Dec 31, 2018
1 Significant Accounting Policies
1.1 Statement of compliance
The financial statements comply in all material aspects with Indian Accounting standards (referred to as âInd ASâ) notified under Section 133 of the Companies Act, 2013 (the âActâ) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
1.2 Basis of Preparation
These financial statements are prepared on historical cost basis, except for certain financial instruments which are measured at fair values as explained in the accounting policies below.
1.3 Critical accounting judgements and key source of estimation uncertainty
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenue, expense, assets and liabilities and disclosures relating to contingent liabilities on the date of the financial statements. Actual results could differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates is recognised in the period in which the estimate is revised and in any future period affected.
Key source of estimation uncertainty which may cause material adjustments:
1.3.1 Revenue recognition
The Company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the Company to estimate the efforts expended to date as a proportion of the total efforts to be expended. Efforts expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date and can be reliably estimated.
1.3.2 Income-tax
The major tax jurisdictions for the Company is India though the Company also files tax returns in overseas jurisdiction. Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments and deferred tax on unrecognised tax benefits. Tax assessment can involve complex issues, which can only be resolved over extended time periods.
1.3.3 Others
Others areas involving estimates relates to actuarial assumptions used to determine the carrying amount of defined benefit obligation, estimation of fair value of share based payment transactions and useful lives of Property, Plant and Equipment.
1.4 Revenue Recognition
Revenue is measured at fair value of consideration received or receivable.
a) Revenues from software solutions and consulting services are recognized based on specified terms of contract.
In case of contract on time and material basis, revenue is recognised when the related services are performed.
In case of fixed price contracts, revenue is recognized using percentage of completion method. The company uses the efforts expended to date as a proportion to the total efforts to be expended as a basis to measure the degree of completion. The cumulative impact of any revision in estimates of the percentage of work completed is reflected in the year in which the change becomes known. Provisions for estimated losses on such engagements are made during the year in which a loss becomes probable and can be reasonably estimated.
Amount received or billed in advance of services performed are recorded as unearned revenue.
Unbilled services represents revenue recognized based on services performed in advance of billing in accordance with contract terms.
Revenue from business process management arises from unit-priced contracts, time based contracts and cost based projects. Such revenue is recognised as services are performed. It is billed in accordance with the specific terms of the contract with the client.
b) Revenue is reported net of discount and indirect taxes.
c) Dividend income is recognised when the shareholders right to receive payment has been established.
d) Interest Income is recognised using effective interest rate method.
1.5 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks anc rewards of ownership to the lessee. All other leases are classified as operating leases.
a) Finance Lease
Assets taken on finance lease are capitalised at lower of present value of the minimum lease payments and the fair value of the leased asset determined at the inception of the lease and liability is recognised for an equivalent amount. Lease payments are apportioned between finance charge and reduction in outstanding liability so as to achieve a constant periodic rate of interest on the remaining balance of liability.
b) Operating Leases
Assets taken on lease under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognised as expenses on straight line basis over the lease term unless the payments to the lessor are structured to increase in line with expected general inflation.
1.6 (a) Functional and presentation currency
These financial statements are presented in millions of Indian Rupees O, the currency of the primary economic environment in which the Company operates.
(b) Foreign currency
Transactions in foreign currency are recorded at the original rate of exchange in force at the time transactions are effected. Monetary items denominated in foreign currency are restated using the exchange rate prevailing on the date of Balance Sheet. The resulting exchange difference on such restatement and settlement is recognized in the profit or loss, except exchange differences on transactions entered into in order to hedge certain foreign currency risk.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the Balance Sheet date. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
1.7 Borrowing Cost
Borrowing cost directly attributable to the acquisition or construction of qualifying assets is capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised in the profit or loss.
1.8 Employee Benefits
a) Post-employment benefits and other long term benefit plan
Payments to defined contribution retirement schemes are recognised as an expense when the employees have rendered service entitling them to such benefits.
For defined benefit schemes and other long term benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at balance sheet date. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest) is reflected immediately in the balance sheet with a charge or credit recognized in the other comprehensive income in respect of defined benefit schmes and in the statement of profit and loss in respect of other long term benefit plans in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in the profit or loss in the period of plan amendment. The retirement benefit liability recognized in the statement of financial position represents the present value of the defined benefit obligation as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the lower of the amount determined as the defined benefit liability and the present value of available refunds and / or reduction in future contributions to the scheme.
The service cost (including past service cost as well as gains and losses on settlement and curtailments) and net interest expenses or income is recognised as employee benefits expense in the profit or loss.
b) Short term employee benefit
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees is recognized as an expense during the period when the employee renders those services. These benefits include compensated absences such as leave expected to be availed within a year, statutory employee profit sharing and bonus payable.
1.9 Share based compensation
Equity settled share based payments to employees and directors are measured at the fair value of the equity instruments at the grant date which is recognised over the vesting period based on periodic estimate of the equity instruments that will eventually vest, with the corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest with the impact of revision recognised in the profit or loss such that the cumulative expense reflects the revised estimates, with a corresponding adjustment to the share option outstanding account.
1.10 Taxes on Income
Income tax expense comprises of current tax and deferred tax. Current and deferred tax are recognised in net income, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
Current tax is measured at the amount expected to be paid or recovered from the domestic and overseas tax authorities using enacted or substantively enacted tax rates after taking credit for tax relief available for export operations in Special Economic Zone (SEZ).
Deferred taxes are recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profits, except when the deferred income tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither the accounting nor taxable profit at the time of the transaction.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be utilised.
Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
For operations under tax holiday scheme, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
Advance taxes and provisions for current income taxes as well as deferred tax assets and liabilities are presented in the Balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the entity intends to settle the asset and liability on a net basis.
1.11 Property, plant and equipment (PPE)
PPE are stated at cost of acquisition less accumulated depreciation (other than freehold land) and impairment loss, if any.
Depreciation
Depreciation is provided on straight-line method based on the estimated useful lives of the assets as determined by the management based on the expert technical advice/ stipulations of schedule II to the Act.
Improvement to Leasehold Premises are amortised over the lease period or useful life of an asset whichever is lesser.
Depreciation methods, estimated useful lives and residual values are reviewed at the end of each year and adjusted prospectively where appropriate.
An item of PPE is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on derecognition is determined as the difference between the sales proceeds and the carrying amount of the assets and is recognised in profit or loss.
1.12 Intangible assets
Intangible assets with finite useful lives that are acquired are initially recognised at cost in case of separately acquired assets and at fair value in case of acquisition in business combination. Subsequent to initial recognition, intangible assets are reported at cost less accumulated amortisation and impairment loss, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. Software licenses are amortised over three years.
Amortisation method, estimated useful lives and residual values are reviewed at the end of each year and adjusted prospectively where appropriate.
An intangible asset is derecognised on disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on derecognition is determined as the difference between the sales proceeds and the carrying amount of the assets and is recognised in profit or loss.
1.13 Impairment
a) Financial assets (other than at fair value)
The company assesses at each balance sheet date, whether a financial asset or a group of financial assets is impaired. Ind AS 109, âFinancial Instruments- requires expected credit losses to be measured through a loss allowance. The company recognizes lifetime expected losses for all contract assets and / or all trade receivables. For all other financial assets except for investments, expected credit losses are measured at an amount equal to the 12-month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. In case of Investments, the Company periodically reviews its carrying value of investments for indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
b) Non-financial assets Tangible and Intangible assets
At the end of each reporting period, the company assesses whether there is an indication that an asset may be impaired. An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. When it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs or allocated. Impairment loss is charged to the profit or loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
1.14 Provisions
Provisions are recognised when the company has present obligation (legal or constructive) as a result of a past event for which reliable estimate can be made of the amount of obligation and it is probable that the company will be required to settle the obligation. When a provision is measured using cash flows estimated to settle the present obligation its carrying amount is the present value of those cash flows; unless the effect of time value of money is immaterial.
