of the cost or fair value and a provision is made to recognize any decline in the carrying value.

Cost of overseas investments represents the Indian Rupee equivalent of the consideration paid for the investment.

1.7 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

1.8 Translation of Foreign Currency Items other than hedged transactions

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transaction. Exchange differences in respect of all current monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and all exchange gains / losses arising there from are recognized in the Statement of Profit and Loss.

Exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period or reported in previous financial statements, are accounted as below:

- In so far as they relate to the acquisition of depreciable capital assets, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset; and

- In other cases, they said exchange differences are accumulated in a Foreign Currency Monetary Item Translation Difference Account (''FCMITDA'') and amortized over the balance period of such long term asset/liability.

Foreign operations carried out with a significant degree of autonomy are classified as "non integral operations” as per the provisions of AS 11 “Effects of changes in foreign exchange rates”. All assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the “Foreign Currency Translation Reserve”.

Foreign operations other than non-integral operations are classified as integral. All monetary assets and liabilities are translated at closing rates while non monetary assets are translated at historical rates and income and expenses are translated at the average rates for the year and the resulting exchange differences are accounted in the Statement of Profit and Loss.

1.9 Hedge Accounting

The Company enters into foreign currency and interest rate swap contracts to hedge its risks associated with foreign currency fluctuations relating to loan liabilities and highly probable forecast transactions. The Company designates these derivative instruments as hedges and records the gain or loss on effective cash flow hedges in the ''Hedging Reserve Account'' until the forecasted transaction materializes. Gain or loss on the ineffective portion of cash flow hedges is recognized in the Statement of Profit and Loss.

1.10 Accounting of Employee Benefits Employee Benefits in India Gratuity

The Company provides for gratuity, a defined benefit retirement plan, which covers eligible employees and the liability under the plan is determined based on actuarial valuation done by an independent value using the projected unit credit method.

Superannuation

Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.

Provident fund

Retirement benefit in the form of Provident Fund and ''Employer-Employee Scheme'' are defined contribution schemes. The Company''s contributions paid/payable to the fund are charged to the Statement of Profit and Loss for the year when the contributions are due. The Company has no obligation other than the contributions payable to the provident fund.

Leave entitlement

Liability for leave entitlement for employees is provided on the basis of actuarial valuation semi-annually and based on estimates for interim financial reporting.

Employee Benefits in Foreign Branch

In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment/entitlement as applicable for employees in foreign branch are provided on the basis of actuarial valuation and based on estimates.

1.11 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources.

Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outflow of resources.

Contingent assets are neither recognized nor disclosed in the financial statements.

1.12 Borrowing costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset upto the date of completion. Other borrowing costs are charged to the Statement of Profit and Loss.

1.13 Impairment of assets

In accordance with AS 28 on ''Impairment of Assets'', where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/depreciation) had no impairment loss been recognized.

1.14 Securities issue expenses

Securities issue expenses including expenses incurred on increase in authorized share capital are adjusted against Securities Premium Account.

1.15 Premium payable on redemption of Foreign Currency Convertible Bonds (FCCB)

Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.

1.16 Lease

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the Statement of Profit and Loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

Leased assets are depreciated on a straight-line basis over the useful life of the asset or the useful life as prescribed under Part A in Schedule II of the Act, whichever is lower.

Leases, where the less or effectively retain substantially all the risks and benefits incidental to ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

1.17 Earnings per share

In determining earnings per share, the Company considers the net profit/loss after tax and the post tax effect of any extra-ordinary, exceptional items and discontinuing operations on earnings per share is shown separately. The number of equity shares considered in computing basic earnings per share is the weighted average number of equity shares outstanding during the year. The number of equity shares considered for computing diluted earnings per share is the aggregate of the weighted average number of equity shares used for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares, which includes potential FCCB conversions and ESOS. The number of equity shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

1.18 Cash and cash equivalents

Cash and cash equivalents comprise cash and cash on deposit with banks and corporations. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

1.19 Cash Flow Statement

Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.

1.20 Exceptional items

When an item of income or expense within profit or loss from ordinary activity is of such size, nature or incidence that their disclosure is relevant to explain the performance of the Company for the year, the nature and amount of such items are disclosed as exceptional items.


Mar 31, 2015

1.1 Basis of preparation of financial statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles ("GAAP") under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as prescribed under section 133 of the Companies Act, 2013 ('the Act') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting Policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

1.2 Use of esti mates

The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities as on the date of the financial statements. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates. Any revision to these accounting estimates is recognized prospectively.

1.3 Revenue Recognition

a) Revenue from IT solutions:

Revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.

Revenue from Software Products is recognized on delivery/installation, as per the predetermined/laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provisions for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/Term License/Other Materials incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

b) Revenue from Transaction Services:

Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.

c) Interest / Dividend Income:

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

Dividend Income is recognized as and when right to receive the same is established.

1.4 Unbilled and unearned revenue

Revenue recognized over and above the billings on a customer is classified as "unbilled revenue" and advance billing to customer is classified as "advance from customer/unearned revenue" and included in other liabilities.

1.5 Fixed assets and depreciation/ amortization

Tangible assets:

Fixed assets except leasehold building are stated at cost, which comprises the purchase consideration and other directly attributable costs of bringing an asset to its working condition for the intended use.

Leasehold Building has been revalued and is reinstated at updated revalued amount

Advances given towards acquisition of fixed assets are disclosed as capital advances under "Long Term Loans and Advances" and the costs incurred on assets not ready for use as at the balance sheet date are disclosed as "Capital work in progress".

Intangible assets:

"Software products (meant for sale)" are products licensed to customers. Costs that are directly associated with such products whether acquired or developed or upgraded in partnership with others, and have a probable economic benefit exceeding one year are recognized as software products (meant for sale).

Costs related to further development of existing "software products meant for sale" are capitalized only if the costs result in a software product, whose life and value in use is in excess of its originally assessed standard of performance, which can be measured reliably, technological feasibility thereof has been established, future economic benefits of each of such products are probable and the Company intends to complete development and to use the software.

Software Products-Others: Purchased software meant for in house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.

Business and Commercial Rights are capitalized at the acquisition price.

Depreciation/Amortization:

Leasehold land and Leasehold building and improvements thereon and other leased assets are amortized over the period of lease or its life, whichever is lower.

Business and Commercial Rights are amortized over their estimated useful life or ten years, whichever is lower while Software Products-Others are amortized over a period of five years.

Software Products (meant for sale) are amortized over a period of 10 years after taking into consideration the residual value.

Depreciation on other fixed assets is systematic allocation of the depreciable amount over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset.

Depreciation on Tangible assets is provided on Straight Line Method (SLM) over the useful lives of assets determined based on internal technical assessments which are as follows :

1.6 Investments

Trade investments are the investments made to enhance the Company's business interest. Investments are either classified as current or long-term based on the management's intention at the time of purchase. Long-term investments are carried at cost and a provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at lower of the cost or fair value and a provision is made to recognize any decline in the carrying value.

Cost of overseas investments represents the Indian Rupee equivalent of the consideration paid for the investment.

1.7 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

1.8 Translation of Foreign Currency Items other than hedged transactions

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transaction. Exchange differences in respect of all current monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and all exchange gains / losses arising there from are recognized in the Statement of Profit and Loss.

Exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period or reported in previous financial statements, are accounted as below:

In so far as they relate to the acquisition of depreciable capital assets, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset; and

In other cases, the said exchange differences are accumulated in a Foreign Currency Monetary Item Translation Difference Account ('FCMITDA) and amortized over the balance period of such long term asset/liability

Foreign operations carried out with a significant degree of autonomy are classified as "non integral operations" as per the provisions of AS 11 "Effects of changes in foreign exchange rates". All assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the "Foreign Currency Translation Reserve".

