Mar 31, 2016
BACKGROUND
Educomp Solutions Limited (the Company) was founded in September, 1994. The Company is engaged in providing end-to-end solutions in the education technology domain through licensing of digital content, solutions for bridging the digital divide (a government initiative to enhance computer literacy), professional development and retail & consulting initiatives. The Company''s business can be categorized into four strategic business units namely School Learning Solutions (comprising of Smart Class & Edureach (ICT) business), K-12 Schools (comprising preschools & high schools), Higher Learning Solutions (comprising of vocational, higher education and professional development) and Online, Supplemental & Global business (comprising of internet based educational services and coaching) spreading education ecosystem. The Company is listed on the BSE Limited and the National Stock Exchange of India Limited.
1. Significant Accounting Policies
(i) Basis for preparation of Financial Statements
a) The financial statements have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material respects with the Accounting Standards (Standards referred to in sections 133 of the Companies Act 2013("the Act")), read with rule 7 of Companies (Accounts) Rules 2014.
The accounting policies adopted for the preparation of financial statements are consistent with those of previous year.
b) The Company has incurred substantial losses and its net worth has been significantly eroded. Based on Company''s projected cash flows, it shall have sufficient funds to run its operations in foreseeable future. As regards availability of requisite funds to meet its debt related obligations including those falling due in financial year 2016-17 as per its CDR package executed with Company''s lenders, the Company intends to monetize its identified investments, receivables and assets to meet the necessary obligations. The Company is also taking several measures to improve operational efficiencies and other avenues of raising funds.
The management is confident that with the above measures and continuous efforts to improve the business, it would be able to generate sustainable cash flow, discharge its short-term and long term liabilities and recover & recoup the erosion in its net worth through profitable operations and continue as a going concern. Accordingly, these financial statements have been prepared on a going concern basis and do not include any adjustments relating to the recoverability and classification of recorded assets, or to amounts and classification of liabilities that may be necessary if the entity is unable to continue as a going concern.
(ii) Current/Non-current classification of assets/ liabilities
All assets and liabilities have been classified as current or non-current as per the criteria set out in the Schedule III to the Companies Act, 2013. The Company has ascertained its operating cycle (except for specific project/contract/product line/service) as 12 months for the purpose of current/non-current classification of assets and liabilities. However, operating cycle for the business activities of the company covers the duration of the specific project/contract/product line/service and extends up to the realization of receivables within the agreed credit period normally applicable to the respective lines of business.
(iii) Use of estimates
The preparation of Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Financial Statements and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
(iv) Revenue recognition
The Company derives its revenue from sale, supply and installation of educational products and rendering of educational services.
Revenue from sale of educational products/ technology equipments is recognized as and when significant risk and rewards of the ownership of goods gets transferred to the buyer. Sales are net off any trade discounts, sales return and Sales Tax/ Value Added Tax.
Revenue under Build, Own, Operate and Transfer ("BOOT model") contracts is recognized on straight line basis over the period of the contract.
Revenue from educational support services are recognized on completion of related services.
Income from interest on fixed deposits is recognized using the time proportion method taking into account applicable rate of interest.
Dividends income is recognized when the right to receive payment is established.
(v) Fixed assets/ depreciation and amortization Tangible assets
Tangible fixed assets are stated at cost of acquisition net of recoverable taxes (wherever applicable), less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any cost attributable to bringing the assets to its working condition for its intended use.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day to day repair and maintenance and cost of replacing parts, are charged to the Statement of Profit and Loss for the period in which such expenses are incurred.
Losses arising from the retirement of, and gain or losses arising from disposal of tangible asset are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognized as income or expense in the Statement of Profit and Loss.
Schedule II to the Companies Act 2013 has become applicable to the Company with effect from April 1, 2014. Accordingly, the Company has determined the useful life of its assets as per Schedule II. Useful lives are as under:
Effective April 1, 2014, the Company has revised the useful life of fixed assets in accordance with part C of Schedule II to the Companies Act, 2013 for the purposes of providing depreciation on fixed assets, except some project related assets. During the year In case of a school building, the Company has carried out a technical assessment of building for identification of components with different useful lives, as required by Schedule II to the Companies Act, 2013, which shall be completed in due course. The impact on the depreciation, if any has been charged to profit and loss account during the year. The following are the project related assets purchased under BOOT model, which are depreciated on a straight line basis over the project duration, which is lower than lives prescribed by Schedule II and which best represents useful lives of these assets as these assets are project specific and their useful life for the Company is only till the end of the respective project, where these assets are deployed:
Depreciation on addition to fixed assets is provided on pro-rata basis from the date the assets are ready to use. Depreciation on sale / deduction from fixed assets is provided for up to the date of sale, deduction, discernment as the case may be.
Leasehold improvements are amortized on the straight- line basis over the primary period of lease or useful life, whichever is shorter.
During the previous year if the Company had not adopted Schedule II to the Companies Act, 2013, depreciation for the year would have been lower by Rs.28.45 million and loss for the year would have been lower by Rs.28.45 million and the written down value of assets as at March 31, 2015 would have been Rs.866.40 million as against reported written down value of Rs.837.95 million.
Intangible assets
An intangible asset is recognized, where it is probable that the future economic benefits attributable to the asset will flow to the enterprise and where its cost can be reliably measured.
Cost of an internally generated asset comprises all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to create, produce and make the asset ready for its intended use.
Losses arising from the retirement of, and gain or losses arising from disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognized as income or expense in the Statement of Profit and Loss.
Intangible assets are stated at cost of acquisition less accumulated amortization and impairment loss. Amortization on the intangible assets is provided on pro-rata basis on the straight-line method based on management''s estimate of useful life, i.e. 3 years for software and 4 years for knowledge-based content.
Licensed intangible assets are amortized over the period of license or expected useful life, whichever is shorter.
Capital work-in-progress/intangibles under development
Capital work-in-progress (including intangible assets under development) represents expenditure incurred in respect of capital projects/intangible assets under development and are carried at cost. Cost includes related acquisition expenses, development costs, borrowing costs (wherever applicable) and other direct expenditure.
Research and development costs
Research costs are expensed off as incurred. Development expenditure incurred on the individual project is recognized as an individual asset when the Company can demonstrate (i) the technical feasibility of completing the intangible asset so that it will be available for use or sale, (ii) its intention to complete the asset, (iii) its ability to use or sell the asset, (iv) asset''s ability to generate future economic benefits,
(v) availability of adequate resources to complete the development and to use or sell the asset and (vi) its ability to measure reliably the expenditure attributable to the intangible asset during development.
(vi) Impairment of assets
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is higher of asset''s net selling price and value in use which means the present value of future cash flows expected to arise from the continuing use of the assets and its eventual disposal. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is impaired.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
(vii) Leases Operating lease
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases.
Where the Company is lessee:
Lease rentals in respect of operating lease arrangements including assets taken on operating lease are recognized as an expense in the Statement of Profit and Loss on straight line basis over the lease term.
Where the Company is lessor:
Lease income on an operating lease arrangement is recognized in the Statement of Profit and Loss on straight line basis over the lease term.
Finance lease
Where the Company is lessee
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.
A leased asset is depreciated on a straight-line basis over the useful life of the asset as determined by the management or the useful life envisaged in Schedule II to the Act, whichever is lower. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset, the lease term and the useful life envisaged in Schedule II to the Act.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
Where the Company is the lessor
Leases in which the Company transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After initial recognition, the Company apportions lease rentals between the principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Statement of Profit and Loss.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation, are recognized as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Statement of Profit and Loss.
(viii) Inventories
Inventory comprises of traded goods and is valued at lower of cost and net realizable value. Cost of inventories comprises all cost of purchases inclusive of custom duty (except the refundable component) and other incidental expenses incurred in bringing such inventories to their present location and condition. In determining the cost, moving weighted average cost method is used. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Items of consumable inventory are valued at cost.
(ix) Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.
Long-term investments are stated at acquisition cost. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary. Any reduction in carrying amount and any reversal of such reductions are charged to or credit to or Statement of Profit and Loss. Current investments are valued at lower of cost and fair value on individual investment basis.
Classification in the Financial Statements
Investments that are realizable within the period of twelve months from the Balance Sheet date are classified as current investment. All other investments are classified as non-current investments.
(x) Foreign exchange transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Nonmonetary item, which are measured in terms of historical cost denomination in a foreign currency, are reported using the exchange rate at the date of transaction.
Monetary assets and liabilities outstanding as at Balance Sheet date are restated at the closing exchange rate on that date.
Exchange difference
Exchange differences arising on the settlement of monetary items or on restatement of the Company''s monetary items at rates different from those at which they were initially recorded during the year or reported in previous Financial Statements (other than those relating to fixed assets and other long term monetary assets) are recognized as income or as expenses in the year in which they arise.
Monetary assets and liabilities outstanding as at Balance Sheet date are restated at the closing exchange rate on that date.