1.15 Non derivative financial instruments
Financial assets and liabilities are recognised when the company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability.
A Financial assets and financial liabilities â subsequent measurement
(i) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held with a business model whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held with a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Financial assets at fair value through profit or loss
Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit and loss are immediately recognised in statement of profit and loss.
(iv) Investment in subsidiaries
Investment in subsidiaries is carried at cost less impairment, if any.
(v) Cash and cash equivalents
The company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
(vi) Financial liabilities
Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
B Share capital Equity shares
Incremental costs directly attributable to the issue or re-purchase of equity shares, net of any tax effects, are recognised as a deduction from equity.
1.16 Derivative financial instruments and hedge accounting
The company enters into foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. These instruments are initially measured at fair value and are re-measured at subsequent reporting dates. The company at the inception documents and designates these instruments as cash flow hedges. Accordingly, the company records the cumulative gain or loss arising from change in fair values on effective cash flow hedges in the CFHR within the other comprehensive income until the forecasted transaction occurs. Gain or loss arising from change in fair values of component excluded from the assessment of hedge effectiveness as well as the ineffective portion of the designated hedges and derivative instruments that do not qualify for hedge accounting are recognized immediately in the profit or loss.
Hedge accounting is discontinued when the hedging instrument expires, terminated or exercised without replacement or rollover as part of the hedging strategy or when the hedge no longer meets the criteria for hedge accounting, the net cumulative gain or loss recognised in hedging reserve at that time remains in equity and is recognised in profit or loss when the forecasted transaction affects profit or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in hedging reserve is immediately transferred to the profit or loss for the year and is grouped under exchange rate difference.
1.17 Earnings per share (-EPS-)
Basic EPS are computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the year. Diluted EPS is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic EPS and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
Dec 31, 2016
1A Background
Hexaware Technologies Limited ("Hexaware" or the "Company") is a public limited company incorporated in India . The Company is engaged in information technology consulting, software development and business process management. Hexaware provides multiple service offerings to its clients across various industries comprising travel, transportation, hospitality, logistics, banking, financial services, insurance, healthcare, manufacturing, consumer and services. The various service offerings comprise application development and management, enterprise package solutions, infrastructure management, business intelligence and analytics, business process, digital assurance and testing.
B Significant Accounting Policies
i) Basis of Preparation of Financial Statements These financial statements are prepared in accordance with generally accepted accounting principles applicable in India under the historical cost convention except for certain financial instruments which are measured at fair value. These financial statements comply in all material aspects with the applicable provisions of the Companies Act, 2013 (the "Act").
ii) Use of Estimates
The preparation of the financial statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosures relating to contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Differences between actual results and estimates are recognized in the year in which the results are known / materialized. Example of such estimates include provision for doubtful debts, employee benefits, share based compensation, provision for income taxes, accounting for contract costs expected to be incurred, the useful lives of depreciable fixed assets and provisions for impairment.
iii) Revenue Recognition
Revenues from software solutions and consulting services are recognized on specified terms of contract. In case of contract on time and material basis revenue is recognized when the related services are performed and in case of fixed price contracts revenue is recognized using percentage of completion method of accounting. The cumulative impact of any revision in estimates of the percentage of work completed is reflected in the year in which the change becomes known. Provisions for estimated losses on such engagements are made during the year in which a loss becomes probable and can be reasonably estimated. Amount received or billed in advance of services performed are recorded as unearned revenue. Unbilled services included in other current assets represents amount recognized based on services performed in advance of billing in accordance with contract terms. Revenue is reported net of discount / incentive.
Revenue from business process management arises from unit - priced contracts, time based contracts, cost based projects and engagement services. Such revenue is recognized on completion of the related services and is billed in accordance with the specific terms of the contract with the client.
Dividend income is recognized when right to receive is established.
Interest Income is recognized on time proportion basis.
Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sales price and the then carrying value of the investment.
iv) Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated depreciation / amortization and impairment loss, if any. Cost includes all expenses incurred for acquisition of assets to bring these to working conditions for intended use.
v) Depreciation and Amortization
Depreciation and amortization on fixed assets is provided on straight-line method based on the estimated useful lives of the assets as determined by the management based on the expert technical advice/stipulations of schedule II to the Act.
vi) Investments
Long term investments are stated at cost. Provision is made for diminution in the value of long term investments, if such diminution is other than temporary. Current investments are carried at cost or fair value, whichever is lower.
vii) Foreign Currency Transaction / Translation Transactions in foreign currency are recorded at the original rate of exchange in force at the time transactions are affected. Exchange differences arising on settlement of foreign currency transactions are recognized in the Statement of Profit and Loss. Monetary items denominated in foreign currency are restated using the exchange rate prevailing at the date of the Balance Sheet and the resulting net exchange difference is recognized in the Statement of Profit and Loss.
In respect of forward contracts entered into to hedge foreign currency exposure in respect of recognized monetary items, the premium or discount on such contracts is amortized over the life of the contract. The exchange difference measured by the change in exchange rate between the inception dates of the contract / last reporting date as the case may be and the balance sheet date is recognized in the Statement of Profit and Loss. Any gain / loss on cancellation of such forward contracts are recognized as income / expense of the year. Foreign Branches
In respect of the foreign branches, being integral foreign operations, all revenues and expenses during the year are reported at average rate prevailing during the year. Monetary assets and liabilities are restated at the year-end exchange rate. Non-monetary assets and liabilities are stated at the rate prevailing on the date of the transaction. Balance in ''head officeâ account whether debit or credit is translated at the amount of the balance in the ''foreign branchâ account in the books of the head office. Net gain / loss on foreign currency translation is recognized in the Statement of Profit and Loss.
viii) Derivative instruments and hedge accounting The Company enters into foreign currency forward contracts and currency options contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates these instruments as cash flow hedges applying the recognition and measurement principles set out in the
Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measurement". These instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Accordingly, the Company records the cumulative gain or loss on effective cash flow hedges in the Hedging Reserve account until the forecasted transaction materializes. Gain or loss on ineffective cash flow hedges is recognized in the Statement of Profit and Loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in hedging reserve is transferred to the Statement of Profit and Loss.
ix) Employee Benefits
i. Post-employment benefits and other long term benefit plans:
Payments to defined contribution schemes are expensed as incurred. For defined benefit schemes and other long term benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight line basis over the average period until the benefits become vested. The retirement benefit liability recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the lower of the amount determined as the defined benefit liability and the present value of available refunds and /or reduction in future contributions to the scheme.
ii. Short term employee benefits:
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees is recognized as an expense during the year when the employee renders those services. These benefits include compensated absences such as leave expected to be availed within a year and bonus payable.
x) Borrowing costs
Borrowing costs 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 a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue.
xi) Leases
i. Finance Lease
Assets taken on finance lease are accounted for as fixed assets at lower of present value of the minimum lease payments and the fair value and a liability is recognized for an equivalent amount. Lease payments are apportioned between finance charge and reduction in outstanding liability.
ii. Operating Leases
Assets taken on lease under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognized as expenses on straight line basis over the lease term.
xii) Taxes on Income
Income Taxes are accounted for in accordance with Accounting Standard (AS 22) on "Accounting for Taxes on Income". Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid or recovered from the tax authorities using the applicable tax rates. Deferred taxes are recognized for future tax consequence attributable to timing difference between taxable income and accounting income, measured at relevant enacted / substantively enacted tax rates. In the event of unabsorbed depreciation and carry forward losses, deferred tax assets are recognized only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available to realize such assets. In other situations, deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realize these assets.