Foreign operations other than non-integral operations are classified as integral. All monetary assets and liabilities are translated at closing rates while non monetary assets are translated at historical rates and income and expenses are translated at the average rates for the year and the resulting exchange differences are accounted in the Statement of Profit and Loss.

1.9 Hedge Accounting

The Company enters into foreign currency and interest rate swap contracts to hedge its risks associated with foreign currency fluctuations relating to loan liabilities and highly probable forecast transactions. The Company designates these derivative instruments as hedges and records the gain or loss on effective cash flow hedges in the 'Hedging Reserve Account' until the forecasted transaction materializes. Gain or loss on the ineffective portion of cash flow hedges is recognized in the Statement of Profit and Loss.

1.10 Accounting of Employee Benefits Employee Benefits in India

Gratuity

The Company provides for gratuity, a defined benefit retirement plan, which covers eligible employees and the liability underthe plan is determined based on actuarial valuation done by an independent valuer using the projected unit credit method.

Superannuation

Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.

Provident fund

Retirement benefit in the form of Provident Fund and 'Employer-Employee Scheme' are defined contribution schemes. The company's contributions paid/payable to the fund are charged to the Statement of Profit and Loss for the year when the contributions are due. The company has no obligation other than the contributions payable to the provident fund.

Leave entitlement

Liability for leave entitlement for employees is provided on the basis of actuarial valuation semi-annually and based on estimates for interim financial reporting.

Employee Benefits in Foreign Branch

In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment/entitlement as applicable for employees in foreign branch are provided on the basis of actuarial valuation and based on estimates for interim financial reporting.

1.11 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources.

Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outflow of resources.

Contingent assets are neither recognized nor disclosed in the financial statements.

1.12 Borrowing costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset upto the date of completion. Other borrowing costs are charged to the Statement of Profit and Loss.

1.13 Impairment of assets

In accordance with AS 28 on 'Impairment of Assets', where there is an indication of impairment of the Company's assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/ depreciation) had no impairment loss been recognized.

1.14 Securities issue expenses

Securities issue expenses including expenses incurred on increase in authorized share capital are adjusted against Securities Premium Account.

1.15 Premium payable on redemption of Foreign Currency Convertible Bonds (FCCB)

Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.

1.16 Lease

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the Statement of Profit and Loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

Leased assets are depreciated on a straight-line basis over the useful life of the asset or the useful life as prescribed under Part A in Schedule II of the Act, whichever is lower.

Leases, where the lessor effectively retain substantially all the risks and benefits incidental to ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

1.17 Earnings per share

In determining earnings per share, the Company considers the net profit/loss after tax and the post tax effect of any extra-ordinary, exceptional items and discontinuing operations on earnings per share is shown separately. The number of equity shares considered in computing basic earnings per share is the weighted average number of equity shares outstanding during the year. The number of equity shares considered for computing diluted earnings per share is the aggregate of the weighted average number of equity shares used for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares, which includes potential FCCB conversions and ESOS. The number of equity shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

1.18 Cash and cash equivalents

Cash and cash equivalents comprise cash and cash on deposit with banks and corporations. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

1.19 Cash Flow Statement

Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.


Mar 31, 2014

1.1 Basis of preparation of financial statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles ("GAAP") under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006, the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India.

1.2 Use of estimates

The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities as on the date of the financial statements. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates. Any revision to these accounting estimates is recognized prospectively.

1.3 Revenue Recognition

a) Revenue from IT solutions:

Revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.

Revenue from Software Products is recognized on delivery/installation, as per the predetermined/laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provision for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/Term License/ Other Materials incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

b) Revenue from Transaction Services:

Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.

1.4 Unbilled and unearned revenue

Revenue recognized over and above the billings on a customer is classified as "unbilled revenue" and advance billing to customer is classified as "advance from customer/unearned revenue" and included in other liabilities.

1.5 Fixed assets and depreciation/ amortization Intangible assets:

"Software products (meant for sale)" are products licensed to customers. Costs that are directly associated with such products whether acquired or developed or upgraded in partnership with others, and have a probable economic benefit exceeding one year are recognized as software products (meant for sale).

Costs related to further development of existing "software products meant for sale" are capitalized only if the costs results in a software product whose life and value in use is in excess of its originally assessed standard of performance, can be measured reliably, technological feasibility has been established, future economic benefits of each of such product is probable and the Company intends to complete development and to use the software.

Software Products-Others: Purchased software meant for in house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.

Business and Commercial Rights are capitalized at the acquisition price.

Tangible assets:

Fixed assets are stated at cost, which comprises the purchase consideration and other directly attributable costs of bringing an asset to its working condition for the intended use.

Advances given towards acquisition of fixed assets are disclosed as capital advances under "Long Term Loans and Advances" and the costs incurred on assets not ready for use as at the balance sheet date are disclosed as "Capital work in progress".

Depreciation/Amortization:

Leasehold land, Leasehold building and improvements thereon and other leased assets are amortized over the period of lease or its life, whichever is lower.

Business and Commercial Rights are amortized over their estimated useful life or ten years, whichever is lower while Software Products - Others are amortized over a period of five years.

Software Products (meant for sale) are amortized over a period of 10 years after taking into consideration the residual value.

Depreciation on other fixed assets is provided applying straight-line method at the rates and in the manner as prescribed in Schedule XIV of the Companies Act, 1956.

1.6 Investments

Trade investments are the investments made to enhance the Company''s business interest. Investments are either classified as current or long-term based on the management''s intention at the time of purchase. Long-term investments are carried at cost and a provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at lower of the cost or fair value and a provision is made to recognize any decline in the carrying value.

Cost of overseas investments represents the Indian Rupee equivalent of the consideration paid for the investment.

1.7 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the Income Tax Act, 1961.

MAT credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

1.8 Translation of Foreign Currency Items other than hedged transactions

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transaction. Exchange differences in respect of all current monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and all exchange gains / losses arising there from are recognized in the Statement of Profit and Loss.

Exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period or reported in previous financial statements, are accounted as below:

- In so far as they relate to the acquisition of depreciable capital assets, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset; and

- In other cases, the said exchange differences are accumulated in a ''Foreign Currency Monetary Items Translation Difference Account'' and amortized over the balance period of such long term asset/Mability.

Foreign operations carried out with a significant degree of autonomy are classified as ''''non integral" operations" as per the provisions of AS 11 "Effects of changes in foreign exchange rates". All assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the "Foreign Currency Translation Reserve".

Foreign operations other than non-integral operations are classified as integral. All monetary assets and liabilities are translated at closing rates while non monetary assets are translated at historical rates and income and expenses are translated at the average rates for the year and the resulting exchange differences are accounted in the Statement of Profit and Loss.

1.9 Hedge Accounting

The Company enters into foreign currency and interest rate swap contracts to hedge its risks associated with foreign currency fluctuations relating to loan liabilities and highly probable forecast transactions. The Company designates these derivative instruments as hedges and records the gain or loss on effective cash flow hedges in the ''Hedging Reserve Account'' until the forecasted transaction materializes. Gain or loss on the ineffective portion of cash flow hedges is recognized in the Statement of Profit and Loss.

1.10 Accounting of Employee Benefits Employee Benefits in India

Gratuity

The Company provides for gratuity, a defined benefit retirement plan, which covers eligible employees and the liability under the plan is determined based on actuarial valuation done by an independent valuer using the projected unit credit method.