The Company has opted for accounting the exchange differences arising on the reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Second Amendment Rules 2011 on Accounting Standard 11 as notified by the Central Government vide Notification dated 29th December, 2011. Accordingly, the effect of exchange difference on foreign currency loan (including FCCB) is accounted for by addition or deduction to the cost of the assets so far it relates to depreciable capital asset and in other cases by transfer to "Foreign Currency Monetary Items Translation Difference Account" (FCMITDA) to be amortized as provided in the aforesaid notification.
(xi) Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, and bonus etc are recognized in the Statement of Profit and Loss in the period in which the employee renders the related service. The employees are further entitled to sick leaves which cannot be encashed and will lapse at the end of the calendar year. The Company is providing provision for such employee benefits on the basis of its best estimate.
(b) Long term employee benefits
(i) Defined contribution plan
Contributions to Provident Fund, Labour Welfare Fund and Employee State Insurance are deposited with the appropriate authorities and charged to the Statement of Profit and Loss on accrual basis. The Company has no further obligations under these plans beyond its monthly contributions.
(ii) Defined benefit plan
Leave encashment- The Company has provided for the liability at the year end on account of unveiled earned leave as per the actuarial valuation as per the Projected Unit Credit method in accordance with Accounting Standard 15, "Employee benefits". All actuarial gains/losses are charged to the Statement of Profit and Loss in the year they arise.
Gratuity- The Company provides for retirement benefits in the form of Gratuity. The Company''s gratuity plan is a defined benefit plan. The present value of gratuity obligation under such defined plan is determined based on an actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under the defined benefit plans, is based on the market yields on Government securities as at the valuation date having maturity periods approximating to the terms of the related obligations. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.
(c) Employee stock option scheme
The stock options are accounted as per the accounting treatment prescribed by the employee stock option scheme and Employee Stock Purchase Guidelines, 1999 issued by Securities Exchange Board of India, whereby the intrinsic value of the option being, excess of market value of the underlying share immediately prior to the date of award over its exercise price is recognized as deferred employee compensation with a credit to Employee stock options outstanding account. The deferred employee compensation is charged to Statement of Profit and Loss on straight line basis over the vesting period of the option. The balance in employee stock option outstanding account net of any unamortized deferred employee compensation is shown separately as part of shareholders'' fund.
(xii) Borrowing cost
Borrowing cost includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs directly 4 attributable to the acquisition, construction or production of an qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
(xiii) Provision for tax
Tax expense for the year comprises current and deferred tax included in determining the net profit for the year.
Provision for current tax is based on the tax liabilities computed in accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognized on timing difference between accounting and taxable income that originates in one year and is capable of reversal in one or more subsequent period. Deferred tax assets and liabilities are measured using the tax rates and laws that have been substantively enacted by the Balance Sheet date.
The Deferred tax assets are recognized only to the extent there is reasonable certainty that sufficient future taxable income will be available against which these assets can be realized in future whereas in cases of existence of carry forward of losses or unabsorbed depreciation, deferred tax assets are recognized only if there is virtual certainty of realization backed by convincing evidence. Deferred tax assets are reviewed at each Balance Sheet date and are written-down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realized.
Minimum Alternative Tax (MAT)
MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period.
In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT Credit receivable. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit receivable to the extent there is no longer convincing evidence to the effect that Company will pay normal income tax during the specified period.
(xiv) Contingent liabilities and provisions Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is 4 a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the Financial Statements.
Provisions
A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
All repairs and maintenance cost of hardware sold under the contracts during the remaining contract period is borne by the Company on the basis of experience of actual cost incurred in servicing such hardware during the previous financial year.
Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Profit and Loss net of any reimbursement.
(xv) Earning per share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders after tax by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period, are adjusted for events of bonus issued to existing shareholders.
For the purpose of calculating diluted earnings per share, the net profit or loss attributable to equity shareholders and the weighted average number of shares outstanding are adjusted for the effects of all dilutive potential equity shares, if any.
(xvi) Segment reporting Identification of segment
The Company''s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.
Intersegment transfer
The Company generally accounts for intersegment sales and transfers at cost plus appropriate margins.
Allocation of common cost
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items which are not allocated to any business segment and include interest expense and income tax is not allocated to the segments.
Segment accounting policy
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole.
(xvii) Cash flow statement
Cash flows are reported using the indirect method, whereby net profits before tax is adjusted for the effect of transaction of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities are segregated.
(xviii) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid investments with original maturities of three months or less.
(xix) Exceptional items
Items of income or expense from ordinary activities which are of such size, nature or incidence that, their disclosure is relevant to explain the performance of the enterprise for the period, are disclosed separately in the Statement of Profit and Loss.
(xx) Share issue expenses
Share issue expenses are adjusted against the securities premium account as permissible under Section 52 of the Act, to the extent balance is available for utilization in the securities premium account. The balance of share issue expenses in excess of securities premium account, if any, is charged to Statement of Profit and Loss.
Mar 31, 2014
(i) Basis for preparation of Financial Statements
The Financial Statements have been prepared to comply in all material
respects with the Accounting Standards notified by Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956.
The Financial Statements have been prepared in accordance with
Generally Accepted Accounting Principles in India (Indian GAAP) under
the historical cost convention on an accrual basis. The accounting
policies have been consistently applied by the Company and are
consistent with those used in the previous year.
(ii) Current/Non-current classification of assets/liabilities
All assets and liabilities have been classified as current or non-
current as per the Company''s normal operating cycle and other criteria
set out in the Revised Schedule VI to the Companies Act, 1956. The
Company has ascertained its operating cycle as 12 months for the
purpose of current/non-current classification of assets and
liabilities.
(iii) Use of estimates
The preparation of Financial Statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
Financial Statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates. Any revision to accounting estimates is
recognized prospectively in current and future periods.
(iv) Revenue recognition
The Company derives its revenue from sale, supply and installation of
educational products and rendering of educational services.
Revenue from sale of educational products/ technology equipments is
recognized as and when significant risk and rewards of the ownership of
goods gets transferred to the buyer. Sales are net off any trade
discounts, sales return and Sales Tax/ Value Added Tax.
Revenue under Build, Own, Operate and Transfer ("BOOT model") contracts
is recognized on straight line basis over the period of the contract.
Revenue from educational support services are recognized on completion
of related services.
Income from interest on fixed deposits is recognized using the time
proportion method taking into account applicable rate of interest.
Dividends income is recognized when the right to receive payment is
established.
(v) Fixed assets/ depreciation and amortization Tangible assets
Tangible assets are stated at cost less accumulated depreciation and
impairment loss, if any. Costs include all expenses incurred to bring
the assets to its present location and condition for its intended use.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day to day
repair and maintenance and cost of replacing parts, are charged to the
Statement of Profit and Loss for the period in which such expenses are
incurred.
Losses arising from the retirement of, and gain or losses arising from
disposal of tangible asset are determined as the difference between the
net disposal proceeds and the carrying amount of asset and recognised
as income or expense in the Statement of Profit and Loss.
Depreciation on tangible fixed assets except those assets purchased for
project implementation under BOOT model is provided on written down
value method based on rates as prescribed in Schedule XIV to the
Companies Act, 1956. Depreciation on addition to fixed assets is
provided on pro-rata basis from the date the assets are ready to use.
Depreciation on sale / deduction from fixed assets is provided for upto
the date of sale, deduction, discardment as the case may be.
Tangible fixed assets purchased for project implementation under BOOT
model, are depreciated on a straight-line basis over the period of
contractual obligation (generally ranging from 3-6 years), depending
upon the period of the contract.
Leasehold improvements are amortized on the straight-line basis over
the primary period of lease or useful life, whichever is shorter.
All individual assets costing less than Rs. 5,000 are fully depreciated
by way of one time depreciation charge in the year of purchase except
in case of deployment as project assets (if any) which are depreciated
on a straight-line basis over the period of contractual obligation
(generally ranging from 3-6 years) depending upon the period of the
contract.
Intangible assets
An intangible asset is recognized, where it is probable that the future
economic benefits attributable to the asset will flow to the enterprise
and where its cost can be reliably measured.
Cost of an internally generated asset comprises all expenditure that
can be directly attributed, or allocated on a reasonable and consistent
basis, to create, produce and make the asset ready for its intended
use.
Losses arising from the retirement of, and gain or losses arising from
disposal of an intangible asset are determined as the difference
between the net disposal proceeds and the carrying amount of asset and
recognised as income or expense in the Statement of Profit and Loss.
Intangible assets are stated at cost of acquisition less accumulated
amortization and impairment loss. Amortization on the intangible assets
is provided on pro-rata basis on the straight-line method based on
management''s estimate of useful life, i.e. 3 years for software and 4
years for knowledge-based content. Licensed intangible assets are
amortised over the period of license or expected useful life whichever
is shorter.