Minimum Alternate Tax (MAT) credit entitlement is recognized in accordance with the Guidance Note on "Accounting for credit available in respect of Minimum Alternate Tax under the Income Tax Act, 1961" issued by The Institute of Chartered Accountants of India (ICAI). MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will be able to adjust against the normal income tax during the specified period. At each balance sheet date, the Company reassesses MAT credit assets and adjusts the same, where required.
Advance taxes paid and provisions for current income taxes are presented net in the balance sheet if arising in the same tax jurisdiction and where the entity intends to settle the asset and liability on a net basis.
xiii) Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
xiv) Share based compensation
The compensation cost of stock options / Restricted Stock Units (RSU) granted to employees of the Company and its subsidiaries is measured using intrinsic value method for the grants made before 1st April, 2015 and for the subsequent grants the same is measured using fair value method being the recommended method of valuation by the Guidance note on Accounting for Employee Share Based Payments issued by the Institute of Chartered Accountants of India. The Compensation cost is amortized over the vesting period of the options.
xv) Provisions, Contingent Liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement are recognized when as a result of past events there is a present obligation that can be estimated reliably 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.
xvi) Cash and Cash Equivalents
Cash and cash equivalents comprise of cash, current account balances and demand deposit with banks and financial institutions.
Dec 31, 2015
1A Background
Hex aware Technologies Limited ("Hex aware" or the "Company") is a public limited company incorporated in India. The Company is engaged in information technology consulting, software development and business process management. Hex aware provides multiple service offerings to its clients across various industries comprising travel, transportation, hospitality, logistics, banking, financial services, insurance, healthcare, manufacturing and services. The various service offerings comprise application development and management, enterprise package solutions, infrastructure management, business intelligence and analytics, business process, quality assurance and independent testing.
B Significant Accounting Policies
i) Basis of Preparation of Financial Statements
These financial statements are prepared in accordance with generally accepted accounting principles applicable in India under the historical cost convention except for certain financial instruments which are measured at fair value. These financial statements comply in all material aspects with the applicable provisions of the Companies Act, 2013 (the "Act").
ii) Use of Estimates
The preparation of the financial statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosures relating to contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Differences between actual results and estimates are recognized in the period in which the results are known / materialized. Example of such estimates include provision for doubtful debts, employee benefits, provision for income taxes, accounting for contract costs expected to be incurred to complete software development, the useful lives of depreciable fixed assets and provisions for impairment.
iii) Revenue Recognition
Revenues from software solutions and consulting services are recognized on specified terms of contract. In case of contract on time and material basis revenue is recognized when the related services are performed and in case of fixed price contracts revenue is recognized using percentage of completion method of accounting. The cumulative impact of any revision in estimates of the percentage of work completed is reflected in the year in which the change becomes known. Provisions for estimated losses on such engagements are made
during the year in which a loss becomes probable and can be reasonably estimated. Amount received or billed in advance of services performed are recorded as unearned revenue. Unbilled services included in other current assets represents amount recognized based on services performed in advance of billing in accordance with contract terms. Revenue is reported net of discount / incentive.
Revenue from business process management arises from unit - priced contracts, time based contracts, cost based projects and engagement services. Such revenue is recognized on completion of the related services and is billed in accordance with the specific terms of the contract with the client.
Dividend income is recognized when right to receive is established.
Interest Income is recognized on time proportion basis.
Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sales price and the then carrying value of the investment.
iv) Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated depreciation / amortization and impairment loss, if any. Cost includes all expenses incurred for acquisition of assets to bring these to working conditions for intended use.
v) Depreciation and Amortization
Depreciation and amortization on fixed assets is provided on straight-line method based on the estimated useful lives of the assets as determined by the management based on the expert technical advice/stipulations of schedule II to the Act.
vi) Investments
Long term investments are stated at cost. Provision is made for diminution in the value of long term investments, if such diminution is other than temporary. Current investments are carried at cost or fair value, whichever is lower.
vii) Foreign Currency Transaction / Translation
Transactions in foreign currency are recorded at the original rate of exchange in force at the time transactions are effected. Exchange differences arising on settlement of foreign currency transactions are recognized in the Statement of Profit and Loss. Monetary items denominated in foreign currency are restated using the exchange rate prevailing at the date of the Balance Sheet and the resulting net exchange difference is recognized in the Statement of Profit and Loss.
In respect of forward contracts entered into to hedge foreign currency exposure in respect of recognized monetary items, the premium or discount on such contracts is amortized over the life of the contract. The exchange difference measured by the change in exchange rate between the inception dates of the contract / last reporting date as the case may be and the balance sheet date is recognized in the Statement of Profit and Loss. Any gain / loss on cancellation of such forward contracts are recognized as income / expense of the year.
Foreign Branches
In respect of the foreign branches, being integral foreign operations, all revenues and expenses during the year are reported at average rate prevailing during the year. Monetary assets and liabilities are restated at the year-end exchange rate. Non-monetary assets and liabilities are stated at the rate prevailing on the date of the transaction. Balance in ''head office'' account whether debit or credit is translated at the amount of the balance in the ''foreign branch'' account in the books of the head office. Net gain / loss on foreign currency translation is recognized in the Statement of Profit and Loss.
viii) Derivative instruments and hedge accounting
The Company enters into foreign currency forward contracts and currency options contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates these instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measurement". These instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Accordingly, the Company records the cumulative gain or loss on effective cash flow hedges in the Hedging Reserve account until the forecasted transaction materializes. Gain or loss on ineffective cash flow hedges is recognized in the Statement of Profit and Loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in hedging reserve is transferred to the Statement of Profit and Loss.
ix) Employee Benefits
i. Post-employment benefits and other long term benefit plans:
Payments to defined contribution schemes are expensed as incurred. For defined benefit schemes and other long term benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight line basis over the average period until the benefits become vested. The retirement benefit liability recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the lower of the amount determined as the defined benefit liability and the present value of available refunds and /or reduction in future contributions to the scheme.
ii. Short term employee benefits:
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees is recognized as an expense during the year when the employee renders those services. These benefits include compensated absences such as leave expected to be availed within a year and bonus payable.
x) Borrowing costs
Borrowing costs 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 a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue.
xi) Leases
i. Finance Lease
Assets taken on finance lease are accounted for as fixed assets at lower of present value of the minimum lease payments and the fair value and a liability is recognized for an equivalent amount.
Lease payments are apportioned between finance charge and reduction in outstanding liability,
ii. Operating Leases
Assets taken on lease under which all risks and rewards of ownership are effectively retained by the less or are classified as operating lease. Lease payments under operating leases are recognized as expenses on straight line basis over the lease term. Furnished and equipped premises leased out under operating lease are capitalized in the books of the Company. Lease income is recognized over the lease term on a straight line basis.
xii) Taxes on Income
Income Taxes are accounted for in accordance with Accounting Standard (AS 22) on "Accounting for Taxes on Income". Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid or recovered from the tax authorities using the applicable tax rates. Deferred taxes are recognized for future tax consequence attributable to timing difference between taxable income and accounting income, measured at relevant enacted / substantively enacted tax rates.
