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Notes to Accounts of Accel Frontline Ltd.

Mar 31, 2015

1. General Information:

(a) Background:

Accel Frontline Limited ("Accel" or the Company) was incorporated on 8th June, 1995. The Company's principal lines of business in IT services which includes, providing system integration solutions comprising network design, hardware and software, IT infrastructure management solutions, warranty management solutions for imported and indigenous equipment, development, implementation and maintenance of software applications.

(b) Comparatives:

All amounts in the standalone financial statements are presented in Rs.. in lakhs except per share data and as otherwise stated. Figures for the previous year have been regrouped / rearranged wherever considered necessary to conform to the figures presented in the current year. The previous year figures have been audited by a firm other than Walker Chandiok & Co LLP.

2 Transfer pricing

As per the Transfer pricing norms introduced in India with effect from 1st April, 2001, the Company is required to use certain specific methods in computing arm's length price of international transactions between the associated enterprises and maintain prescribed information and documents relating to such transactions. The appropriate method to be adopted will depend on the nature of transactions/class of transactions, class of associated persons, functions performed and other factors, which have been prescribed. The Transfer pricing study for the fiscal year ended 31st March, 2015 is in progress and accordingly, the contracts may be amended subsequently and related adjustment, if any, will be quantified upon completion of this study. However, in the opinion of the Management, the outcome of the study will not have material impact on the Company's results.

3 Segment reporting

Considering the risk/return profiles of the segments between product and geography, the Company has identified business as primary segment in accordance with Accounting Standard (AS) 17 Segment Reporting. The Company does not have any secondary segment.

The Company's principal lines of business is IT services which includes, providing system integration (SI) solutions comprising network design, hardware and software, IT Infrastructure management solutions (IMS), software development and support (SS) and warranty management solutions (WMS) for imported and indigenous equipments, development, implementation and maintenance of software applications.

4 Overseas Branch Operation

During the year, the branch at Singapore in the name of "Accel Frontline Limited - Singapore Branch" continued its operation. The revenue and expenses of the said Branch have been included in the financials of the company against each line item, translated into Indian rupees, as applicable. The summary of the financials of the Branch is as follows:

5 Disclosures in respect of non-cancellable operating leases

The lease rentals charged for the years ended 31st March, 2015 and 2014 and maximum obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows: The total of future minimum lease payments for each of the following periods:

6 Prior period item includes Rs.1,433, representing revenues pertaining to certain back to back annual maintenance contracts recognised in the previous year based on the billing instead of straight lining the revenue over the period of the contract. The Company has revised the process of revenue recognition retrospectively during the year ended 31st March, 2015. Further, it includes Rs.72 relating to employee benefit expenses.

7 Commitments

The Company did not have any capital commitments as at the balance sheet date. Other commitments are cancellable at the option of the company and hence not disclosed.


Mar 31, 2014

1.01 Background

Accel Frontline Limited ("Accel" or the Company) was incorporated in Chennai in 1995. The Company''s principal lines of business in IT services includes, providing system integration solutions comprising network design, hardware and software, IT Infrastructure management solutions, warranty management solutions for imported and indigenous equipments, development, implementation and maintenance of software applications. The company has the following subsidiaries.

1.02 Contingent liabilities

2014 2013

Sales tax 8,740,588 6,071,815

Service tax 584,433 4,428,905

Income tax 103,707,400 123,884,050

Central Excise 2,431,495 -

Bank Guarantees outstanding 257,960,823 297,344,600

Provident Fund Authorities 18,417,730 -

Claims against the company 22,233,262 21,952,808 not acknowledged as debt

Note : The contingent liability with respect to Income tax as mentioned above has been shown based on the various assessment orders received by the company. However, part of the disallowances as mentioned in the said orders has already been allowed in the subsequent assessment years. The adjustments (if any) will be made in the financials after our appeals before appropriate authorities are disposed off.

During the year 2010-2011, Accel IT Resources Limited hived off its outsourcing division for a total consideration of Rs.500 lacs based on independent valuation from a Chartered Accountant pursuant to the approval of the shareholders in their meeting held on 04th February, 2011 w.e.f closing business hours of 31st March, 2011. The amount of such consideration has been included under "Income from Sale of Business" in the year 31st March, 2011. The transaction included transfer of all contracts, consents, commercial rights, know how, employees outsourced to different organizations, all rights, powers, liabilities relating to or connected with business of providing/ outsourcing IT manpower etc. There was no transfer of tangible assets of the company.