Capital work-in-progress/intangibles under development
Capital work-in-progress (including intangible assets under
development) represents expenditure incurred in respect of capital
projects/intangible assets under development and are carried at cost.
Cost includes related acquisition expenses, development costs,
borrowing costs (wherever applicable) and other direct expenditure.
Research and development costs
Research costs are expensed off as incurred. Development expenditure
incurred on the individual project is recognized as an individual asset
when the Company can demonstrate (i) the technical feasibility of
completing the intangible asset so that it will be available for use or
sale, (ii) its intention to complete the asset, (iii) its ability to
use or sell the asset, (iv)asset''s ability to generate future economic
benefits, (v) availability of adequate resources to complete the
development and to use or sell the asset and (vi) its ability to
measure reliably the expenditure attributable to the intangible asset
during development.
(vi) Impairment of assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/ external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
higher of asset''s net selling price and value in use which means the
present value of future cash flows expected to arise from the
continuing use of the assets and its eventual disposal. An impairment
loss is charged to the Statement of Profit and Loss in the year in
which an asset is impaired.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
(vii) Leases Operating lease
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases.
Where the Company is lessee
Lease rentals in respect of operating lease arrangements including
assets taken on operating lease are recognized as an expense in the
Statement of Profit and Loss on straight line basis over the lease
term.
Where the Company is lessor
Lease income on an operating lease arrangement is recognized in the
Statement of Profit and Loss on straight line basis over the lease
term.
Finance lease
Leases where the lessor effectively transfers substantially all the
risks and benefits of ownership over the lease term are classified as
finance lease.
Assets taken on finance lease are capitalized at fair value or net
present value of the minimum lease payments, whichever is lower. The
principal component in the lease rental is adjusted against the lease
liability and the interest component is charged to Statement of Profit
and Loss.
(viii) Inventories
Inventory comprises of traded goods and is valued at lower of cost and
net realisable value. Cost of inventories comprises all cost of
purchases inclusive of custom duty (except the refundable component)
and other incidental expenses incurred in bringing such inventories to
their present location and condition. In determining the cost, moving
weighted average cost method is used. Net realisable value is the
estimated selling price in the ordinary course of business, less the
estimated costs of completion and the estimated costs necessary to make
the sale.
(ix) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at acquisition cost. Provision for
diminution in the value of long-term investments is made only if such a
decline is other than temporary. Any reduction in carrying amount and
any reversal of such reductions are charged to or credit to or
Statement of Profit and Loss. Current investments are valued at lower
of cost and fair value on individual investment basis.
Classification in the Financial Statements
Investments that are realisable within the period of twelve months from
the Balance Sheet date are classified as current investment. All other
investments are classified as non-current investments.
(x) Foreign exchange transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary item, which are
measured in terms of historical cost denomination in a foreign
currency, are reported using the exchange rate at the date of
transaction.
Exchange difference
Exchange differences arising on the settlement of monetary items or on
restatement of the Company''s monetary items at rates different from
those at which they were initially recorded during the year or reported
in previous Financial Statements (other than those relating to fixed
assets and other long term monetary assets) are recognised as income or
as expenses in the year in which they arise.
Monetary assets and liability outstanding as at balance sheet date are
restated at the closing exchange rate on that date.
The Company has opted for accounting the exchange differences arising
on the reporting of long term foreign currency monetary items in line
with Companies (Accounting Standards) Second Amendment Rules 2011 on
Accounting Standard 11 as notified by the Central Government vide
Notification dated 29th December, 2011. Accordingly, the effect of
exchange difference on foreign currency loan (including FCCB) is
accounted for by addition or deduction to the cost of the assets so far
it relates to depreciable capital asset and in other cases by transfer
to "Foreign Currency Monetary Items Translation Difference Account"
(FCMITDA) to be amortized as provided in the aforesaid notification.
(xi) Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. Benefits
such as salaries, wages, and bonus etc are recognized in the Statement
of Profit and Loss in the period in which the employee renders the
related service. The employees are further entitled to sick leaves
which cannot be encashed and will lapse at the end of the calendar
year. The Company is providing provision for such employee benefits on
the basis of its best estimate.
(b) Long term employee benefits
(i) Defined contribution plan
Contributions to provident fund, labour welfare fund and ESI are
deposited with the appropriate authorities and charged to the Statement
of Profit and Loss on accrual basis. The Company has no further
obligations under these plans beyond its monthly contributions.
(ii) Defined benefit plan
Leave encashment- The Company has provided for the liability at the
year end on account of unavailed earned leave as per the actuarial
valuation as per the Projected Unit Credit method in accordance with
Accounting Standard 15, "Employee benefits". All actuarial gains/losses
are charged to the Statement of Profit and Loss in the year they arise.
Gratuity- The Company provides for retirement benefits in the form of
Gratuity.The Company''s gratuity plan is a defined benefit plan. The
present value of gratuity obligation under such defined plan is
determined based on an actuarial valuation carried out by an
independent actuary using the Projected Unit Credit Method, which
recognizes each period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit separately to build
up the final obligation. The obligation is measured at the present
value of the estimated future cash flows. The discount rate used for
determining the present value of the obligation under the defined
benefit plans, is based on the market yields on Government securities
as at the valuation date having maturity periods approximating to the
terms of the related obligations. Actuarial gains and losses are
recognized immediately in the Statement of Profit and Loss.
(c) Employee stock option scheme
The stock options are accounted as per the accounting treatment
prescribed by the employee stock option scheme and Employee Stock
Purchase Guidelines, 1999 issued by Securities Exchange Board of India,
whereby the intrinsic value of the option being, excess of market value
of the underlying share immediately prior to the date of award over its
exercise price is recognized as deferred employee compensation with a
credit to Employee stock options outstanding account. The deferred
employee compensation is charged to Statement of Profit and Loss on
straight line basis over the vesting period of the option. The balance
in employee stock option outstanding account net of any unamortized
deferred employee compensation is shown separately as part of
shareholders'' fund.
(xii) Borrowing cost
Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings. Borrowing
costs directly attributable to the acquisition, construction or
production of an qualifying asset that necessarily takes a substantial
period of time to get ready for its intended use or sale are
capitalized as part of the cost of the respective asset. All other
borrowing costs are expensed in the period they occur.
(xiii) Provision for tax
Tax expense for the year comprises current and deferred is included in
determining the net profit for the year.
Provision for current tax is based on the tax liabilities computed in
accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognized on timing difference
between accounting and taxable income that originates in one year and
is capable of reversal in one or more subsequent period. Deferred tax
assets and liabilities are measured using the tax rates and laws that
have been substantively enacted by the Balance Sheet date.
The Deferred tax assets are recognized only to the extent there is
reasonable certainty that sufficient future taxable income will be
available against which these assets can be realized in future whereas
in cases of existence of carry forward of losses or unabsorbed
depreciation, deferred tax assets are recognized only if there is
virtual certainty of realization backed by convincing evidence.
Deferred tax assets are reviewed at each Balance Sheet date and are
written-down or written-up to reflect the amount that is reasonably /
virtually certain (as the case may be) to be realized.
Minimum Alternative Tax (MAT)
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in Guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the Statement of Profit and Loss
and shown as MAT Credit receivable. The Company reviews the same at
each Balance Sheet date and writes down the carrying amount of MAT
Credit receivable to the extent there is no longer convincing evidence
to the effect that Company will pay normal income tax during the
specified period.
(xiv) Contingent liabilities and provisions Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
Financial Statements.
Provisions
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed,
the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the Statement of Profit and Loss net of any
reimbursement.
(xv) Earning per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders after tax by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period, are adjusted for events of bonus issued to existing
shareholders.
For the purpose of calculating diluted earnings per share, the net
profit or loss attributable to equity shareholders and the weighted
average number of shares outstanding are adjusted for the effects of
all dilutive potential equity shares, if any.
(xvi) Segment reporting
Idenification of segment
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Intersegment transfer
The Company generally accounts for intersegment sales and transfers at
cost plus appropriate margins.
Allocation of common cost
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment and include interest
expense and income tax is not allocated to the segments.
Segment accounting policy
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
(xvii) Cash flow statement
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effect of transaction of non-cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities are segregated.
(xviii) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
(xix) Material events
Material Events occurring after the Balance Sheet date upto the date of
signing of the financials are taken into cognizance.
Mar 31, 2013
(i) Basis for preparation of Financial Statements
The Financial Statements have been prepared to comply in all material
respects with the Accounting Standards notified by Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956.
The Financial Statements have been prepared under the historical cost
convention on an accrual basis. The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
(ii) Use of estimates
The preparation of Financial Statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
Financial Statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates. Any revision to accounting estimates is
recognized prospectively in current and future periods.
(iii) Revenue recognition
The Company derives its revenue from sale, supply and installation of
educational products and rendering of educational services.