In the event of unabsorbed depreciation and carry forward losses, deferred tax assets are recognized only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available to realize such assets. In other situations, deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realize these assets.
Minimum Alternate Tax (MAT) credit entitlement is recognized in accordance with the Guidance Note on "Accounting for credit available in respect of Minimum Alternate Tax under the Income Tax Act, 1961" issued by The Institute of Chartered Accountants of India (ICAI). MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will be able to adjust against the normal income tax during the specified period. At each balance sheet date, the Company reassesses MAT credit assets and adjusts the same, where required.
Advance taxes paid and provisions for current income taxes are presented net in the balance sheet if arising in the same tax jurisdiction and where the entity intends to settle the asset and liability on a net basis.
xiii) Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
xiv) Share based compensation
The compensation cost of stock options / Restricted Stock Units (RSU) granted to employees of the Company and its subsidiaries is measured using intrinsic value method for the grants made before 1st April, 2015 and for the subsequent grants the same is measured using fair value method being the recommended method of valuation by the Guidance note on Accounting for Employee Share Based Payments issued by the Institute of Chartered Accountants of India. The difference between the fair value and intrinsic value is not material to the profit for the year.
xv) Provisions, Contingent Liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement are recognized when as a result of past events there is a present obligation that can be estimated reliably 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.
xvi) Cash and Cash Equivalents
Cash and cash equivalents comprise of cash, current account balances and demand deposit with banks and financial institutions.
e. Shares allotted as fully paid up by way of bonus shares during five years preceding the year end
The Company allotted 145,545,781 equity shares as fully paid up bonus shares by utilization of Securities premium account on 2nd March, 2011 pursuant to shareholder''s resolution passed in Extra Ordinary General Meeting held on 15th February, 2011.
f. Rights, preferences and restrictions attached to equity shares
The Company has one class of equity shares having a par value of '' 2 each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all liabilities, in proportion to their shareholding.
g. Shares reserved for issue under options
The Company has granted employee stock options under ESOP 2002, 2007 and 2008 schemes and restricted stock units under the ESOP 2008 and 2015 scheme. Each option entitles the holder to one equity share of '' 2 each. 9,844,513 (1,576,500) options were outstanding as on 31st December, 2015. (Refer Note no. 26)
h. Share application money pending allotment
Share application money pending allotment is Rs, Nil (Rs, 0.45 million) as at 31st December, 2015 which pertains to Nil (36,000) shares.
i. The Board of Directors, at its meeting held on 3rd February, 2016 has declared interim dividend of Rs, 2.40/- per equity share.
Dec 31, 2014
I) Basis of Preparation of Financial Statements These financial
statements are prepared in accordance with generally accepted
accounting principles applicable in India under the historical cost
convention except for certain financial instruments which are measured
at fair value. These financial statements comply with the applicable
provisions of the Companies Act, 1956/ 2013 and the accounting
standards.
ii) Use of Estimates
The preparation of the financial statements, in conformity with the
generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities and disclosures relating to contingent liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognised in the period in which the results
are known/materialised. Example of such estimates include provision for
doubtful debts, employee benefits, provision for income taxes,
accounting for contract costs expected to be incurred to complete
software development, the useful lives of depreciable fixed assets and
provisions for impairment.
iii) Revenue Recognition
Revenues from software solutions and consulting services are recognised
on specified terms of contract. In case of contract on time and
material basis revenue is recognised when the related services are
performed and in case of fixed price contracts revenue is recognised
using percentage of completion method of accounting. The cumulative
impact of any revision in estimates of the percentage of work completed
is reflected in the year in which the change becomes known. Provisions
for estimated losses on such engagements are made during the year in
which a loss becomes probable and can be reasonably estimated. Amount
received or billed in advance of services performed are recorded as
unearned revenue. Unbilled services included in other current assets
represents amount recognised based on services performed in advance of
billing in accordance with contract terms. Revenue is reported net of
discount/ incentive.
Revenue from business process management arises from unit - priced
contracts, time based contracts, cost based projects and engagement
services. Such revenue is recognised on completion of the related
services and is billed in accordance with the specific terms of the
contract with the client.
Dividend income is recognised when right to receive is established.
Interest Income is recognised on time proportion basis. Profit on sale
of investments is recorded on transfer of title from the Company and is
determined as the difference between the sales price and the then
carrying value of the investment.
iv) Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated
depreciation/amortisation and impairment loss, if any. Cost includes
all expenses incurred for acquisition of assets to bring these to
working conditions for intended use.
v) Depreciation and Amortisation
Depreciation and amortisation on fixed assets is provided on
straight-line method based on the estimated useful lives of the assets
as follows
Asset Class Estimated Useful Life
Building 61 years
Computer Systems (included
in Plant and Machinery) 3 years
Office Equipment 5 years
Electrical Fittings (included in
Plant and Machinery) 8 years
Furniture and Fixtures 8 years
Vehicles 4 years
Leasehold Land Over the lease period
Improvements to leased Over the lease period
Premises
Software 3 years
vi) Investments
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments, if such diminution is
other than temporary. Current investments are carried at cost or fair
value, whichever is lower.
vii) Foreign Currency Transaction/Translation
Transactions in foreign currency are recorded at the original rate of
exchange in force at the time transactions are effected. Exchange
differences arising on settlement of foreign currency transactions are
recognised in the Statement of Profit and Loss. Monetary items
denominated in foreign currency are restated using the exchange rate
prevailing at the date of the Balance Sheet and the resulting net
exchange difference is recognised in the Statement of Profit and Loss.
In respect of forward contracts entered into to hedge foreign currency
exposure in respect of recognized monetary items, the premium or
discount on such contracts is amortised over the life of the contract.
The exchange difference measured by the change in exchange rate between
the inception dates of the contract/ last reporting date as the case
may be and the balance sheet date is recognised in the Statement of
Profit and Loss. Any gain/loss on cancellation of such forward
contracts are recognised as income/expense of the period.
Foreign Branches
In respect of the foreign branches, being integral foreign operations,
all revenues and expenses during the year are reported at average rate
prevailing during the period. Monetary assets and liabilities are
restated at the year-end exchange rate. Non-monetary assets and
liabilities are stated at the rate prevailing on the date of the
transaction. Balance in ''head office'' account whether debit or credit
is translated at the amount of the balance in the ''foreign branch''
account in the books of the head office. Net gain/loss on foreign
currency translation is recognised in the Statement of Profit and Loss.
viii) Derivative instruments and hedge accounting
The Company enters into foreign currency forward contracts and currency
options contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions. The
Company designates these instruments as cash flow hedges applying the
recognition and measurement principles set out in the Accounting
Standard (AS) 30 "Financial Instruments: Recognition and Measurement".