As per clause no.10.7. of the agreement for the sale of the outsourcing division of the company, dated 15th March, 2011, in the unlikely event of the business getting reduced by the Group companies, the company agrees to indemnify the purchaser an amount equivalent to the short fall in the yearly minimum service charges of Rs.1.25 crores as mentioned in clause no.10.5 of the said agreement. The shortfall amount would be paid back to the purchaser at the end of each subsequent financial year. If the short fall is not made good in the next financial year the company has the right to adjust any such refunds on any time before 31st March, 2016.


Mar 31, 2013

1.01 Background

Accel Frontline Limited ("Accel" or the Company) was incorporated in Chennai in 1995. The Company''s principal lines of business in IT services includes, providing system integration solutions comprising network design, hardware and software, IT Infrastructure management solutions, warranty management solutions for imported and indigenous equipments, development, implementation and maintenance of software applications.

2.1.1.- Rights, preferences and restrictions attached to shares

The Company has one class of equity shares having a par value of Rs.10 per share. Each share holder is eligible for one vote per share held. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferential amounts in proportion to their share holding.

2.2.A.1 Dividend added back to reserves in the previous year include Rs.114.94 lakhs representing dividend received by Accel Frontline Services Limited from the company which got cancelled as per the merger scheme and Rs.29.16 lakhs representing write back of dividend proposed in Accel Frontline Services Limited for the year 2010-11, but, not approved later in the AGM.

2.2.A.2 To give efect to the merger scheme in the previous year, 5,747,127 shares of the company held by Accel Frontline Services Limited was cancelled. The value of these shares was Rs.2,500 lakhs, out of this, Rs.574.71 lakhs was deducted from the Issued, Subscribed & Paid up capital and the balance of Rs.1,925.29 lakhs was deducted from Proft and Loss account

2.3.1 The term loan is secured by a pari passu charge by way of hypothecation of current assets and the moveable assets of the company. The loan carries an interest rate of 14% per annum.The loan is repayable over a period of three years in ten quaterly instalments (including current maturities) in the below mentioned repayment pattern

2.3.2 Term loan from fnancial institutions include the following:

a. Rs.497.08 lakhs which is secured against the immoveable property belonging to the managing director and is repayable over a period of 5 years, out of which, Rs.78.43 lakhs is repayable within one year

b. Rs.100 lakhs which is secured against certain shares held by the holding company M/s.Accel Limited and is repayable after 2 years

2.3.3 The loans have been availed for acquiring certain fxed assets and are secured by hypothecation of specifc assets purchased out of such loans. The loans are repaid in accordance to the repayment schedule agreed with the lender.

2.3.4 This loan is availed from Life Insurance Corporation of India and is secured against the keyman insurance policy placed with them

3.1 Investments in subsidiaries

As at March 31, 2013, the Company had an aggregate investment of Rs 215,107,541 in its subsidiaries. During the current year, the company increased its investment in Accel Systems & Technologies Pte Ltd. by Rs.69,430,441 (S$1,60,000) and the percentage of shares held by the company as at 31.3.13 is 57.39%. The Company also invested Rs 863,513 (£10,000) in Accel Technologies Limited, a newly incorporated 100% subsidiary company in United Kingdom.

3.2 Sundry debtors/sundry creditors/loans & advances

a) The balances stated at their values shown under sundry debtors, sundry creditors and loans & advances are subject to confrmation

b) During the year, a provision for doubtful debts was created for Rs.4,109,530 /- (previous year Rs. 2,501,075/- ). A sum of Rs.13,050,409/- (previous year Rs. 17,288,686/-) was written of as bad debts as the management felt that these are doubtful of recovery / irrecoverable.

3.3 Contingent liabilities (In Indian Rupees)

2013 2012

Sales tax 6,071,815 6,113,923

Service tax 4,428,905 8,955,820

Income tax 123,884,050 95,160,050

Letters of credit outstanding 20,325,636

Bank Guarantees outstanding 297,344,600 314,934,395

Claims against the company 21,952,808 21,915,411 not acknowledged as debt

Note : The contingent liability with respect to Income tax as mentioned above has been shown based on the various assessment orders received by the company. However, part of the disallowances as mentioned in the said orders has already been allowed in the subsequent assessment years. The adjustments (if any) will be made in the fnancials after our appeals before appropriate authorities are disposed of.

3.4 Segment reporting

During the year under review, the company''s operations predominantly relate to IT related services and accordingly, this is the only primary reportable segment. The geographical segment is not relevant since export sales are less than 10% of the total sales.

3.5 Comparative fnancial information

The previous year''s balances have been regrouped/reclassifed wherever necessary to conform to the current year''s presentation in accordance with the Revised Schedule VI of the Companies Act 1956.

 
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