Revenue from sale of educational products/ technology equipments is
recognized as and when significant risk and rewards of the ownership of
goods gets transferred to the buyer. Sales are net off any trade
discounts, sales return and Sales Tax/ Value Added Tax.
Revenue under Build Own Operate and Transfer ("BOOT model") contracts
is recognized on straight line basis over the period of the contract.
Revenue from educational support services are recognized on completion
of related services.
A portion of the revenue earned on licensing of knowledge based content
under "Out right sale basis" contracts is treated as unearned revenue
towards future cost of updates due to economic obligation of the
Company to provide the same. The unearned revenue is recognized in
subsequent period matching with the cost of future updates to be
incurred in subsequent period.
Income from interest on fixed deposits is recognized using the time
proportion method, based on interest rates implicit in the transaction.
Dividends income is recognized when the right to receive payment is
established.
(iv) Fixed assets/ depreciation and amortization Tangible assets
Tangible assets are stated at cost less accumulated depreciation and
impairment loss, if any. Costs include all expenses incurred to bring
the assets to its present location and condition for its intended use.
Depreciation on tangible fixed assets except those assets purchased for
project implementation under BOOT model is provided on written down
value method based on rates as per management''s estimate of useful life
of the assets or at the rates and in the manner prescribed in Schedule
XIV to the Companies Act, 1956, whichever is higher. Depreciation on
addition to fixed assets is provided on pro- rata basis from the date
the assets are ready to use. Depreciation on sale / deduction from
fixed assets is provided for upto the date of sale, deduction,
discardment as the case may be.
Tangible fixed assets purchased for project implementation under BOOT
model, are depreciated on a straight-line basis over the period of
contractual obligation generally ranging from 3-6 years, depending upon
the period of the contract.
Leasehold improvements are amortized on the straight-line basis over
the primary period of lease or useful life, whichever is shorter.
Assets costing less than Rs.5,000 are fully depreciated in the year of
purchase except in case of deployment as project assets (if any) which
are depreciated on a straight-line basis over the period of contractual
obligation generally ranging from 3-6 years depending upon the period
of the contract.
Intangible assets
An intangible asset is recognized, where it is probable that the future
economic benefits attributable to the asset will flow to the enterprise
and where its cost can be reliably measured.
Cost of an internally generated asset comprises all expenditure that
can be directly attributed, or allocated on a reasonable and consistent
basis, to create, produce and make the asset ready for its intended
use.
Intangible assets are stated at cost of acquisition less accumulated
amortization and impairment loss. Amortization on the intangible assets
is provided on pro-rata basis on the straight-line method based on
management''s estimate of useful life, i.e. 3 years for software and 4
years for knowledge-based content. Licensed intangible assets are
amortised over the period of license.
Capital work-in-progress/intangibles under development
Capital work-in-progress (including intangible assets under
development) represents expenditure incurred in respect of capital
projects/intangible assets under development and are carried at cost.
Cost includes related acquisition expenses, development costs,
borrowing costs (wherever applicable) and other direct expenditure.
Research and development costs
Research costs are expensed as incurred. Development expenditure
incurred on the individual project is recognized as an individual asset
when the Company can demonstrate (i) the technical feasibility of
completing the intangible asset so that it will be available for use or
sale, (ii) its intention to complete the asset, (iii) its ability to
use or sell the asset, (iv)asset''s ability to generate future economic
benefits, (v) availability of adequate resources to complete the
development and to use or sell the asset and (vi) its ability to
measure reliably the expenditure attributable to the intangible asset
during development.
(v) Impairment of assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
higher of asset''s net selling price and value in use which means the
present value of future cash flows expected to arise from the
continuing use of the assets and its eventual disposal. An impairment
loss is charged to the Statement of Profit and Loss in the year in
which an asset is impaired.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
(vi) Leases
Operating lease
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases.
Lease rentals in respect of operating lease arrangements including
assets taken on operating lease are recognized as an expense in the
Statement of Profit and Loss on straight line basis over the lease
term.
Finance lease
Leases where the lessor effectively transfers substantially all the
risks and benefits of ownership over the lease term are classified as
finance lease. Assets taken on finance lease are capitalized at fair
value or net present value of the minimum lease payments, whichever is
lower. The principal component in the lease rental is adjusted against
the lease liability and the interest component is charged to Statement
of Profit and Loss.
(vii) Inventories
Inventory comprises of traded goods and is valued at lower of cost and
net realisable value. Cost of inventories comprises all cost of
purchases inclusive of custom duty (except the refundable component)
and other incidental expenses incurred in bringing such inventories to
their present location and condition. In determining the cost, moving
weighted average cost method is used. Net realisable value is the
estimated selling price in the ordinary course of business, less the
estimated costs of completion and the estimated costs necessary to make
the sale.
(viii) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at acquisition cost. Provision for
diminution in the value of long-term investments is made only if such a
decline is other than temporary. Current investments are valued at
lower of cost and market rate on individual investment basis.
Classification in the Financial Statements
Investments that are realisable within the period of twelve months from
the Balance Sheet date are classified as current investment. All other
investments are classified as non-current investments.
(ix) Foreign exchange transactions
a. Foreign exchange transactions are recorded at the exchange rates
prevailing at the date of transaction. Exchange differences arising on
the settlement of monetary items or on restatement of the Company''s
monetary items at rates different from those at which they were
initially recorded during the year, or reported in previous Financial
Statements, other than those relating to fixed assets and other long
term monetary assets are recognised as income or as expenses in the
year in which they arise.
b. The Company has opted for accounting the exchange differences
arising on the reporting of long term foreign currency monetary items
in line with Companies (Accounting Standards) Second Amendment Rules
2011 on Accounting Standard 11 as notified by the Central Government
vide Notification dated 29th December, 2011. Accordingly, the effect of
exchange difference on foreign currency loan (including FCCB) is
accounted for by addition or deduction to the cost of the assets so far
it relates to depreciable capital asset and in other cases by transfer
to "Foreign Currency Monetary Items Translation Difference Account"
(FCMITDA) to be amortized as provided in the aforesaid notification.
(x) Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. Benefits
such as salaries, wages, and bonus etc are recognized in the Statement
of Profit and Loss in the period in which the employee renders the
related service. The employees are further entitled to sick leaves
which cannot be encashed and will lapse at the end of the calendar
year. The Company is providing provision for such employee benefits on
the basis of its best estimate.
(b) Long term employee benefits
(i) Defined contribution plan
Contributions to provident fund, labour welfare fund and ESI are
deposited with the appropriate authorities and charged to the Statement
of Profit and Loss on accrual basis. The Company has no further
obligations under these plans beyond its monthly contributions.
(ii) Defined benefit plan
Leave encashment- The Company has provided for the liability at the
year end on account of unavailed earned leave as per the actuarial
valuation as per the Projected Unit Credit method in accordance with
Accounting Standard 15, "Employee benefits". All actuarial gains/losses
are charged to the Statement of Profit and Loss in the year this arise.
Gratuity- The Company provides for retirement benefits in the form of
Gratuity. The Company''s gratuity plan is a defined benefit plan. The
present value of gratuity obligation under such defined plan is
determined based on an actuarial valuation carried out by an
independent actuary using the Projected Unit Credit Method, which
recognizes each period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit separately to build
up the final obligation. The obligation is measured at the present
value of the estimated future cash flows. The discount rate used for
determining the present value of the obligation under the defined
benefit plans, is based on the market yields on Government securities
as at the valuation date having maturity periods approximating to the
terms of the related obligations. Actuarial gains and losses are
recognized immediately in the Statement of Profit and Loss.
(c) Employee stock option scheme
The stock options are accounted as per the accounting treatment
prescribed by the employee stock option scheme and Employee Stock
Purchase Guidelines, 1999 issued by Securities Exchange Board of India,
whereby the intrinsic value of the option being, excess of market value
of the underlying share immediately prior to the date of award over its
exercise price is recognized as deferred employee compensation with a
credit to Employee stock options outstanding account. The deferred
employee compensation is charged to Statement of Profit and Loss on
straight line basis over the vesting period of the option. The balance
in employee stock option outstanding account net of any unamortized
deferred employee compensation is shown separately as part of
shareholders'' fund.
(xi) Borrowing cost
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings. Borrowing
costs directly attributable to the acquisition, construction or
production of an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale are capitalized as part
of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
(xii) Provision for tax
Tax expense for the year comprises current and deferred is included in
determining the net profit for the year.
Provision for current tax is based on the tax liabilities computed in
accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognized on timing difference
between accounting and taxable income that originates in one year and
is capable of reversal in one or more subsequent period. Deferred tax
assets and liabilities are measured using the tax rates and laws that
have been substantively enacted by the Balance Sheet date.
The Deferred tax assets are recognized only to the extent there is
reasonable certainty that sufficient future taxable income will be
available against which these assets can be realized in future whereas
in cases of existence of carry forward of losses or unabsorbed
depreciation, deferred tax assets are recognized only if there is
virtual certainty of realization backed by convincing evidence.