These instruments are initially measured at fair value and are
re-measured at subsequent reporting dates. Accordingly, the Company
records the cumulative gain or loss on effective cash flow hedges in
the Hedging Reserve account until the forecasted transaction
materialises. Gain or loss on ineffective cash flow hedges is
recognised in the Statement of Profit and Loss. If a hedged transaction
is no longer expected to occur, the net cumulative gain or loss
recognised in hedging reserve is transferred to the Statement of Profit
and Loss.
ix) Employee Benefits
i. Post-employment benefits and other long-term benefit plans:
Payments to defined contribution schemes are expensed as incurred. For
defined benefit schemes and other long-term benefit plans, the cost of
providing benefits is determined using the Projected Unit Credit
Method, with actuarial valuations being carried out at each balance
sheet date. Actuarial gains and losses are recognised in full in the
Statement of Profit and Loss for the period in which they occur. Past
service cost is recognised immediately to the extent that the benefits
are already vested, and otherwise is amortised on a straight-line basis
over the average period until the benefits become vested. The
retirement benefit liability recognised in the balance sheet represents
the present value of the defined benefit obligation as adjusted for
unrecognized past service cost, as reduced by the fair value of scheme
assets. Any asset resulting from this calculation is limited to the
lower of the amount determined as the defined benefit liability and the
present value of available refunds and/or reduction in future
contributions to the scheme.
ii. Short-term employee benefits:
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
as an expense during the period when the employee renders those
services. These benefits include compensated absences such as leave
expected to be availed within a year and bonus payable.
x) Borrowing costs
Borrowing costs attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use or sale. All other borrowing
costs are charged to revenue.
xi) Leases
i. Finance Lease
Assets taken on finance lease are accounted for as fixed assets at
lower of present value of the minimum lease payments and the fair value
and a liability is recognised for an equivalent amount. Lease payments
are apportioned between finance charge and reduction in outstanding
liability.
ii. Operating Leases
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on straight-line basis over the lease term.
Furnished and equipped premises leased out under operating lease are
capitalised in the books of the Company. Lease income is recognised
over the lease term on a straight-line basis.
xii) Taxes on Income
Income Taxes are accounted for in accordance with Accounting Standard
(AS) 22 on "Accounting for Taxes on Income". Tax expense comprises of
current tax and deferred tax. Current tax is measured at the amount
expected to be paid or recovered from the tax authorities using the
applicable tax rates. Deferred taxes are recognised for future tax
consequence attributable to timing difference between taxable income
and accounting income, measured at relevant enacted / substantively
enacted tax rates.
In the event of unabsorbed depreciation and carry forward losses,
deferred tax assets are recognised only to the extent that there is
virtual certainty supported by convincing evidence that sufficient
future taxable income will be available to realise such assets. In
other situations, deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available to realise these assets.
Minimum Alternate Tax (MAT) credit entitlement is recognized in
accordance with the Guidance Note on "Accounting for credit available
in respect of Minimum Alternate Tax under the Income Tax Act, 1961"
issued by The Institute of Chartered Accountants of India (ICAI). MAT
credit is recognised as an asset only when and to the extent there is
convincing evidence that the Company will be able to adjust against the
normal income tax during the specified period. At each balance sheet
date, the Company reassesses MAT credit assets and adjusts the same,
where required.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance tax paid and income tax
provision arising in the same tax jurisdiction and where the entity
intends to settle the asset and liability on a net basis.
xiii) Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Statement
of Profit and Loss in the year in which an asset is identified as
impaired. The impairment loss recognised in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
xiv) Share based compensation
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. difference between the market
price of the Company''s shares on the date of grant of options and the
exercise price to be paid by the option holders. The compensation cost,
if any, is amortised over the vesting period of the options.
xv) Provisions, Contingent Liabilities and Contingent assets Provisions
involving substantial degree of estimation in measurement are
recognised when as a result of past events there is a present
obligation that can be estimated reliably and it is probable that there
will be an outflow of resources. Contingent liabilities are not
recognised, but are disclosed in the notes. Contingent assets are
neither recognised nor disclosed in the financial statements.
xvi) Cash and Cash Equivalents
Cash and cash equivalents comprise of cash, current account balances
and demand deposit with banks and financial institutions.
Dec 31, 2013
A) Basis of Preparation of Financial Statements
These financial statements are prepared in accordance with generally
accepted accounting principles applicable in India under the historical
cost convention except for certain financial instruments which are
measured at fair value. These financial statements comply with the
applicable provisions of the Companies Act, 1956/ 2013 and the
accounting standards.
b) Use of Estimates
The preparation of the financial statements, in conformity with the
generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities and disclosures relating to contingent liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognised in the period in which the results
are known / materialised. Example of such estimates include provision
for doubtful debts, employee benefits, provision for income taxes,
accounting for contract costs expected to be incurred to complete
software development, the useful lives of depreciable fixed assets and
provisions for impairment.
c) Revenue Recognition
Revenues from software solutions and consulting services are recognized
on specified terms of contract. In case of contract on time and
material basis revenue is recognised when the related services are
performed and in case of fixed price contracts revenue is recognized
using percentage of completion method of accounting. The cumulative
impact of any revision in estimates of the percentage of work completed
is reflected in the year in which the change becomes known. Provisions
for estimated losses on such engagements are made during the year in
which a loss becomes probable and can be reasonably estimated. Amount
received or billed in advance of services performed are recorded as
unearned revenue. Unbilled services included in other current assets
represents amount recognized based on services performed in advance of
billing in accordance with contract terms. Revenue is reported net of
discount / incentive.
Dividend income is recognised when right to receive is established.
Interest Income is recognised on time proportion basis.
Profit on sale of investments is recorded on transfer of title from the
Company and is determined as the difference between the sales price and
the then carrying value of the investment.
d) Fixed Assets
Fixed assets are stated at cost of acquisition less accumulated
depreciation /amortisation and impairment loss, if any. Cost includes
all expenses incurred for acquisition of assets.
f) Investments
Long term investments are stated at cost. Provision is made for
diminution in the value of long term investments, if such decline is
other than temporary. Current investments are carried at cost or fair
value, whichever is lower.
g) Foreign Currency Transaction / Translation
Transactions in foreign currency are recorded at the original rate of
exchange in force at the time transactions are affected. Exchange
differences arising on settlement of foreign currency transactions are
recognized in the Statement of Profit and Loss. Monetary items
denominated in foreign currency are restated using the exchange rate
prevailing at the date of the Balance Sheet and the resulting net
exchange difference is recognized in the Statement of Profit and Loss.
In respect of forward contracts entered into to hedge foreign currency
exposure in respect of recognized monetary items, the premium or
discount on such contracts is amortized over the life of the contract.
The exchange difference measured by the change in exchange rate between
the inception dates of the contract / last reporting date as the case
may be and the balance sheet date is recognized in the Statement of
Profit and Loss. Any gain/loss on cancellation of such forward
contracts are recognised as income/expense of the period. Foreign
Branches
In respect of the foreign branches, being integral foreign operations,
all revenues and expenses (except depreciation) during the year are
reported at average rate prevailing during the period. Monetary assets
and liabilities are restated at the year-end exchange rate.
Non-monetary assets and liabilities are stated at the rate prevailing on
the date of the transaction. Balance in "head office'' account whether
debit or credit is translated at the amount of the balance in the
"foreign branch'' account in the books of the head office. Net gain /
loss on foreign currency translation is recognized in the Statement of
Profit and Loss. h) Derivative instruments and hedge accounting
The Company enters into foreign currency forward contracts and currency
options contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions. The
Company designates these instruments as cash flow hedges applying the
recognition and measurement principles set out in the Accounting
Standard (AS) 30 "Financial Instruments: Recognition and Measurement".