Superannuation

Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.

Provident fund

Eligible employees receive benefits from a provident fund, which is a defined contribution plan under which the contribution is made to a Trust/Government administered Trust. In the case of Trust, the aggregate contribution along with interest thereon is paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contribution to the ''3i Infotech Provident Fund Trust'' equal to a specified percentage of the covered employee''s salary. The Company also contributes to a Government administered pension fund on behalf of its employees.

The interest rate payable by the trust to the beneficiaries every year is being notified by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. Such shortfall is charged to the Statement of Profit and Loss in the year it is determined.

Leave entitlement

Liability for leave entitlement for employees is provided on the basis of actuarial valuation semi-annually and based on estimates for interim financial reporting.

Employee Benefits in Foreign Branch

In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment/entitlement as applicable for employees in foreign branch is provided on the basis of actuarial valuation and based on estimates for interim financial reporting.

1.11 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources.

Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outflow of resources.

Contingent assets are neither recognized nor disclosed in the financial statements.

1.12 Borrowing costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset upto the date of completion. Other borrowing costs are charged to the Statement of Profit and Loss.

1.13 Impairment of assets

In accordance with AS 28 on ''Impairment of Assets'', where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/ depreciation) had no impairment loss been recognized.

1.14 Securities issue expenses

Securities issue expenses including expenses incurred on increase in authorized share capital are adjusted against Securities Premium Account.

1.15 Premium payable on redemption of FCCB

Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.

1.16 Lease

Finance leases, which effectively transfer to the Parent Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the Statement of Profit and Loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

Leased assets are depreciated on a straight-line basis over the useful life of the asset or the useful life as per Schedule XIV of the Companies Act, 1956, whichever is lower.

Leases, where the lessor effectively retain substantially all the risks and benefits incidental to ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

1.17 Earnings per share

In determining earnings per share, the Company considers the net profit/loss after tax and the post tax effect of any extra-ordinary, exceptional items and discontinuing operations on earnings per share is shown separately. The number of shares considered in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares considered for computing diluted earnings per share is the aggregate of the weighted average number of shares used for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares which includes potential FCCB conversions and ESOS. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

2.1 Share Capital

The Company has only one class of equity shares having a par value of ''10 each. Each shareholder has right to vote in respect of such share, on every resolution placed before the Company and his voting right on a poll shall be in proportion to his share of the paid up equity capital of the Company. In the event of liquidation, the equity shareholders are entitled to receive the remaining assets of the Company after payments of preferential amounts in proportion to their shareholding.

The Company has not issued any class of shares as fully paid up shares pursuant to contract(s) without payment being received in cash and bonus shares during the period of 5 years immediately preceding the Balance Sheet date.

The company has not bought back any class of shares during the period of 5 years immediately preceding the Balance Sheet date.

The preference shares are redeemable at amount that would provide the holder of the said shares an internal rate of return 6% per annum excluding the dividend rate on the outstanding amount of the said shares payable on the expiry of ten years from the date of allotment i.e. March 31, 2012.

Also refer note no. 2.26 A in respect of Corporate Debt Restructuring (CDR).

d) Employee Stock Option Scheme (ESOS)

The Company''s Employee Stock Option Schemes are applicable to "Eligible Employees" as defined in the scheme which includes directors and employees of the Company and its subsidiaries.

They provide for issue of equity options up to 25% of the paid-up equity capital to eligible employees. Currently, the Company has 2 schemes, ESOS 2000 and ESOS 2007(as amended).

The options granted under the ESOS scheme 2000 and 2007 vest in a phased manner over three years with 20%, 30% and 50% of the grants vesting at the end of each year from the date of the grant and the same can be exercised within ten years from the date of the grant or five years from the date of vesting of options whichever is later by paying cash at a price determined on the date of the grant. One Stock option if converted will be equivalent to one equity share.

During the previous year, the Board of Directors of the Company approved ESOS Plan-2013 under the existing scheme ESOS 2007. The plan consists of variations in certain terms with regard to vesting and certain other related matters in ESOS 2007. The options granted are convertible and one option is equivalent to one equity share each. This plan is applicable to all the new options granted to eligible employees in or after 2013. The existing options would continue to be governed by the existing terms. The options granted as per ESOS Plan -2013 would vest in a phased manner over three years with 33%, 33% and 34% of the grants vesting at the end of each year from the date of the grant and the same can be exercised within ten years from the date of grant of options or five years from the date of vesting of options, whichever is later.

During the year ended March 31, 2014, the Company granted 16,948,000 options to the employees of the Company and its Whole-Time Directors at an exercise price of Rs.10 under Employee Stock Option Plan, 2013.

Method used for accounting for share based payment scheme.

The Company has elected to use the intrinsic value method to account for the compensation cost of stock options to eligible employees. Intrinsic value is the amount by which the quoted market price of the underlying share as on the date of grant exceeds the exercise price of the option.

* During the year ended March 31, 2014, 1,500,000 options (for the year ended March 31, 2013 Nil Options) granted to Managing Director and Global CEO and 1,000,000 options granted to Executive Director & Global CFO.

** Includes 2,590,000 options granted to non executive directors (for the year ended March 31, 2013, 290,000 options granted to non-executive directors).

Note for securities offered under Corporate Debt Restructuring:

In terms of the Corporate Debt Restructuring (CDR) package agreed with the lenders participating in CDR package (hereinafter referred to as "CDR Lenders") and the Master Restructuring Agreement (MRA) signed for this purpose, the Company and its certain subsidiaries had agreed to offer guarantees and security to the CDR Lenders. The necessary security documentation was executed with the Security Trustee appointed by the CDR Lenders and security was created. In pursuance of the CDR package, it was agreed that those lenders who were holding security prior to CDR package would continue to hold such security with first priority over it and remaining CDR Lenders will hold it with second priority.

A. Security created:

During the year ended March 31, 2014, the underlying '' facilities of some of the CDR Lenders aggregating Rs.738.81 crores have been converted into equivalent USD 120.26 million pursuant to execution on January 9, 2014 of Amendment Agreement to the Master Restructuring Agreement (MRA) dated March 30, 2012 (as amended by Amendment Agreement dated July 25, 2012) and the Foreign Currency Facility Agreements with the respective banks on various dates. The security which was offered in terms of the MRA will continue to be applicable as is upon conversion to the aforementioned foreign currency loans.

Further, during the year, the Company, upon receipt of necessary approvals from the CDR Lenders, has executed Facility Agreements with ICICI Bank Limited, to avail additional facilities up to Rs.215 crores(Outstanding as at March 31, 2014 Rs.172.94 crores). In terms of these Facility Agreements, the additional facility availed shall also be secured by the assets secured with the CDR Lenders in terms of the MRA. The charge so created in favour of ICICI Bank Limited shall be on a first pari passu basis with CDR Lenders. The Company will execute necessary security documents with ICICI Bank Limited for this purpose.

In terms of the Corporate Debt Restructuring package, during the year ended March 31,2014, the Company has also sold its property situated at Goregaon. The charge on immoveable assets of the Company was released to this extent for the purpose of the aforesaid sale of the Goregaon property.

B. Corporate guarantees from material subsidiaries:

Corporate guarantees of each of the material subsidiaries guaranteeing the secured obligations ("Corporate Guarantees"), in favour of all the CDR lenders. Each Corporate Guarantee shall be secured/credit enhanced by security interest over assets of the relevant material subsidiary providing the Corporate Guarantee, as permitted under applicable laws in the relevant jurisdictions, as detailed in the table below and shall have the ranking as mentioned against each security.