Deferred tax assets are reviewed at each Balance Sheet date and are
written-down or written-up to reflect the amount that is reasonably /
virtually certain (as the case may be) to be realized.
Minimum Alternative Tax (MAT)
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the Statement of Profit and Loss
and shown as MAT Credit receivable. The Company reviews the same at
each Balance Sheet date and writes down the carrying amount of MAT
Credit receivable to the extent there is no longer convincing evidence
to the effect that Company will pay normal Income Tax during the
specified period.
(xiii) Contingent liabilities and provisions Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does
not recognize a contingent liability but discloses its existence in the
financial statements.
Provisions
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed,
the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the Statement of Profit and Loss net of any
reimbursement.
(xiv) Earning per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders after tax by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period, are adjusted for events of bonus issued to existing
shareholders.
For the purpose of calculating diluted earnings per share, the net
profit or loss attributable to equity shareholders and the weighted
average number of shares outstanding are adjusted for the effects of
all dilutive potential equity shares, if any.
(xv) Cash flow statement
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effect of transaction of non-cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing
and financing activities are segregated.
(xvi) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
Mar 31, 2012
(i) Basis for preparation of Financial Statements
The financial statements which have been prepared under the historical
cost convention on the accrual basis of accounting, are in accordance
with the applicable requirements of the Companies Act, 1956 (the 'Act')
and comply in all material aspects with the Accounting Standards
prescribed by the Central Government, in accordance with the Companies
(Accounting Standards) Rules, 2006 as adopted consistently by the
Company, to the extent applicable.
(ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
(iii) Revenue recognition
The Company recognizes revenue on accrual basis in accordance with
Accounting Standard 9. The Company derives its revenue from either
supply or on installation of educational products and provision of
educational services.
The revenue from sale of educational products/ technology equipments is
recognized on transfer of property in goods which generally coincides
with dispatch/ delivery to the customer.
Revenue from Edureach (ICT) under BOOT contract is recognized ratably
over the period of the contract/contractual obligations. Revenue from
professional development is recognized after the professional
development services have been rendered to the customer. Revenue from
online educational services (if charged) is recognized upon receipt of
subscription fee in case non-refundable otherwise ratably over the
subscription period.
Revenue from franchisee constituting one time franchisee fee (non-
refundable) is recognized upon receipt of fee from the franchisee. The
recurring revenue from franchisee is recognized on accrua basis. The
revenue from tuition fee is recorded equally over the period of
instruction.
Revenue for smartclass projects is recognized under various heads,
namely: BOOT Contracts / Out right sale basis contracts / Boot business
"transferred under BOOT contracts"/ Exports. Revenue from smartclass
BOOT contracts is recognized ratably over the period of the Contract/
contractual obligations. Revenue from "Out right sale basis" contracts
consisting of both hardware and knowledge based content, wherein
knowledge based content is recognized on icensing /delivery / grant of
the same for the contract period and technology Equipments on
delivery/dispatch basis. Revenue from "transfer of existing BOOT
Contracts "is recognized on grant of "right to use "of Knowledge based
content.
However , a portion of the revenue earned on right to use/licensing of
educational content/ Knowledge Based content under "Out right Sale
basis" contracts and "BOOT Business "transferred under Boot Contracts
is treated as unearned towards future cost of updates due to economic
obligation of the Company to provide the same. The unearned revenue is
recognized in subsequent period matching with the cost of future
updates incurred in those period.
Revenue from overseas agreements / exports is recognized when the
Educational knowledge Based content license is delivered & accepted.
However in case where knowledge base content is icensed for a long term
period, and is dependent on percent of revenue earned by the licensee,
the revenue is recognized on establishment of right to receive.
Income from interest on fixed deposits is recognized using the time
proportion method, based on interest rates implicit in the transaction.
Dividends income is recognized when the right to receive payment is
established.
(iv) Expenditure
Expenses are accounted for on accrual basis and provisions are made for
all known losses and liabilities.
License Fees for educational content
In respect of licensing contracts with fixed license fee for fixed
period and a pre-defined number of sublicensing arrangements, icense
fee is expensed in such a manner that cumulative amount of fee expense
at the end of each year is based on higher of the following two:
(i) Number of sub-licensing arrangements for which content has been
provided. This will be computed based on total license fee divided by
predefined number of sub licensing arrangements.
(ii) Number of years of license period already expired. This will be
computed based on total license fee divided by fixed period of
licensing contract.
In respect of contracts where license fees is paid on the basis of
period of usage, the license fees is charged in the respective periods.
In respect of contracts where license fee is paid on the basis of per
year per sub licensing arrangement, the entire cost of license for each
of the sub-licensing arrangement is expensed at the time the revenue
from sub licensing arrangement is recognized.
(v) Fixed assets/ Depreciation & Amortization
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. Costs include all expenses incurred to bring
the assets to its present location and condition for its intended use.
Depreciation on tangible fixed assets is provided at the written down
value method at the rates and in the manner prescribed in Schedule XIV
to the Companies Act, 1956. Depreciation on addition to fixed assets is
provided on pro-rata basis from the date the assets are ready to use.
Depreciation on sale / deduction from fixed assets is provided for upto
the date of sale, deduction, discardment as the case may be.
Fixed assets purchased for utilization and implementing the contractual
obligations under the project undertaken under Edureach (ICT), Turnkey
and smartclass are depreciated on a straight-line basis over the period
of contractual obligation generally ranging from 3-6 years depending
upon the period of the contract.
Leasehold improvements are amortized on the straight-line basis over
the primary period of lease.
Assets costing less than Rs.5,000 are fully depreciated in the year of
purchase except in case of deployment as project assets (if any)
Capital work-in-progress comprises of capital assets which are not yet
put to use and also include outstanding advances paid to acquire fixed
assets.
Intangible Assets
An Intangible asset is recognized, where it is probable that the future
economic benefits attributable to the asset will flow to the enterprise
and where its cost can be reliably measured.
Intangible asset are stated at cost of acquisition less accumulated
amortization. Amortization on the Intangible assets is provided on
pro-rata basis on the straight-line method based on management's
estimate of useful life, i.e. 3 years for software, 4 years for
Knowledge-based content including smartclass content. Licensed
intangible assets are amortised over the period of license.
Cost of an internally generated asset comprises all expenditure that
can be directly attributed, or allocated on a reasonable and consistent
basis, to create, produce and make the asset ready for its intended
use.
(vi) Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/ external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
higher of asset's net selling price and value in use which means the
present value of future cash flows expected to arise form the
continuing use of the assets and its eventual disposal. An Impairment
loss is charged to the statement of profit & loss in the year in which
an asset is impaired.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
(vii) Leases
Operating lease
As Lessee:
Lease rentals in respect of operating lease arrangements including
assets taken on operating lease are recognized as an expense in the
statement of profit & loss on accrual basis.
As Lessor:
Lease rental income under operating lease are recognized in the Profit
and Loss on a straight -line basis/ agreed terms over the period of
lease as the case may be
Finance lease
Leases where the lessor effectively transfers substantially all the
risks and benefits of ownership over the lease term are classified as
finance lease. Assets taken on finance lease are capitalized at fair
value or net present value of the minimum lease payments, whichever is
lower. The principal component in the lease rental is adjusted against
the lease liability and the interest component is charged to Profit and
Loss account.
(viii) Inventories
Items of Inventories are measured at lower of cost and net realizable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, freight & other expenses incurred in
bringing the inventories to their present location and condition. The
cost is determined using the weighted average method.
(ix) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at acquisition cost. Provision for
diminution in the value of long-term investments is made only if such a
decline is other than temporary. Current investments are valued at
lower of cost and market rate on individual investment basis.
Classification in the financial statements
Investments that are realisable within the period of twelve months from
the balance sheet date are classified as current investment. All other
investments are classified as non-current investments.
(x) Foreign exchange transactions
a. Foreign exchange transactions are recorded at the exchange rates
prevailing at the date of transaction. Exchange differences arising on
the settlement of monetary items or on restatement of the Company's
monetary items at rates different from those at which they were
initially recorded during the year, or reported in previous financial
statements, other than those relating to fixed assets & other long term
assets are recognised as income or as expenses in the year in which
they arise.
b. The Company has opted for accounting the exchange differences
arising on the reporting of long term foreign currency monetary items
in line with Companies (Accounting Standards) Second Amendment Rules
2011 on Accounting Standard 11 as notified by the Central Government
vide Notification dated 29th December, 2011. Accordingly, the effect of
exchange difference on foreign currency loan (including FCCB) is
accounted for by addition or deduction to the cost of the assets so far
it relates to depreciable capital asset and in other cases by transfer
to "Foreign Currency Monetary Items Translation Difference
Account"(FCMITDA) to be amortized as provided in the aforesaid
notification.
(xi) Employee benefits
(a) Short term employee benefits
2. All employee benefits payable wholly within twelve months of
rendering the service are classified as Short term employee benefits.