These instruments are initially measured at fair value and are
re-measured at subsequent reporting dates. Accordingly, the Company
records the cumulative gain or loss on effective cash flow hedges in
the Hedging Reserve account until the forecasted transaction
materializes. Gain or loss on ineffective cash flow hedges is
recognized in the Statement of Profit and Loss. If a hedged transaction
is no longer expected to occur, the net cumulative gain or loss
recognised in hedging reserve is transferred to the Statement of Profit
and Loss for the period. i) Employee Benefits
i. Post-employment benefits and other long term benefit plans:
Payments to defined contribution retirement schemes are expensed as
incurred. For defined benefit schemes and other long term benefit
plans, the cost of providing benefits is determined using the Projected
Unit Credit Method, with actuarial valuations being carried out at
balance sheet date. Actuarial gains and losses are recognized in full
in the Statement of Profit and Loss for the period in which they occur.
Past service cost is recognized immediately to the extent that the
benefits are already vested, and otherwise is amortized on a straight
line basis over the average period until the benefits become vested.
The retirement benefit liability recognized in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost, as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to the lower of the amount determined as the defined benefit
liability and the present value of available refunds and /or reduction
in future contributions to the scheme. ii. Short term employee
benefits:
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
as an expense during the period when the employee renders those
services. These benefits include compensated absences such as leave
expected to be availed within a year and bonus payable.
j) Borrowing Cost
Borrowing cost attributable to the acquisition or construction of
qualifying assets is capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use or sale. All other borrowing
costs are charged to revenue.
k) Leases
i. Finance Lease
Assets taken on finance lease are accounted for as fixed assets at
lower of present value of the minimum lease payments and the fair value
and a liability is recognised for an equivalent amount. Lease payments
are apportioned between finance charge and reduction in outstanding
liability.
ii. Operating Leases
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as
expenses on straight line basis over the lease term.
Furnished and equipped premises leased out under operating lease are
capitalised in the books of the Company. Lease income is recognised
over the lease term on a straight line basis.
I) Taxes on Income
income Taxes are accounted for in accordance with Accounting Standard
(AS 22) on "Accounting for Taxes on Income". Tax expense comprises of
current tax and deferred tax. Current tax is measured at the amount
expected to be paid or recovered from the tax authorities using the
applicable tax rates. Deferred taxes are recognised for future tax
consequence attributable to timing difference between taxable income
and accounting income, measured at relevant enacted tax rates.
In the event of unabsorbed depreciation and carry forward losses,
deferred tax assets are recognised only to the extent that there is
virtual certainty that sufficient future taxable income will be
available to realise such assets. In other situations, deferred tax
assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available to
realise these assets.
Minimum Alternate Tax (MAT) credit entitlement is recognized in
accordance with the Guidance Note on "Accounting for credit available
in respect of Minimum Alternate Tax under the Income Tax Act, 196
Tissue by The Institute of Chartered Accountants of India (ICAI). MAT
credit is recognised as an asset only when and to the extent there is
convincing evidence that the company will be able to adjust against the
normal income tax during the specified period. At each balance sheet
date, the Company reassesses MAT credit assets and adjusts the same,
where required. Advance taxes and provisions for current income taxes
are presented in the balance sheet after off-setting advance tax paid
and income tax provision arising in the same tax jurisdiction and where
the entity intends to settle the asset and liability on a net basis.
m) Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Statement
of Profit and Loss in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
n) Share based compensation
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. difference between the market price
of the Company''s shares on the date of grant of options and the
exercise price to be paid by the option holders. The compensation cost,
if any, is amortised over the vesting period of the options.
o) Provisions, Contingent Liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement
are recognised when as a result of past events there is a present
obligation that can be estimated reliably and it is probable that there
will be an outflow of resources. Contingent liabilities are not
recognised, but are disclosed in the notes. Contingent assets are
neither recognised nor disclosed in the financial statements.
p) Cash and Cash Equivalents
Cash and cash equivalents comprise of cash, current account balances
and demand deposit with banks and financial institutions.
Dec 31, 2012
A) Basis of Preparation of Financial Statements
These financial statements are prepared in accordance with generally
accepted accounting principles applicable in India under the historical
cost convention except for certain financial instruments which are
measured at fair value. These financial statements comply with the
provisions of the Companies Act, 1956 and the applicable accounting
standards.
b) Use of Estimates
The preparation of the financial statements, in conformity with the
generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities and disclosures relating to contingent liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognised in the period in which the results
are known / materialised. Example of such estimates include provision
for doubtful debts, employee benefits, provision for income taxes,
accounting for contract costs expected to be incurred to complete
software development, the useful lives of depreciable fixed assets and
provisions for impairment.
c) Revenue Recognition
Revenues from software solutions and consulting services are recognized
on specified terms of contract. In case of contract on time and
material basis revenue is recognised when the related services are
performed and in case of fixed price contracts revenue is recognized
using percentage of completion method of accounting. The cumulative
impact of any revision in estimates of the percentage of work completed
is reflected in the year in which the change becomes known. Provisions
for estimated losses on such engagements are made during the year in
which a loss becomes probable and can be reasonably estimated. Amount
received or billed in advance of services performed are recorded as
unearned revenue. Unbilled services included in other current assets
represents amount recognized based on services performed in advance of
billing in accordance with contract terms. Revenue is reported net of
discount / incentive.
Dividend income is recognised when right to receive is established.
Interest Income is recognised on time proportion basis.
Profit on sale of investments is recorded on transfer of title from the
Company and is determined as the difference between the sales price and
the then carrying value of the investment.
d) Fixed Assets
Fixed assets stated at cost of acquisition less accumulated
depreciation / amortisation and impairment loss, if any. Cost includes
all expenses incurred for acquisition of assets.
e) Depreciation and Amortisation
Depreciation and amortisation on fixed assets is provided on
straight-line method based on the estimated useful lives of the assets
as determined by the management.
The management estimates the useful lives for various fixed assets as
follows:
f) Investments
Long term investments are stated at cost. Provision is made for
diminution in the value of long term investments, if such decline is
other than temporary. Current investments are carried at cost or fair
value, whichever is lower.
g) Foreign Currency Transaction / Translation
Transactions in foreign currency are recorded at the original rate of
exchange in force at the time transactions are effected. Exchange
differences arising on settlement of foreign currency transactions are
recognized in the Statement of Profit and Loss. Monetary items
denominated in foreign currency are restated using the exchange rate
prevailing at the date of the Balance Sheet and the resulting net
exchange difference is recognized in the Statement of Profit and Loss.
In respect of forward contracts entered into to hedge foreign currency
exposure in respect of recognized monetary items, the premium or
discount on such contracts is amortized over the life of the contract.
The exchange difference measured by the change in exchange rate between
the inception dates of the contract / last reporting date as the case
may be and the balance sheet date is recognized in the Statement of
Profit and Loss. Any gain / loss on cancellation of such forward
contracts are recognised as income / expense of the period.
Foreign Branches
In respect of the foreign branches, being integral foreign operations,
all revenues and expenses (except depreciation) during the year are
reported at average rate prevailing during the period. Monetary assets
and liabilities are restated at the year-end exchange rate.
Non-monetary assets and liabilities are stated at the rate prevailing
on the date of the transaction. Balance in ''head office'' account
whether debit or credit is translated at the amount of the balance in
the ''foreign branch'' account in the books of the head office. Net gain
/ loss on foreign currency translation is recognized in the Statement
of Profit and Loss.
h) Derivative instruments and hedge accounting
The Company enters into foreign currency forward contracts and currency
options contracts to hedge its risks associated with foreign currency
fuctuations relating to highly probable forecast transactions. The
Company designates these instruments as cash flow hedges applying the
recognition and measurement principles set out in the Accounting
Standard (AS) 30 "Financial Instruments: Recognition and Measurement".