D. Security and terms and conditions for others:

1. Rs.0.60 crores (as at March 31, 2013 of Rs.1.32 crores) loan is secured by way of hypothecation of certain Company owned vehicles.

2. Working capital loans aggregating to Rs.35.76 crores (as at March 31, 2013 of Rs.35.76 crores) are secured by way of floating charge on Trade receivables.

2.9.1 Buildings - Leasehold include:

(i) Gross Block of Rs.20.85 crores (as at March 31, 2013 Rs.0.85 crores), Accumulated Depreciation Rs.4.62 crores (as at March 31, 2013Rs.4.27 crores) and Net Block of Rs.16.23 crores (as at March 31, 2013 Rs. 16.58 crores) being lease premium paid in respect of building taken on lease for sixty years.

(ii) Gross Block of Rs.Nil (as at March 31, 2013 Rs.11.49 crores), Accumulated Depreciation Rs.Nil (as at March 31, 2013 Rs 4.71 crores) and Net Block of Rs.Nil (as at March 31, 2013 Rs.6.78 crores) being lease premium paid in respect of building taken on lease for ninety nine years, and the title deed is yet to be received.

2.9.3 Depreciation for the year includes loss on sale/discarding of various assets amounting to Rs.4.36 crores (for the year ended March 31, 2013 Rs.10.80 crores) and certain intangible assets have been fully amortized having Gross Block of Rs.15.40 crores (as at March 31,2013 Rs.Nil crores), Accumulated Depreciation Rs.2.66 crores (as at March 31,2013 Rs.Nil crores) and Net Block of Rs.12.74 crores (as at March 31, 2013 Rs.Nil crores) due to technological obsolescence.

2.10.1 Pledge of shares

Investments in these companies have been pledged as per the Master Restructuring Agreement entered by the Company with CDR Lenders. (Also refer note on securities offered under Corporate Debt Restructuring)


Mar 31, 2013

1.1 Basis of preparation of financial statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles ("GAAP") under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006, the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India.

1.2 Use of estimates

The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities as on the date of the financial statements. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates. Any revision to these accounting estimates is recognized prospectively.

1.3 Revenue Recognition

a) Revenue from IT solutions :

Revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.

Revenue from Software Products is recognized on delivery/installation, as per the predetermined/laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provision for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/Term License/Other Materials incidental to the aforesaid services recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

b) Revenue from Transaction Services :

Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.

1.4 Unbilled and unearned revenue

Revenue recognized over and above the billings on a customer is classified as "unbilled revenue" and advance billing to customer is classified as "advance from customer/unearned revenue" and included in other liabilities.

1.5 Fixed assets and depreciation/ amortization

Intangible assets :

"Software products (meant for sale)" are products licensed to customers. Costs that are directly associated with such products whether acquired or developed or upgraded in partnership with others, and have a probable economic benefit exceeding one year are recognized as software products (meant for sale).

Costs related to further development of existing "software products (meant for sale)" are capitalized only if the costs result in a software product whose life and value in use is in excess of its originally assessed standard of performance, can be measured reliably, technological feasibility has been established, future economic benefits of each of such product is probable and the Company intends to complete development and to use the software.

Software Products-Others : Purchased software meant for in-house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.

Business and Commercial Rights are capitalized at the acquisition price.

Tangible assets :

Fixed assets are stated at cost, which comprises the purchase consideration and other directly attributable costs of bringing an asset to its working condition for the intended use.

Advances given towards acquisition of fixed assets are disclosed as capital advances under "Long Term Loans and Advances" and the costs incurred on assets not ready for use as at the balance sheet date are disclosed as "Capital work in progress".

Depreciation/Amortisation :

Leasehold land, Leasehold building and improvements thereon and other leased assets are amortized over the period of lease or its life, whichever is lower.

Business and Commercial Rights are amortized over their estimated useful life or ten years, whichever is lower while Software Products - Others are amortized over a period of five years.

Software Products (meant for sale) are amortized over a period of 10 years after taking into consideration the residual value.

Depreciation on other fixed assets is provided applying straight-line method at the rates and in the manner as prescribed in Schedule XIV of the Companies Act, 1956.

1.6 Investments

Trade investments are the investments made to enhance the Company''s business interest. Investments are either classified as current or long-term based on the management''s intention at the time of purchase. Long-term investments are carried at cost and a provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at lower of the cost or fair value and a provision is made to recognize any decline in the carrying value.

Cost of overseas investments represents the Indian Rupee equivalent of the consideration paid for the investment.

1.7 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the Income Tax Act, 1961.

MAT credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

1.8 Translation of Foreign Currency Items other than hedged transactions

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transaction. Exchange differences in respect of all current monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and all exchange gains / losses arising there from are adjusted to the Statement of Profit and Loss.

Exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period or reported in previous financial statements, are accounted as below:

- In so far as they relate to the acquisition of depreciable capital assets, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset; and

- In other cases, the said exchange differences are accumulated in a ''Foreign Currency Monetary Items Translation Difference Account'' and amortised over the balance period of such long term asset/liability

Foreign operations carried out with a significant degree of autonomy are classified as "non integral" operations" as per the provisions of AS 11 "Effects of changes in foreign exchange rates". All assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the "Foreign Currency Translation Reserve".

Foreign operations other than non-integral operations are classified as integral. All monetary assets and liabilities are translated at closing rates while non monetary assets are translated at historical rates and income and expenses are translated at the average rate for the year and the resulting exchange differences are accounted in the Statement of Profit and Loss.

1.9 Hedge Accounting

The Company enters into foreign currency and interest rate swap contracts to hedge its risks associated with foreign currency fluctuations relating to loan liabilities and highly probable forecast transactions. The Company designates these derivative instruments as hedges and records the gain or loss on effective cash flow hedges in the ''Hedging Reserve Account'' until the forecasted transaction materializes. Gain or loss on the ineffective portion of cash flow hedges is recognized in the Statement of Profit and Loss.

1.10 Accounting of Employee Benefits Employee Benefits in India

Gratuity

The Company provides for gratuity, a defined benefit retirement plan, which covers eligible employees and the liability under the plan is determined based on actuarial valuation done by an independent valuer using the projected unit credit method.

Superannuation

Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.

Provident fund

Eligible employees receive benefits from a provident fund, which is a defined contribution plan under which the contribution is made to a Trust/Government administered Trust. In the case of Trust, the aggregate contribution along with interest thereon is paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contribution to the ''3i Infotech Provident Fund Trust'' equal to a specified percentage of the covered employee''s salary. The Company also contributes to a Government administered pension fund on behalf of its employees.

The interest rate payable by the trust to the beneficiaries every year is being notified by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. Such shortfall is charged to the Statement of Profit and Loss in the year it is determined.

Leave entitlement

Liability for leave entitlement for employees is provided on the basis of actuarial valuation semi-annually and based on estimates for interim financial reporting.

Employee Benefits in Foreign Branch

In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment/entitlement as applicable for employees in foreign branch, is provided on the basis of actuarial valuation and based on estimates for interim financial reporting.

1.11 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources.

Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outflow of resources.

Contingent assets are neither recognized nor disclosed in the financial statements.

1.12 Borrowing costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset upto the date of completion. Other borrowing costs are charged to the Statement of Profit and Loss.

1.13 Impairment of assets

In accordance with AS 28 on ''Impairment of Assets'', where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/ depreciation) had no impairment loss been recognized.

1.14 Securities issue expenses

Securities issue expenses including expenses incurred on increase in authorized share capital are adjusted against Securities Premium Account.

1.15 Premium payable on redemption of FCCB

Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.