Benefits such as salaries, wages, and bonus etc are recognized in the
Profit and Loss Account in the period in which the employee renders the
related service. The employees are further entitled to sick leaves
which cannot be encashed and will lapse at the end of the calendar
year. The company is providing provision for such employee benefits on
the basis of its best estimate.
(a) Long term employee benefits
(i) Defined contribution plan
Contributions to provident fund, labour welfare fund and ESI are
deposited with the appropriate authorities and charged to the statement
of profit & loss on accrual basis. The Company has no further
obligations under these plans beyond its monthly contributions.
(ii) Defined benefit plan
Leave encashment- The Company has provided for the liability at the
year end on account of unavailed earned leave as per the actuarial
valuation as per the Projected Unit Credit method in accordance with
Accounting Standard 15, "Employee benefits". All actuarial gains/losses
are charged to the statement of profit & loss in the year these arise.
Gratuity- The Company provides for retirement benefits in the form of
Gratuity. The Company's gratuity plan is a defined benefit plan. The
present value of gratuity obligation under such defined plan is
determined based on an actuarial valuation carried out by an
independent actuary using the Projected Unit Credit Method, which
recognizes each period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit separately to build
up the final obligation. The obligation is measured at the present
value of the estimated future cash flows. The discount rate used for
determining the present value of the obligation under the defined
benefit plans, is based on the market yields on Government securities
as at the valuation date having maturity periods approximating to the
terms of the related obligations. Actuarial gains and losses are
recognized immediately in the statement of profit & loss.
(b) Employee stock option scheme
The stock options are accounted as per the accounting treatment
prescribed by the employee stock option scheme and Employee Stock
Purchase Guidelines, 1999 issued by Securities Exchange Board of India,
whereby the intrinsic value of the option being, excess of market value
of the underlying share immediately prior to the date of award over its
exercise price is recognized as deferred employee compensation with a
credit to Employee stock options outstanding account. The deferred
employee compensation is charged to statement of profit & loss on
straight line basis over the vesting period of the option. The balance
in employee stock option outstanding account net of any unamortized
deferred employee compensation is shown separately as part of
shareholders fund.
(ii) Borrowing cost
Borrowing costs are determined in accordance with the provisions of AS
16. Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
(iii) Provision for tax
Tax expense for the year comprises current and deferred is included in
determining the net profit for the year.
Provision for current tax is based on the tax liabilities computed in
accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognized on timing difference
between accounting and taxable income that originates in one year and
is capable of reversal in one or more subsequent period. Deferred tax
assets and liabilities are measured using the tax rates and laws that
have been substantively enacted by the balance sheet date.
The Deferred tax assets are recognized only to the extent there is
reasonable certainty that sufficient future taxable income will be
available against which these assets can be realized in future where as
in cases of existence of carry forward of losses or unabsorbed
depreciation, deferred tax assets are recognized only if there is
virtual certainty of realization backed by convincing evidence.
Deferred tax assets are reviewed at each Balance Sheet date and are
written-down or written-up to reflect the amount that is reasonably /
virtually certain (as the case may be) to be realized.
Minimum Alternative Tax (MAT) credit assets is recognized in the
balance sheet where it is likely that it will be adjusted against the
discharge of tax liability in future under the Income Tax Act, 1961.
(iv) Provision, 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 an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
notes. Contingent assets are neither recognized nor disclosed in the
financial statements.
(iv) Earning per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders after tax by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period, are adjusted for events of bonus issued to existing
shareholders.
For the purpose of calculating diluted earning per share, the net
profits or loss attributable to equity shareholders and the weighted
average number of shares outstanding are adjusted for the effects of
all dilutive potentia equity shares, if any.
(v) Cash Flow Statement
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effect of transaction of non-cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing
and financing activities are segregated.
(vi) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
(vii) Material Events
Material Events occurring after the Balance Sheet date are taken into
cognizance.
Mar 31, 2011
(i) Basis for preparation of Financial Statements
The financial statements which have been prepared under the historical
cost convention on the accrual basis of accounting, are in accordance
with the applicable requirements of the Companies Act, 1956 (the 'Act')
and comply in all material aspects with the Accounting Standards
prescribed by the Central Government, in accordance with the Companies
(Accounting Standards) Rules, 2006 as adopted consistently by the
Company, to the extent applicable.
The presentation of financial statements in conformity with GAAP
requires management of the Company to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's
best knowledge of current events and actions the Company may undertake
in future, actual results ultimately may differ from the estimates.
(ii) Revenue recognition
The Company recognizes revenue on accrual basis in accordance with
Accounting Standard 9. The Company derives its revenue from either
supply or on installation of educational products and provision of
educational services.
The revenue from sale of educational products/technology equipments is
recognized on transfer of property in goods which generally coincides
with dispatch/delivery to the customer.
Revenue from Edureach (ICT) under BOOT contract is recognized ratably
over the period of the contract/contractual obligations. Revenue from
professional development is recognized after the professional
development services have been rendered to the customer. Revenue from
online educational services (if charged) is recognized upon receipt of
subscription fee in case non-refundable otherwise ratably over the
subscription period.
Revenue from franchisee constituting one time franchisee fee
(non-refundable) is recognized upon receipt of fee from the franchisee.
The recurring revenue from franchisee is recognized on accrual basis.
The revenue from tuition fee is recorded equally over the period of
instruction.
Revenue for smart class projects is recognized under various heads,
namely: BOOT Contracts/Out right sale basis contracts/Boot business
"transferred under BOOT contracts"/Exports. Revenue from smart class
BOOT contracts is recognized ratably over the period of the
Contract/contractual obligations. Revenue from "Out right sale basis"
contracts consisting of both hardware and Knowledge Based Content,
wherein Knowledge Based Content is recognized on
licensing/delivery/grant of the same for the contract period and
technology Equipments on delivery/dispatch basis. Revenue from
"transfer of existing BOOT Contracts "is recognized on grant of "right
to use "of Knowledge Based Content.
However, a portion of the revenue earned on right to use/Licensing of
Educational content/Knowledge Based Content under "Out right Sale
basis" contracts and "BOOT Business" transferred under Boot Contracts
is treated as unearned towards future cost of updates due to economic
obligation of the Company to provide the same. The unearned revenue
will be recognized in subsequent period matching with the cost of
future updates incurred in those period.
Revenue from overseas agreements/exports is recognized when the
Educational Knowledge Based Content license is delivered & accepted.
However in case where knowledge base content is licensed for a long
term period, and is dependent on percent of revenue earned by the
licensee, the revenue is recognized on establishment of right to
receive.
Income from interest on fixed deposits is recognized using the time
proportion method, based on interest rates implicit in the transaction.
Dividends income is recognized when the right to receive payment is
established.
(iii) Expenditure
Expenses are accounted for on accrual basis and provisions are made for
all known losses and liabilities.
License Fees for educational content
In respect of licensing contracts with fixed license fee for fixed
period and a pre-defined number of sublicensing arrangements, license
fee is expensed in such a manner that cumulative amount of fee expense
at the end of each year is based on higher of the following two:
(i) Number of sub-licensing arrangements for which content has been
provided. This will be computed based on total license fee divided by
predefined number of sub licensing arrangements.
(ii) Number of years of license period already expired. This will be
computed based on total license fee divided by fixed period of
licensing contract.
In respect of contracts where license fees is paid on the basis of
period of usage, the license fees is charged in the respective periods.
In respect of contracts where license fee is paid on the basis of per
year per sub licensing arrangement, the entire cost of license for each
of the sub- licensing arrangement is expensed at the time the revenue
from sub-licensing arrangement is recognized.
(iv) Fixed assets/Depreciation & Amortization
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any costs include all expenses incurred to bring
the assets to its present location and condition for its intended use.
Fixed assets purchased for utilization and implementing the contractual
obligations under the project undertaken under Edureach (ICT), Turnkey
and Smart Class are depreciated on a straight-line basis over the
period of contractual obligation generally ranging from 3-6 years
depending upon the period of the contract.
Depreciation on other tangible fixed assets is provided at the written
down value method at the rates and in the manner prescribed in Schedule
XIV to the Companies Act, 1956. Depreciation on addition to fixed
assets is provided on pro-rata basis from the date the assets are ready
to use. Depreciation on sale/ deduction from fixed assets is provided
for upto the date of sale, deduction, discardment as the case may be.
Leasehold improvements are amortized on the straight-line basis over
the primary period of lease.
Assets costing less than Rs.5,000 are fully depreciated in the year of
purchase except in case of deployment as project assets (if any).
Capital work-in-progress comprises of capital assets which are not yet
put to use and also include outstanding advances paid to acquire fixed
assets.
Intangible Assets
An Intangible asset is recognized, where it is probable that the future
economic benefits attributable to the asset will flow to the enterprise
and where its cost can be reliably measured.