These instruments are initially measured at fair value and are
re-measured at subsequent reporting dates. Accordingly, the Company
records the cumulative gain or loss on effective cash flow hedges in
the Hedging Reserve account until the forecasted transaction
materializes. Gain or loss on ineffective cash fow hedges is recognized
in the Statement of profit and loss. If a hedged transaction is no
longer expected to occur, the net cumulative gain or loss recognised in
hedging reserve is transfer to the Statement of Profit and Loss for the
period.
i) Employee Benefits
i. Post-employment benefits and other long term benefit plans
Payments to defined contribution retirement schemes are expensed as
incurred. For defined benefit schemes and other long term benefit
plans, the cost of providing benefits is determined using the Projected
Unit Credit Method, with actuarial valuations being carried out at
balance sheet date. Actuarial gains and losses are recognized in full
in the Statement of Profit and Loss for the period in which they occur.
Past service cost is recognized immediately to the extent that the
benefits are already vested, and otherwise is amortized on a straight
line basis over the average period until the benefits become vested.
The retirement benefit liability recognized in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost, as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to the lower of the amount determined as the defined benefit
liability and the present value of available refunds and /or reduction
in future contributions to the scheme. ii. Short term employee
benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
as an expense during the period when the employee renders those
services. These benefits include compensated absences such as leave
expected to be availed within a year and bonus payable.
j) Borrowing Cost
Borrowing cost attributable to the acquisition or construction of
qualifying assets is capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use or sale. All other borrowing
costs are charged to revenue.
k) Leases
i. Finance Lease
Assets taken on finance lease are accounted for as fixed assets at
lower of present value of the minimum lease payments and the fair value
and a liability is recognised for an equivalent amount. Lease payments
are apportioned between finance charge and reduction in outstanding
liability.
ii. Operating Leases
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on straight line basis over the lease term.
Furnished and equipped premises leased out under operating lease are
capitalised in the books of the Company. Lease income is recognised
over the lease term on a straight line basis.
l) Taxes on Income
ncome Taxes are accounted for in accordance with Accounting Standard
(AS 22) on "Accounting for Taxes on Income". Tax expense comprises of
current tax and deferred tax. Current tax is measured at the amount
expected to be paid or recovered from the tax authorities using the
applicable tax rates. Deferred taxes are recognised for future tax
consequence attributable to timing difference between taxable income
and accounting income, measured at relevant enacted tax rates.
In the event of unabsorbed depreciation and carry forward losses,
deferred tax assets are recognised only to the extent that there is
virtual certainty that sufficient future taxable income will be
available to realise such assets. In other situations, deferred tax
assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available to
realise these assets.
Minimum Alternate Tax (MAT) credit entitlement is recognized in
accordance with the Guidance Note on "Accounting for credit available
in respect of Minimum Alternate Tax under the Income Tax Act, 1961"
issued by The Institute of Chartered Accountants of India (ICAI). MAT
credit is recognised as an asset only when and to the extent there is
convincing evidence that the company will be able to adjust it against
the normal income tax during the specified period. At each balance
sheet date, the Company reassesses MAT credit assets and adjusts the
same, where required.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance tax paid and income tax
provision arising in the same tax jurisdiction and where the entity
intends to settle the asset and liability on a net basis.
m) Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Statement
of Profit and Loss in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
n) Share based compensation
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. difference between the market price
of the Company''s shares on the date of grant of options and the
exercise price to be paid by the option holders. The compensation cost,
if any, is amortised over the vesting period of the options.
o) Provisions, Contingent Liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement
are recognised when as a result of past events there is a present
obligation that can be estimated reliably and it is probable that there
will be an outflow of resources. Contingent liabilities are not
recognised, but are disclosed in the notes. Contingent assets are
neither recognised nor disclosed in the financial statements.
p) Cash and Cash Equivalents
Cash and cash equivalents comprise of cash,current account balances and
demand deposit with banks and financial institutions.
Dec 31, 2011
1. Accounting Convention and Concepts
These financial statements have been prepared under the historical cost
convention in accordance with generally accepted accounting principles
in India, the provisions of the Companies Act, 1956 and the applicable
accounting standards.
2. Use of Estimates
The preparation of the financial statements, in conformity with the
generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Differences between actual results and estimates are recognised in the
period in which the results are known/ materialised. Example of such
estimates include provision for doubtful debts, employee benefits,
provision for income taxes, accounting for contract costs expected to
be incurred to complete software development, the useful lives of
depreciable fixed assets and provisions for impairment.
3. Revenue Recognition
a) Revenues from software solutions and consulting services are
recognized on specified terms of contract in case of contract on time
basis and in case of fixed price contracts revenue is recognized using
percentage of completion method of accounting. The cumulative impact of
any revision in estimates of the percentage of work completed is
reflected in the year in which the change becomes known. Provisions for
estimated losses on such engagements are made during the year in which
a loss becomes probable and can be reasonably estimated. Amount
received or billed in advance of services performed are recorded as
unearned revenue. Unbilled services included in other current assets
represents amount recognized based on services performed in advance of
billing in accordance with contract terms.
b) Dividend income is recognised when right to receive is established.
c) Interest Income is recognised on time proportion basis.
d) Profit on sale of investments is recorded on transfer of title from
the Company and is determined as the difference between the sales price
and the then carrying value of the investment.
4. Fixed Assets
Fixed assets stated at cost of acquisition less accumulated
depreciation and impairment loss, if any. Cost includes all expenses
incurred for acquisition of assets. Intangible assets are recorded at
cost and are carried at cost less accumulated amortisation and
accumulated impairment loss, if any.
5. Depreciation and Amortisation
Depreciation and amortisation on fixed assets is provided on
straight-line method based on the estimated useful lives of the assets
as determined by the management.
The management estimates the useful lives for various fixed assets as
follows:
6. Investments
Long-term investments are stated at cost. Provision is made for
diminution in the value of long term investments, if such decline is
other than temporary. Current investments are carried at cost or fair
value, whichever is lower.
7. Foreign Currency Transaction/ Translation
Transactions in foreign currency are recorded at the original rate of
exchange in force at the time transactions are affected. Exchange
differences arising on settlement of foreign currency transactions are
recognized in the Profit and Loss Account.
Monetary items denominated in foreign currency are restated using the
exchange rate prevailing at the date of the Balance Sheet and the
resulting net exchange difference is recognized in the Profit and Loss
Account.
In respect of forward contracts entered into to hedge foreign currency
exposure in respect of recognized monetary items, the premium or
discount on such contracts is amortised over the life of the contract.
The exchange difference measured by the change in exchange rate between
the inception dates of the contract/ last reporting date as the case
may be and the balance sheet date is recognized in the profit and loss
account. Any gain/ loss on cancellation of such forward contracts is
recognised as income/ expense of the period.
Foreign Branches
In respect of the foreign branches, being integral foreign operations,
all revenues and expenses (except depreciation) during the year are
reported at average rate prevailing during the period. Monetary assets
and liabilities are restated at the yearend exchange rate.
Non-monetary assets and liabilities are stated at the rate prevailing
on the date of the transaction. Balance in 'head office' account
whether debit or credit is translated at the amount of the balance in
the 'foreign branch' account in the books of the head office. Net gain/
loss on foreign currency translation is recognized in the Profit and
Loss Account.