1.16 Lease

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the Statement of Profit and Loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

Leased assets are depreciated on a straight-line basis over the useful life of the asset or the useful life as per Schedule XIV of the Companies Act, 1956, whichever is lower.

Leases, where the lessor effectively retains substantially all the risks and benefits incidental to ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

1.17 Earnings per share

In determining earnings per share, the Company considers the net profit/loss after tax and the post tax effect of any extra-ordinary, exceptional items and discontinuing operations on earnings per share is shown separately. The number of shares considered in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares considered for computing diluted earnings per share is the aggregate of the weighted average number of shares used for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares which includes potential FCCB conversions and ESOS. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issued.


Mar 31, 2012

1.1 Method of Accounting

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles ("GAAP") under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006, the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard required a change in accounting policy hitherto in use.

1.2 Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of financial statements. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates. Any revision to accounting estimates is recognized prospectively.

1.3 Revenue Recognition

a) Revenue from IT solutions:

Revenue from IT solutions comprises of revenue from software products, IT services and sale of hardware/

outsourced software.

i) Revenue from software products is recognized on delivery/installation or as considered appropriate by the management on the basis of facts in specific cases, whichever is lower. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

ii) Revenue from IT services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on time and material contracts is recognized as and when services are performed. Revenue on fixed-price contracts is recognized on the percentage of completion method. Provision for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

iii) Revenue from supply of Hardware/Other Materials and sale of Third Party Software License/Term License incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

b) Revenue from Transaction Services:

Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.

1.4 Unbilled and Unearned Revenue

Revenue recognized over and above the billings on a customer is classified as "unbilled revenue" while billing over and above the revenue recognized in respect of a customer is classified as "unearned revenue".

1.5 a. Fixed Assets Intangible:

a) "Software Products (Meant for sale)" are products licensed to customers. Costs that are directly associated with such products whether acquired or developed in partnership with others, and have probable economic benefit exceeding one year are recognized as Software Products (Meant for sale).

b) Software Products-Others: Purchased software meant for in house consumption and significant upgrades thereof and have probable economic benefit exceeding one year are capitalized at the acquisition price.

c) Business and Commercial Rights are capatalized at the acquisition price.

Tangible:

Fixed Assets are stated at cost, which comprises of purchase consideration and other directly attributable cost of bringing an asset to its working condition for the intended use.

Advances given towards acquisition of fixed assets are disclosed as capital advances under Long Term Loans & Advances and the cost of assets not ready for use as at the balance sheet date are disclosed as capital work in progress.

b. Depreciation/Amortization:

Leasehold land, Leasehold building and improvements thereon and other leased assets are amortized over the period of lease or its life, whichever is lower.

Business & Commercial Rights are amortized at lower of the period the benefits arising out of these are expected to accrue and ten years while Software Products - Others and Goodwill arising on merger/acquired Goodwill is amortized over a period of five years.

Software Products (Meant for sale) are amortized over a period of ten years.

Depreciation on other fixed assets is provided on straight-line method at the rates and in the manner as prescribed in Schedule XIV to the Companies Act, 1956.

1.6 Investments

Trade investments are the investments made to enhance the Company's business interest. Investments are either classified as current or long-term based on the management's intention at the time of purchase. Long-term investments are carried at cost and provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at the lower of the cost and fair value and provision is made to recognize any decline in the carrying value. Cost of overseas investment comprises the Indian Rupee value of the consideration paid for the investment.

1.7 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the Income Tax Act, 1961.

MAT credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

1.8 Translation of Foreign Currency Items other than hedged transactions

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transactions. Current assets, current liabilities and borrowings denominated in foreign currency are translated at the exchange rate prevalent at the date of the Balance Sheet. The resultant gain/loss are recognized in the Statement of Profit & Loss. Overseas equity investments are recorded at the rate of exchange in force on the date of allotment/acquisition.

Foreign operations carried out with a significant degree of autonomy are classified as non integral operations as per the provisions of AS 11 "Effects of changes in foreign exchange rates" and all assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accounted in the Foreign Currency Translation Reserve. Other Foreign operations are classified as integral and all monetary assets and liabilities are translated at closing rates while non monetary assets are translated at historical rates and income and expenses are translated at average rate, the resulting exchange differences are accounted in Statement of Profit & Loss.

1.9 Hedge Accounting

The Company enters into foreign currency cum interest rate swap contracts to hedge its risks associated with foreign currency fluctuations relating to loan liabilities and highly probable forecast transactions. The Company designates these instruments as hedges and records the gain or loss on effective cash flow hedges in the Hedging Reserve Account until the forecasted transaction materializes. Gain or loss on ineffective cash flow hedges is recognized in the Statement of Profit and Loss.

1.10 Accounting of Employee Benefits Employee Benefits in India

a) Gratuity

The Company provides for gratuity, a defined benefit retirement plan, covering eligible employees. Liability under gratuity plan is determined on actuarial valuation done by the Life Insurance Corporation of India (LIC) at the beginning of the year, based upon which, the Company contributes to the Scheme with LIC. The Company also provides for the additional liability over the amount contributed to LIC based on the actuarial valuation done by an independent valuer using the Projected Unit Credit Method.

b) Superannuation

Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.

c) Provident fund

Eligible employees receive benefits from a provident fund, which is a defined contribution plan to the Trust/ Government administered Trust. In the case of Trust, aggregate contribution along with interest thereon is paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contribution to the 3i Infotech Provident Fund Trust equal to a specified percentage of the covered employee's salary. Company also contributes to a Government administered pension fund on behalf of its employees.

The interest rate payable by the trust to the beneficiaries every year is being notified by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. Such shortfall is charged to Statement of Profit & Loss in the year it is determined.

d) Liability for leave encashment/entitlement for employees is provided on the basis of the actuarial valuation at the year end and based on estimates for interim financials.

Employee Benefits in Foreign Branch

In respect of employees in foreign branches, necessary provision is made based on the applicable local laws. Gratuity and leave encashment/entitlement as applicable for employees in foreign branches is provided on the basis of the actuarial valuation at the year end and based on estimates for interim financials.

1.11 Provisions, Contingent Liabilities and Contingent Assets

i) Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources.

ii) Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outflow of resources.

iii) Contingent Assets are neither recognized nor disclosed in the financial statements.

1.12 Borrowing Costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset upto the date of completion. Other borrowing costs are charged to the Statement of Profit & Loss.

1.13 Impairment of Assets

In accordance with AS 28 on 'Impairment of Assets', where there is an indication of impairment of the Company's assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit & Loss whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/depreciation) had no impairment loss been recognized.

1.14 a) Securities issue expenses

Securities issue expenses including expenses incurred on increase in authorized share capital and premium payable on securities are adjusted against Securities Premium Account.

b) Premium payable on redemption of FCCB

Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.

1.15 Lease

Where the Company has substantially acquired all risks and rewards of ownership of the assets, leases are classified as financial lease. Such assets are capitalized at the inception of the lease, at the lower of fair value or present value of minimum lease payment and liability is created for an equivalent amount. Each lease rental paid is allocated between liability and interest cost so as to obtain constant periodic rate of interest on the outstanding liability for each year.

Where significant portion of risks and reward of ownership of assets acquired under lease are retained by lessor, leases are classified as Operating lease. Equalized lease rentals for such leases are charged to Statement of Profit & Loss.