Intangible asset are stated at cost of acquisition less accumulated
amortization. Amortization on the Intangible assets is provided on
pro-rata basis on the straight-line method based on management's
estimate of useful life, i.e. 3 years for software, 4 years for
Knowledge-based content including Smart class content. Licensed
intangible assets are amortised over the period of license.
(v) Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
higher of asset's net selling price and value in use which means the
present value of future cash flows expected to arise form the
continuing use of the assets and its eventual disposal. An Impairment
loss is charged to the profit & loss account in the year in which an
asset is impaired.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
(vi) Leases
As Lessee:
Lease rentals in respect of operating lease arrangements including
assets taken on operating lease are recognized as an expense in the
Profit and Loss Account on accrual basis.
As Lessor:
Lease rental income under operating lease are recognized in the Profit
and Loss on a straight-line basis/agreed terms over the period of lease
as the case may be .
(vii) Inventories
Items of Inventories are measured at lower of cost and net realizable
value after providing for obsolescence. If any, cost of inventories
comprises of cost of purchase, freight & other expenses incurred in
bringing the inventories to their present location and condition. The
cost is determined using the weighted average method.
(viii) Investments
Long term Investments are stated at cost, less provision for other than
temporary diminution in value.
Short term investments are carried at lower of cost and fair value,
computed category-wise.
(ix) Foreign Exchange Transactions
a. Foreign exchange transactions are recorded at the exchange rates
prevailing at the date of transaction. Exchange differences arising on
the settlement of monetary items or on restatement of the Company's
monetary items at rates different from those at which they were
initially recorded during the year, or reported in previous financial
statements, other than those relating to fixed assets are recognised as
income or as expenses in the year in which they arise.
b. In translating the Financial statements of liaison offices which
are treated as integral foreign operations, the monetary assets and
liabilities are translated at the rate prevailing on the balance sheet
date; non monetary assets and liabilities are translated at the
exchange rate prevailing at the date of transaction and income and
expenses items are translated at the respective monthly average rate.
c. The Company has opted for accounting the exchange differences
arising on the reporting of long term foreign currency monetary items
in line with Companies (Accounting Standards) Amendment Rules 2009 on
Accounting Standard 11 as notified by the Central Government vide
Notification F No. 17/33/2009/CL-V dated 31st March, 2009. Accordingly,
the effect of exchange difference on foreign currency loan (including
FCCB) is accounted for by addition or deduction to the cost of the
assets so far it relates to depreciable capital asset and in other
cases by transfer to "Foreign Currency Monetary Items Translation
Difference Account"(FCMITDA) to be amortized as provided in the
aforesaid notification but not beyond March 31, 2011.
(x) Employee benefits
(a) Short Term Employee Benefits
Short term employee benefits are recognized in the period during which
the services have been rendered.
(b) Long Term Employee Benefits
(i) Defined Contribution Plan
Contributions to provident fund and ESI are deposited with the
appropriate authorities and charged to the profit and loss account on
accrual basis.
(ii) Defined Benefit Plan
Leave Encashment-The Company has provided for the liability at the year
end on account of unavailed earned leave as per the actuarial valuation
as per the Projected Unit Credit method in accordance with Accounting
Standard 15, "Employee benefits". All actuarial gains/losses are
charged to the profit and loss account in the year these arise.
Gratuity-The Company provides for retirement benefits in the form of
Gratuity. The Company's gratuity plan is a defined benefit plan. The
present value of gratuity obligation under such defined plan is
determined based on an actuarial valuation carried out by an
independent actuary using the Projected Unit Credit Method, which
recognizes each period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit separately to build
up the final obligation. The obligation is measured at the present
value of the estimated future cash flows. The discount rate used for
determining the present value of the obligation under the defined
benefit plans, is based on the market yields on Government securities
as at the valuation date having maturity periods approximating to the
terms of the related obligations. Actuarial gains and losses are
recognized immediately in the profit and loss account.
(c) Employee Stock Option Scheme
The stock options are accounted as per the accounting treatment
prescribed by the employee stock option scheme and Employee Stock
Purchase Guidelines, 1999 issued by Securities Exchange Board of India,
whereby the intrinsic value of the option being, excess of market value
of the underlying share immediately prior to the date of award over its
exercise price is recognized as deferred employee compensation with a
credit to Employee stock options outstanding account. The deferred
employee compensation is charged to profit and loss account on straight
line basis over the vesting period of the option. The balance in
employee stock option outstanding account net of any unamortized
deferred employee compensation is shown separately as part of
shareholders fund.
(xi) Miscellaneous Expenditure
Miscellaneous expenditure is written off in the profit and loss account
in the year of incurrence or commencement of business which ever is
later.
(xii) Borrowing Cost
Borrowing costs are determined in accordance with the provisions of AS
16. Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
(xiii) Provision for Tax
Tax expense for the year comprises current and deferred is included in
determining the net profit for the year.
Provision for current tax is based on the tax liabilities computed in
accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognized on timing difference
between accounting and taxable income that originates in one year and
is capable of reversal in one or more subsequent period. Deferred tax
assets and liabilities are measured using the tax rates and laws that
have been substantively enacted by the balance sheet date.
The Deferred tax assets are recognized only to the extent there is
reasonable certainty that sufficient future taxable income will be
available against which these assets can be realized in future where as
in cases of existence of carry forward of losses or unabsorbed
depreciation, deferred tax assets are recognized only if there is
virtual certainty of realization backed by convincing evidence.
Deferred tax assets are reviewed at each Balance Sheet date and are
written- down or written-up to reflect the amount that is
reasonably/virtually certain (as the case may be) to be realized.
Minimum Alternative Tax (MAT) credit assets is recognized in the
balance sheet where it is likely that it will be adjusted against the
discharge of tax liability in future under the Income Tax Act, 1961.
(xiv) Provision, 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 an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
notes. Contingent assets are neither recognized nor disclosed in the
financial statements.
(xv) Earning Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders after tax by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period, are adjusted for events of bonus issued to existing
shareholders.
For the purpose of calculating diluted earning per share, the net
profits or loss attributable to equity shareholders and the weighted
average number of shares outstanding are adjusted for the effects of
all dilutive potential equity shares, if any.
(xvi) Cash Flow Statement
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effect of transaction of non-cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities are segregated.
Mar 31, 2010
(i) Basis for preparation of Financial Statements
The financial statements which have been prepared under the historical
cost convention on the accrual basis of accounting, are in accordance
with the applicable requirements of the Companies Act, 1956 (the Act)
and comply in all material aspects with the Accounting Standards
prescribed by the Central Government, in accordance with the Companies
(Accounting Standards) Rules, 2006 as adopted consistently by the
company, to the extent applicable.
The presentation of financial statements in conformity with GAAP
requires management of the Company to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on managements
best knowledge of current events and actions the company may undertake
in future, actual results ultimately may differ from the estimates.
(ii) Revenue recognition
The Company recognizes revenue on accrual basis in accordance with
Accounting Standard 9. The Company derives its revenue from either
supply or on installation of educational products and provision of
educational services.
The revenue from sale of educational products/ technology equipments is
recognized on transfer of property in goods which generally coincides
with dispatch/ delivery to the customer.
Revenue from Edureach (ICT) under BOOT contract is recognized ratably
over the period of the contract/contractual obligations. Revenue from
professional development is recognized after the professional
development services have been rendered to the customer. Revenue from
online educational services (if charged) is recognized upon receipt of
subscription fee in case non-refundable otherwise ratably over the
subscription period.
Revenue from franchisee constituting one time franchisee fee
(non-refundable) is recognized upon receipt of fee from the franchisee.
The recurring revenue from franchisee is recognized on accrual basis.
The revenue from tuition fee is recorded equally over the period of
instruction.
Revenue for smart class projects is recognized under various heads,
namely: BOOT Contracts / Out right sale basis contracts / Boot business
Ãtransferred under BOOT contractsÃ/ Exports. Revenue from smart class
BOOT contracts is recognized ratably over the period of the Contract/
contractual obligations. Revenue from ÃOut right sale basisà contracts
consisting of both hardware and knowledge Based content, wherein
knowledge Based content is recognized on licensing /delivery / grant of
the same for the contract period and technology Equipments on
delivery/dispatch basis. Revenue from Ãtransfer of existing BOOT
Contracts Ãis recognized on grant of Ãright to use Ãof Knowledge based
content.
However , a portion of the revenue earned on right to use/licensing of
educational content/ Knowledge Based content under ÃOut right Sale
basisà contracts and ÃBOOT Business Ãtransferred under Boot Contracts
is treated as unearned towards future cost of updates due to economic
obligation of the company to provide the same . The unearned revenue
will be recognized in subsequent period matching with the cost of
future updates incurred in those period.
Revenue from overseas agreements / exports is recognized when the
Educational knowledge Based content license is delivered & accepted.