1.16 Earnings per share

In determining the earnings per share, the Company considers the net profit/loss after tax and post tax effect of any extra-ordinary/exceptional item is shown separately. The number of shares considered in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares considered for computing diluted earnings per share comprises the weighted average number of shares used for deriving the basic earnings per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares which includes potential FCCB conversions. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

1.17 Asset Held for Sale/Discontinuing Operations

'Assets held for sale' or 'Discontinuing Operations' is a component of the Company that either has been disposed of or that is classified as held for sale and (a) represents a separate major line of business or geographical area of operations; and (b) is a part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. Asset held for sale/discontinuing operations are carried at the lower of carrying amount or their fair value. Any gain or loss from disposal of such units, together with the results of the operations until the date of disposal, is reported separately as 'Discontinuing Operations'.


Mar 31, 2011

1.1 Overview of the Group

3i Infotech Limited (Parent) was promoted by erstwhile ICICI limited. The Parent and its subsidiaries are collectively referred to as the Group. The Group is a global information technology conglomerate headquartered in Mumbai, India. The Group undertakes sale of software products, software development and consulting services, IT enabled managed services and Transaction services.

1.2 Basis of preparation of consolidated fnancial statements

The consolidated fnancial statements are prepared and presented under historical cost convention, on the accrual basis of accounting, in accordance with the accounting principles generally accepted in India (GAAP) and in compliance with the Accounting Standards (AS) issued by Companies (Accounting Standards) Rules, 2006, to the extent applicable. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard required a change in accounting policy hitherto in use.

1.3 Use of estimates

The preparation of the consolidated fnancial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of fnancial statements. The recognition, measurement, classifcation or disclosures of an item or information in the fnancial statements are made relying on these estimates. Any revision to accounting estimates is recognized prospectively.

1.4 Principles of consolidation

The consolidated fnancial statements include the fnancial statements of "The Parent" and all its subsidiaries, which are more than 50% owned or controlled and have been prepared in accordance with the consolidation procedures laid down in AS 21- Consolidated Financial Statements.

The consolidated fnancial statements have been prepared on the following basis:

- The fnancial statements of the Parent and the subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances / transactions and resulting profts in full. Unrealized losses resulting from intra-group transactions have also been eliminated except to the extent that recoverable value of related assets is lower than their cost to the Group.

- The consolidated fnancial statements are presented, to the extent possible, in the same format as that adopted by the Parent for its standalone fnancial statements.

- The consolidated fnancial statements are prepared using uniform accounting policies across the Group.

- Goodwill arising on consolidation - The excess of cost to the Parent Company, of its investment in subsidiaries over its portion of equity in the subsidiaries at the respective dates on which investment in subsidiaries was made, is recognized in the fnancial statements as goodwill and in the case where equity exceeds the cost; the same is being adjusted in the said goodwill. The Parent Companys portion of equity in the subsidiaries is determined on the basis of the value of assets and liabilities as per the fnancial statements of the subsidiaries as on the date of investment.

- Entities acquired during the year have been consolidated from the respective dates of their acquisition.

(a) In April 2010, the Parent Company has sold its investment in aok In-house Factoring Services Private Ltd. to 3i Infotech BPO Limited (formerly known as Linear Financial and Management Systems Pvt. Ltd.) and in May 2010, Delta Services (India) Private Limited to 3i Infotech Consultancy Services Limited.

(b) Refer note no. 2.4.1

(c) Refer note no. 2.4.2

(d) In May 2010, Delta Services (India) Private Limited has sold its investment in Manipal Informatics Private Limited to 3i Infotech Consultancy Services Limited.

(e) In December 2010, the Parent Company has sold its investment in eMudhra Consumer Services Limited (formerly known as 3i Infotech Consumer Services Limited) and its subsidiary and step down subsidiaries to Indus Innovest Holdings Private Ltd. Refer note 2.4.4.

(f) 3i Infotech Consulting Inc. have been merged with 3i Infotech Inc. effective from December 31, 2010 and consequently the assets and liabilities have been transferred to 3i Infotech Inc.

(g) Lantern Systems Inc., ePower Inc. & Objectsoft Group Inc. have been merged with 3i Infotech Inc. effective from December 31, 2010 and consequently the assets and liabilities pertaining to those entities which were hitherto owned by J&B Software (Canada) Inc have been transferred to 3i Infotech Inc.

(h) Share purchase agreement dated December 29, 2010 has been signed between 3i Infotech Insurance & Re-insurance Brokers Limited and Aretha Advisors pursuant to which the shares of 3i Infotech Insurance & Re-insurance Brokers Limited have been sold off to Aretha Advisors on December 31, 2010. Refer note 2.4.5

(i) Refer note 2.4.6

(j) 3i Infotech Consulting Services SDN BHD has been closed with effect from December 20, 2010.

(k) Stex Software Pvt. Ltd., E-Enable Technologies Pvt. Ltd. and KNM Services Pvt. Ltd. have been merged with 3i Infotech Ltd. effective from April 01, 2010 and consequently the assets and liabilities have been transferred to 3i Infotech Ltd.

(l) Delta Services (India) Private Limited and Manipal Informatics Pvt. Limited. have been merged with 3i Infotech Consultancy Services Limited effective from April 01, 2009 and consequently the assets and liabilities have been transferred to 3i Infotech Consultancy Services Limited.

1.6 Revenue recognition

a) Revenue from IT solutions:

Revenue from IT solutions comprises of revenue from Software Products, IT Services and Sale of Hardware /Outsourced Software.

i) Revenue from Software Products is recognized on delivery / installation, as per the predetermined / laid down policy across all geographies or lower, as considered appropriate by the management on the basis of facts in specifc cases. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

ii) Revenue from IT Services is recognized either on time and material basis or fxed price basis or based on certain measurable criteria as per relevant agreements. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provision for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

iii) Revenue from supply of Hardware, Software License / Term License / Other Materials incidental to the aforesaid services recognized based on delivery / installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

b) Revenue from Transaction Services:

Revenue from Transaction Services and Other Service contracts is recognized based on transactions processed or manpower deployed.

1.7 Unbilled and Unearned Revenue:

Revenue recognized over and above the billings on a customer is classifed as "unbilled revenue" while billing over and above the revenue recognized in respect of a customer is classifed as "unearned revenue".

1.8 a) Fixed Assets

Intangible: Purchased software meant for in-house consumption and signifcant upgrades thereof, Business & Commercial Rights are capitalized at the acquisition price.

Acquired software / products meant for sale are capitalized at the acquisition price.

Tangible: Fixed Assets are stated at cost, which comprises of purchase consideration and other directly attributable cost of bringing an asset to its working condition for the intended use.

Advances given towards acquisition of fxed assets and the cost of assets not ready for use as at the Balance Sheet date are disclosed under capital work-in-progress.

b) Depreciation / Amortization:

Leasehold land, leasehold building and improvements thereon are amortized over the period of lease or the life given below whichever is lower.

Business and Commercial Rights are amortized at lower of the period the benefts arising out of these are expected to accrue and ten years, while purchased software meant for in-house consumption and signifcant upgrades thereof and Goodwill arising on merger / acquired Goodwill is amortized over a period of fve years.

Acquired software are amortized at lower of the estimated life of the product and fve years.

1.9 Investments

Trade investments are the investments made to enhance the Parent Companys business interest. Investments are either classifed as current or long-term based on the managements intention at the time of purchase. Long-term investments are carried at cost and provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at the lower of the cost and fair value and provision is made to recognize any decline in the carrying value. Cost of overseas investment comprises the Indian Rupee value of the consideration paid for the investment.

1.10 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the specifc applicable laws.

MAT Credit asset pertaining to the Parent and its Indian subsidiary company is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profts is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a reasonable / virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each Balance Sheet date.

The deferred tax assets / liabilities and tax expenses are determined separately for the Parent and each subsidiary company, as per their applicable laws and then aggregated.

1.11 Translation of Foreign Currency Items

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transactions. Current assets, current liabilities and borrowings denominated in foreign currency are translated at the exchange rate prevalent at the date of the Balance Sheet. The resultant gain / loss is recognized in the Proft & Loss Account. Overseas investments are recorded at the rate of exchange in force on the date of allotment / acquisition.

All the activities of the foreign operations are carried out with a signifcant degree of autonomy. Accordingly, as per the provisions of AS 11 "Effects of changes in foreign exchange rates", these operations have been classifed as Non integral operations and therefore all assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the Foreign Currency Translation Reserve.

1.12 Accounting of Employee Benefts Employee Benefts in India

a) Gratuity

(i) Parent

The Parent Company provides for gratuity, a defned beneft retirement plan, covering eligible employees. Liability under gratuity plan is determined on actuarial valuation done by the Life Insurance Corporation of India (LIC) at the beginning of the year, based upon which, the Parent Company contributes to the Scheme with LIC. The Parent Company also provides for the additional liability over the amount contributed to LIC based on the actuarial valuation done by an independent valuer using the Projected Unit Credit Method.

(ii) Subsidiaries

Liability for Gratuity for employees is provided on the basis of the actuarial valuation at the year end.

b) Superannuation

Certain employees in India are also participants in a defned superannuation contribution plan. The Parent contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Parent has no further obligations to the plan beyond its monthly contributions.

c) Provident fund

(i) Parent

Eligible employees receive benefts from a provident fund, which is a defned contribution plan to the Trust / Government administered Trust. In the case of Trust aggregate contribution along with interest thereon is paid at retirement, death, incapacitation or termination of employment. Both the employee and the

Parent Company make monthly contribution to the 3i Infotech Provident Fund Trust equal to a specifed percentage of the covered employees salary. The Parent Company also contributes to a Government administered pension fund on behalf of its employees.

The interest rate payable by the trust to the benefciaries every year is being notifed by the government. The Parent has an obligation to make good the shortfall, if any, between the return from investments of the trust and the notifed interest rate. Such shortfall is charged to Proft & Loss Account in the year it is determined.

(ii) Subsidiaries

Contribution is made to the state administered fund as a percentage of the covered employees salary.

d) Liability for leave encashment / entitlement for employees is provided on the basis of the actuarial valuation at the year end.

e) All actuarial gains / losses are charged to revenue in the year these arise.

Employee Benefts in the Foreign Branch

In respect of employees in foreign branches, necessary provision has been made based on the applicable laws. Gratuity / leave encashment for employees in the foreign branches is provided on the basis of the actuarial valuation at the year end.

All actuarial gains / losses are charged to revenue in the year these arise.

Employee Benefts in Foreign Subsidiary Companies

In respect of employees in Foreign Subsidiary Companies, contributions to defned contribution pension plans are recognized as an expense in the Proft & Loss Account as incurred.

Liability for leave entitlement is provided on the basis of actual eligibility at the year end.

1.13 Provisions, Contingent Liabilities and Contingent Assets

i) Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outfow of resources.

ii) Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may but probably will not, require outfow of resources.

iii) Contingent Assets are neither recognized nor disclosed in the fnancial statements.

1.14 Borrowing Costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset up to the date of completion. Other borrowing costs are charged to the Proft & Loss Account.

1.15 Impairment of assets

In accordance with AS 28 on Impairment of Assets, where there is an indication of impairment of the Groups assets related to cash generating units, the carrying amounts of such assets are reviewed at each Balance Sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Proft & Loss Account whenever the carrying amount of such assets exceeds its recoverable amount. If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization / depreciation) had no impairment loss been recognized.

1.16 a) Securities issue expenses

Securities issue expenses, Issue expenses including expenses incurred on increase in authorized share capital and premium payable on securities are adjusted against Securities Premium Account.

b) Premium payable on redemption of FCCB

Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium Account.

1.17 Lease

Where the Group has substantially acquired all risks and rewards of ownership of the assets, leases are classifed as fnancial lease. Such assets are capitalized at the inception of the lease, at the lower of fair value or present value of minimum lease payment and liability is created for an equivalent amount. Each lease rental paid is allocated between liability and interest cost so as to obtain constant periodic rate of interest on the outstanding liability for each year.

Where signifcant portion of risks and reward of ownership of assets acquired under lease are retained by lessor, leases are classifed as Operating lease. Equalized lease rentals for such leases are charged to Proft & Loss Account.

1.18 Earnings per share

In determining the earnings per share, the Group considers the net proft after tax and post tax effect of any extra- ordinary / exceptional item is shown separately. The number of shares considered in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares considered for computing diluted earnings per share comprises the weighted average number of shares used for deriving the basic earnings per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares which includes potential FCCB conversions. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

1.19 Inventories

Inventories consist of postage, paper, envelopes, hardware and supplies, and are stated at cost (computed on frst in frst out or weighted average basis as the case may be) or net realizable value, whichever is lower.


Mar 31, 2010

1.1 Overview of the Group

3i Infotech Limited (‘Parent’) was promoted by erstwhile ICICI limited. The Parent and its subsidiaries are collectively referred to as ‘the Group’. The Group is a global information technology conglomerate headquartered in Mumbai, India. The Group undertakes sale of software products, software development and consulting services, IT enabled managed services and Transaction services.

1.2 Basis of preparation of consolidated fnancial statements

The consolidated fnancial statements are prepared and presented under historical cost convention, on the accrual basis of accounting, in accordance with the accounting principles generally accepted in India (‘GAAP’) and in compliance with the Accounting Standards (‘AS’) issued by The Companies (Accounting Standards) Rules, 2006, to the extent applicable. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard required a change in accounting policy hitherto in use.

1.3 Use of estimates

The preparation of the consolidated fnancial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of fnancial statements. The recognition, measurement, classifcation or disclosures of an item or information in the fnancial statements are made relying on these estimates. Any revision to accounting estimates is recognized prospectively.

1.4 Principles of consolidation

The consolidated fnancial statements include the fnancial statements of “ The Parent” and all its subsidiaries, which are more than 50% owned or controlled and have been prepared in accordance with the consolidation procedures laid down in AS 21-‘Consolidated Financial Statements’.

The consolidated fnancial statements have been prepared on the following basis:

l The fnancial statements of the Parent and the subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances/transactions and resulting profts in full. Unrealized losses resulting from intra-group transactions have also been eliminated except to the extent that recoverable value of related assets is lower than their cost to the Group.

l The consolidated fnancial statements are presented, to the extent possible, in the same format as that adopted by the Parent for its standalone fnancial statements.

l The consolidated fnancial statements are prepared using uniform accounting policies across the Group.

l Goodwill arising on consolidation - The excess of cost to the Parent, of its investment in subsidiaries over its portion of equity in the subsidiaries at the respective dates on which investment in subsidiaries was made, is recognized in the fnancial statements as goodwill and in the case where equity exceeds the cost; the same is being adjusted in the said goodwill. The Parent’s portion of equity in the subsidiaries is determined on the basis of the value of assets and liabilities as per the fnancial statements of the subsidiaries as on the date of investment.

l Entities acquired during the year have been consolidated from the respective dates of their acquisition.

(a) In March 2010, the Parent Company has sold its investment in aok In-house BPO Services Ltd. and HCCA Business Services Pvt. Ltd. to 3i Infotech BPO Ltd.

(b) During the year, 3i Infotech (Middle East) FZ LLC. transferred its entire membership interest in Objectsoft Group Inc., ePower Inc. and Lantern Systems Inc. to J&B Software (Canada) Inc.