However in case
where knowledge base content is licensed for a long term period, and is
dependent on percent of revenue earned by the licensee, the revenue is
recognized on establishment of right to receive.
Income from interest on fixed deposits is recognized using the time
proportion method, based on interest rates implicit in the transaction.
Dividends income is recognized when the right to receive payment is
established.
(iii) Expenditure
Expenses are accounted for on accrual basis and provisions are made for
all known losses and liabilities.
License Fees for educational content
In respect of licensing contracts with fixed license fee for fixed
period and a pre-defined number of sublicensing arrangements, license
fee is expensed in such a manner that cumulative amount of fee expense
at the end of each year is based on higher of the following two:
(i) Number of sub Ãlicensing arrangements for which content has been
provided. This will be computed based on total license fee divided by
predefined number of sub licensing arrangements.
(ii) Number of years of license period already expired. This will be
computed based on total license fee divided by fixed period of
licensing contract.
(iii) In respect of contracts where License fees is paid on the basis
of period of usage, the license fees is charged in the respective
periods.
In respect of contracts where license fee is paid on the basis of per
year per sub licensing arrangement, the entire cost of license for each
of the sub- licensing arrangement is expensed at the time the revenue
from sub licensing arrangement is recognized.
(iv) Fixed assets/ Depreciation & Amortization
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. Costs include all expenses incurred to bring
the assets to its present location and condition for its intended use.
Fixed assets purchased for utilization and implementing the contractual
obligations under the project undertaken under Edureach (ICT), Turnkey
and Smart Class are depreciated on a straight-line basis over the
period of contractual obligation generally ranging from 3-6 years
depending upon the period of the contract.
Depreciation on other tangible fixed assets is provided at the written
down value method at the rates and in the manner prescribed in Schedule
XIV to the Companies Act, 1956. Depreciation on addition to fixed
assets is provided on pro-rata basis from the date the assets are put
to use. Depreciation on sale / deduction from fixed assets is provided
for upto the date of sale, deduction, discardment as the case may be.
Leasehold improvements are amortized on the straight-line basis over
the primary period of lease.
Assets costing less than Rs. 5,000 are fully depreciated in the year of
purchase except in case of deployment as project assets (if any)
Capital work-in-progress comprises of capital assets which are not yet
put to use and also include outstanding advances paid to acquire fixed
assets.
Intangible Assets
An Intangible asset is recognized, where it is probable that the future
economic benefits attributable to the asset will flow to the enterprise
and where it its cost can be reliably measured.
Intangible asset are stated at cost of acquisition less accumulated
amortization. Amortization on the Intangible assets is provided on
pro-rata basis on the straight-line method based on managements
estimate of useful life, i.e. 3 years for software, 4 years for
Knowledge-based content including Smart class content. Licensed
intangible assets are amortised over the period of license.
(v) Impairment of Assets
All assets other than inventories, financial assets including
investments and deferred tax asset, are reviewed for impairment, to
determine any events or changes in circumstances which might indicate
that the carrying amount may not be recoverable as per the provisions
of applicable Accounting standards. If such indication exists the
recoverable amount of the asset is estimated in order to determine the
extent of impairment loss. The recoverable amount is higher of assets
net selling price and value in use which means the present value of
future cash flows expected to arise form the continuing use of the
asset and its eventual disposal. An Impairment loss is charged to the
profit & loss account in the year in which an asset is impaired.
Reversal of impairment loss is recognized immediately as income in the
Profit & loss account.
(vi) Leases
Lease rentals in respect of operating lease arrangements including
assets taken on operating lease are recognized as an expense in the
profit and loss account on accrual basis.
Lease rentals under operating lease are recognized in the Profit and
Loss on a straight Ãline basis/ agreed terms over the period of lease
as the case may be
(vii) Inventories
Items of Inventories are measured at lower of cost and net realizable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, freight & other expenses incurred in
bringing the inventories to their present location and condition. The
cost is determined using the weighted average method.
(viii) Investments
Long term Investments are stated at cost, less provision for other than
temporary diminution in value.
Short term investments are carried at lower of cost and quoted value/
fair value, computed category-wise.
(ix) Foreign exchange transactions
a. Foreign exchange transactions are recorded at the exchange rates
prevailing at the date of transaction. Receivables and payables at the
year end are translated at the exchange rate prevailing on the balance
sheet date and differences coming there on are recognized in profit and
loss account.
b. Monetary items denominated in foreign currencies at the year-end
are re-stated at year-end rates.
c. Realized gains and losses on foreign exchange transactions during
the year, other than those relating to fixed assets, are recognized in
the profit and loss account.
d. Foreign currency assets and liabilities are translated at the
year-end rates and resultant gains/ losses on foreign exchange
translations other than those relating to fixed assets are recognized
in the profit and loss account.
e. In translating the Financial statements of liaison offices which
are treated as integral foreign operations, the monetary assets and
liabilities are translated at the rate prevailing on the balance sheet
date; non monetary assets and liabilities are translated at the
exchange rate prevailing at the date of transaction and income and
expenses items are translated at the respective monthly average rate.
f. The Company has opted for accounting the exchange differences
arising on the reporting of long term foreign currency monetary items
in line with Companies (Accounting Standards) Amendment Rules 2009 on
Accounting Standard 11 as notified by the Central Government vide
Notification F No. 17/33/2009/CL-V dated 31st March, 2009.
Accordingly, the effect of exchange difference on foreign currency loan
(including FCCB) is accounted for by addition or deduction to the cost
of the assets so far it relates to depreciable capital asset and in
other cases by transfer to ÃForeign Currency Monetary Items Translation
Difference AccountÃ(FCMITDA) to be amortized as provided in the
aforesaid notification but not beyond March 31, 2011. Exchange
differences recognized in the profit and loss account in the previous
year ending 31 March, 2010 relating to said long term liabilities in
foreign currency has been adjusted against opening general reserves as
provided in the aforesaid notification.
(x) Employee benefits
(a) Short term employee benefits
Short term employee benefits are recognized in the period during which
the services have been rendered.
(b) Long term employee benefits
(i) Defined contribution plan
Contributions to provident fund are deposited with the appropriate
authorities and charged to the profit and loss account on accrual
basis.
(ii) Defined benefit plan
Leave encashment- The Company has provided for the liability at the
year end on account of unavailed earned leave as per the actuarial
valuation as per the Projected Unit Credit method in accordance with
Accounting Standard 15(Revised), ÃEmployee benefitsÃ. All actuarial
gains/losses are charged to the profit and loss account in the year
these arise.
Gratuity- The Company provides for the Gratuity based on actuarial
valuation at the end of the year as per the Projected Unit Credit
method in accordance with Accounting Standard 15(Revised), ÃEmployee
benefitsÃ. All actuarial gains/losses are charged to the profit and
loss account in the year these arise.
(c) Employee stock option scheme
The stock options are accounted as per the accounting treatment
prescribed by the employee stock option scheme and Employee Stock
Purchase Guidelines, 1999 issued by Securities Exchange Board of India,
whereby the intrinsic value of the option being, excess of market value
of the underlying share immediately prior to the date of award over its
exercise price is recognized as deferred employee compensation with a
credit to Employee stock options outstanding account. The deferred
employee compensation is charged to profit and loss account on straight
line basis over the vesting period of the option. The balance in
employee stock option outstanding account net of any unamortized
deferred employee compensation is shown separately as part of
shareholders fund.
(xi) Miscellaneous expenditure
Miscellaneous expenditure is written off in the profit and loss account
in the year of incurrence or commencement of business which ever is
later.
(xii) Borrowing cost
Borrowing costs are determined in accordance with the provisions of AS
16. Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
(xiii) Provision for tax
Tax expense for the year comprises current and deferred is included in
determining the net profit for the year.
Provision for current tax is based on the tax liabilities computed in
accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognized on timing Difference
between accounting and taxable income that originates in one year and
are capable of reversal in one or more subsequent period. Deferred tax
assets and liabilities are measured using the tax rates and laws that
are enacted or substantively enacted by the balance sheet date.
The deferred tax asset is recognized subject to principle of prudence
and conservatism and carried forward only to the extent that there is a
virtual certainty that sufficient future taxable income will be
available against which such deferred tax asset will be realized.
(xiv) Provision, 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 an outflow of resources. Contingent
Liabilities are not recognized but are disclosed in the notes.
Contingent Assets are neither recognized nor disclosed in the financial
statements.
(xv) Earning per share
Basic Earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders after tax (and
including post tax effect of any extra-ordinary item) by the weighted
average number of equity shares outstanding during the year. The
weighted average number of equity shares outstanding during the period,
are adjusted for events of bonus issue to existing shareholders.
For the purpose of calculating diluted earning per share, the net
profits or loss attributable to equity shareholders and the weighted
average number of shares outstanding are adjusted for the effects of
all dilutive potential equity shares, if any.
(xvi) Cash Flow Statement
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effect of transaction of non-cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities are segregated.
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