(c) Objectsoft Global Services Inc has been merged with Objectsoft Group Inc.

(d) Nile Information Technology (Nile) was considered as an Associate till June 2009. The Group ceases to have signifcant infuence during the year; hence the investment in Nile is now considered as a non-trade Investment.

1.6 Revenue recognition

Revenue from software products is recognized on delivery/installation, as per the pre determined/laid down policy across all geographies or lower, as considered appropriate by the management on the basis of facts in specifc cases. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

Revenue from IT services is recognized either on time and material basis or fxed price basis or based on certain measurable criteria as per relevant agreements. Revenue on time and material contracts is recognized as and when services are performed. Revenue on fxed-price contracts is recognized on the percentage of completion method. Provision for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.

Revenue from supply of Hardware/Outsourced Software License/Term License/other materials is incidental to the aforesaid services recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

1.7 Unbilled and Unearned Revenue:

Revenue recognized over and above the billings on a customer is classifed as “unbilled revenue” while billing over and above the revenue recognized in respect of a customer is classifed as “unearned revenue”.

1.8 a. Fixed Assets

Intangible: Purchased software meant for in house consumption and signifcant upgrades thereof, Business & Commercial Rights are capitalized at the acquisition price.

Acquired software/products meant for sale are capitalized at the acquisition price.

Tangible: Fixed Assets are stated at cost, which comprises of purchase consideration and other directly attributable cost of bringing an asset to its working condition for the intended use.

Advances given towards acquisition of fxed assets and the cost of assets not ready for use as at the balance sheet date are disclosed under capital work-in-progress.

b. Depreciation/Amortization:

Leasehold land, leasehold building and improvements thereon are amortized over the period of lease or the life given below whichever is lower.

Business & Commercial Rights are amortized at lower of the period the benefts arising out of these are expected to accrue and ten years, while purchased software meant for in house consumption and signifcant upgrades thereof and Goodwill arising on merger/acquired Goodwill is amortized over a period of fve years.

Project Assets/acquired software are amortized at lower of the estimated life of the product /project and fve years.

Depreciation on other fxed assets is provided on straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. In the case of some subsidiary companies, it is provided on straight line basis over the estimated useful life of the assets given herein below:

1.9 Investments

Trade investments are the investments made to enhance the Parent Company’s business interest. Investments are either classifed as current or long-term based on the management’s intention at the time of purchase. Long-term investments are carried at cost and provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at the lower of the cost and fair value and provision is made to recognize any decline in the carrying value. Cost of overseas investment comprises the Indian Rupee value of the consideration paid for the investment.

1.10 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the specifc applicable laws.

MAT credit asset pertaining to the Parent and its Indian subsidiary company is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profts is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a reasonable/virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

The deferred tax assets/liabilities and tax expenses are determined separately for the Parent and each subsidiary company, as per their applicable laws and then aggregated.

1.11 Translation of Foreign Currency Items

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transactions. Current assets, current liabilities and borrowings denominated in foreign currency are translated at the exchange rate prevalent at the date of the Balance Sheet. The resultant gain/loss are recognized in the Proft & Loss account. Overseas investments are recorded at the rate of exchange in force on the date of allotment/acquisition.

All the activities of the foreign operations are carried out with a signifcant degree of autonomy. Accordingly, as per the provisions of AS 11 “Effects of changes in foreign exchange rates”, these operations have been classifed as ‘Non integral operations’ and therefore all assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the Foreign Currency Translation Reserve.

1.12 Accounting of Employee Benefts Employee Benefts in India

a) Gratuity

(i) Parent

The Parent Company provides for gratuity, a defned beneft retirement plan, covering eligible employees. Liability under gratuity plan is determined on actuarial valuation done by the Life Insurance Corporation of India (LIC) at the beginning of the year, based upon which, the Parent Company contributes to the Scheme with LIC. The Parent Company also provides for the additional liability over the amount contributed to LIC based on the actuarial valuation done by an independent valuer using the Projected Unit Credit Method.

(ii) Subsidiaries

Liability for Gratuity for employees is provided on the basis of the actuarial valuation at the year end.

b) Superannuation

Certain employees in India are also participants in a defned superannuation contribution plan. The Parent contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Parent has no further obligations to the plan beyond its monthly contributions.

c) Provident fund

(i) Parent

Eligible employees receive benefts from a provident fund, which is a defned contribution plan to the Trust/Government administered Trust. In the case of Trust aggregate contribution along with interest thereon is paid at retirement, death, incapacitation or termination of employment. Both the employee and the Parent Company make monthly contribution to the 3i Infotech Provident Fund Trust equal to a specifed percentage of the covered employee’s salary. The Parent Company also contributes to a Government administered pension fund on behalf of its employees.

The interest rate payable by the trust to the benefciaries every year is being notifed by the government. The Parent has an obligation to make good the shortfall, if any, between the return from investments of the trust and the notifed interest rate. Such shortfall is charged to proft & loss account in the year it is determined.

(ii) Subsidiaries

Contribution is made to the state administered fund as a percentage of the covered employees’ salary.

d) Liability for leave encashment/entitlement for employees is provided on the basis of the actuarial valuation at the year end.

e) All actuarial gains/losses are charged to revenue in the year these arise.

Employee Benefts in the Foreign Branch

In respect of employees in foreign branches, necessary provision has been made based on the applicable laws. Gratuity/leave encashment for employees in the foreign branches is provided on the basis of the actuarial valuation at the year end.

All actuarial gains/losses are charged to revenue in the year these arise.

Employee Benefts in Foreign Subsidiary Companies

In respect of employees in Foreign Subsidiary Companies, contributions to defned contribution pension plans are recognized as an expense in the proft & loss account as incurred.

Liability for leave entitlement is provided on the basis of actual eligibility at the year end.

1.13 Provisions, Contingent Liabilities and Contingent Assets

i) Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outfow of resources.

ii) Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outfow of resources.

iii) Contingent Assets are neither recognized nor disclosed in the fnancial statements.

1.14 Borrowing Costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset up to the date of completion. Other borrowing costs are charged to the Proft & Loss account.

1.15 Impairment of assets

In accordance with AS 28 on ‘Impairment of Assets’, where there is an indication of impairment of the Group’s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Proft & Loss account whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/depreciation) had no impairment loss been recognized.

1.16 a) Securities issue expenses

Securities issue expenses, Issue expenses including expenses incurred on increase in authorized share capital and premium payable on securities are adjusted against Securities Premium Account.

b) Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.

1.17 Lease

Where the Group has substantially acquired all risks and rewards of ownership of the assets, leases are classifed as fnancial lease. Such assets are capitalized at the inception of the lease, at the lower of fair value or present value of minimum lease payment and liability is created for an equivalent amount. Each lease rental paid is allocated between liability and interest cost so as to obtain constant periodic rate of interest on the outstanding liability for each year.

Where signifcant portion of risks and reward of ownership of assets acquired under lease are retained by lessor, leases are classifed as Operating lease. Equalized lease rentals for such leases are charged to Proft & Loss account.

1.18 Earnings Per Share

In determining the Earnings Per Share, the Group considers the net proft after tax and post tax effect of any extra- ordinary/exceptional item is shown separately. The number of shares considered in computing basic Earnings Per Share is the weighted average number of shares outstanding during the year. The number of shares considered for computing diluted Earnings Per Share comprises the weighted average number of shares used for deriving the basic Earnings Per Share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares which includes potential FCCB conversions. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

1.19 Inventories

Inventories consist of postage, paper, envelopes, hardware and supplies, and are stated at cost (computed on frst in frst out or weighted average basis as the case may be) or net realizable value, whichever is lower.