8. Derivative Instruments and Hedge Accounting
The Company enters into foreign currency forward contracts and currency
options contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions. The
Company designates these instruments as hedges applying the recognition
and measurement pr in cripples set out in the Accounting Standard (AS)
30 "Financial Instruments: Recognition and Measurement". Accordingly,
the Company records the gain or loss on effective cash flow hedges in
the Hedging Reserve account until the forecasted transaction
materializes. Gain or loss on ineffective cash flow hedges is
recognized in the profit and loss account. (Refer Note No. 14 of
Schedule 12B).
9. Employee Benefits
a) Post employment benefits and other long-term benefit plans:
Payments to defined contribution retirement schemes are expensed as
incurred. For defined benefit schemes and other long-term benefit
plans, (compensated absences) the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at balance sheet date. Actuarial gains and
losses are recognized in full in the profit and loss account for the
period in which they occur. Past service cost is recognized immediately
to the extent that the benefits are already vested, and otherwise is
amortised on a straight line basis over the average period until the
benefits become vested. The retirement benefit liability recognized in
the balance sheet represents the present value of the defined benefit
obligation as adjusted for unrecognized past service cost, as reduced
by the fair value of scheme assets. Any asset resulting from this
calculation is limited to the lower of the amount determined as the
defined benefit liability and the present value of available refunds
and reduction in future contributions to the scheme.
b) Short term employee benefits:
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
as an expense during the period when the employee renders those
services. These benefits include compensated absences such as leave
expected to be availed within a year and bonus payable.
10. Borrowing Cost
Borrowing cost attributable to the acquisition or construction of
qualifying assets is capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use or sale. All other borrowing
costs are charged to revenue.
11. Leases Finance Lease
Assets taken on finance lease are accounted for as fixed assets at
lower of present value of the minimum lease payments and the fair
value. Lease payments are apportioned between finance charge and
reduction in outstanding liability.
Operating Leases
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lesser are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on straight line basis.
Furnished and equipped premises leased out under operating lease are
capitalised in the books of the Company. Lease income is recognised in
Profit and Loss Account over the lease term on a straight line basis.
12. Taxes on Income
Income Taxes are accounted for in accordance with Accounting Standard
22 (AS 22) on "Accounting for Taxes on Income". Tax expense comprises
of current tax and deferred tax. Current tax is measured at the amount
expected to be paid or recovered from the tax authorities using the
applicable tax rates. Deferred taxes are recognised for future tax
consequence attributable to timing difference between taxable income
and accounting income, measured at relevant enacted tax rates and in
the case of deferred tax assets, on consideration of prudence, are
recognized and carried forward to the extent of reasonable certainty/
virtual certainty, as the case maybe.
Minimum Alternate Tax (MAT) credit entitlement is recognized in
accordance with the Guidance Note on "Accounting for credit available
in respect of Minimum Alternate Tax under the Income Tax Act, 1961"
issued by ICAI. 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. At each balance sheet
date the Company reassesses MAT credit assets, to the extent they
become reasonably certain or virtually certain of realization, as the
case may be and adjusts the same accordingly.
In the event of unabsorbed depreciation and carry forward of losses,
deferred tax assets are recognised only to the extent that there is
virtual certainty that sufficient future taxable income will be
available to realise such assets. In other situations, deferred tax
assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available to
realise these assets.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance tax paid and income tax
provision arising in the same tax jurisdiction and the entity intends
to settle the asset and liability on a net basis.
13. Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognized in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
14. Share based Compensation
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. difference between the market price
of the Company's shares on the date of grant of options and the
exercise price to be paid by the option holders. The compensation cost,
if any, is amortised over the vesting period of the options.
15. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised 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 recognised, but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the
financial statements.
Dec 31, 2010
1. Basis of preparation of financial statements
These consolidated financial statements of Hexaware Technologies
Limited ("the holding company") and its subsidiaries (together"the
Company / Group") are prepared under the historical cost convention in
accordance with generally accepted accounting principles applicable in
India, the provisions of the Companies Act, 1956 and the applicable
accounting standards, to the extent possible in the same format as that
adopted by the holding company for its separate financial statements.
The financial statements of subsidiaries used in the consolidation are
drawn upto the same reporting date as that of the holding company, viz
December 31, 2010
2. Principles of Consolidation
a) The financial statements of the holding company and its subsidiaries
have been consolidated on a line by line basis by adding together the
book value of like items of assets, liabilities, income and expenses,
after eliminating intra- group balances, intra-group transactions and
any unrealized gain or losses on balances remaining within the group in
accordance with the Accounting Standard (AS 21) "Consolidated Financial
Statements".
b) The financial statements of the holding company and its subsidiaries
have been consolidated using uniform accounting policies for like
transactions and other events in similar circumstances.
c) The excess of the cost to the holding company of its investments in
each of the subsidiaries over and above the share of equity in the
respective subsidiary, on the acquisition date, is recognized in the
financial statements as goodwill which is tested for impairment on an
annual basis.
d) Minority interest in the net assets of consolidated subsidiaries
consists of:
i) The amount of equity attributable to minorities at the date on which
investment in the subsidiary is made and
ii) the minorities share of movements in equity since the date the
parent-subsidiary relationship comes into existence
Minority interests in share of net profit/loss for the year is
identified and adjusted against the profit after tax of the Company.
Excess of loss attributable to the minority over the minority interest
in the equity of the subsidiary is absorbed by the Company
3. Use of Estimates
The preparation of the financial statements in conformity with the
generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Difference
between actual results and estimates are recognized in the period in
which the results are known/materialize.
4. Revenue Recognition
i. Revenues from software solutions and consulting services are
recognized on specified terms of contract in case of contract on time
basis and in case of fixed price contracts revenue is recognized using
percentage of completion method of accounting.The cumulative impact of
any revision in estimates of the percentage of work completed is
reflected in the year in which the change becomes known. Provisions for
estimated losses on such engagements are made during the year in which
a loss becomes probable and can be reasonably estimated. Amount
received or billed in advance of services performed are recorded as
unearned revenue. Unbilled services included in other current assets
represents amount recognized based on services performed in advance of
billing in accordance with contract terms.
ii. Revenue from business process outsourcing arises from unit - priced
contracts and engagement services. Such revenue is recognised on
completion of the related services and is billed in accordance with the
specific terms of the contract with the client. Revenue from per
incident services is based on the performance of specific criteria at
contracted rates.
iii. Dividend income is recognised when right to receive is
established.
iv. Interest Income is recognised on time proportion basis
5. Fixed Assets
Fixed assets stated at cost of acquisition less accumulated
depreciation and impairment loss, if any. Cost includes all expenses
incurred for acquisition of assets.
Intangible assets are recorded at cost and are carried at cost less
accumulated amortization and accumulated impairment cost, if any.
6. Depreciation and Amortisation
Depreciation and amortisation on fixed assets is provided on
straight-line method based on the estimated useful lives of the assets
as determined by the management.
The management estimates the useful lives for various fixed assets as
follows:
Asset Class Estimated useful Life
Buildings 61 years
Computer Systems (included in
Plant and Machinery) 3 years
Office Equipment (included in
Plant and Machinery) 5 years
Electrical Fittings (included in
Plant and Machinery) 8 years
Furniture and Fixtures 8 years
Vehicles 4 years
Leasehold Land Over the lease period
Improvement to Leasehold Premises Over the lease period
Software 3 years
7. Investments
Long term investments are stated at cost. Provision is made for
diminution in the value of long term investments, if such decline is
other than temporary. Current investments are carried at cost or fair
value, which ever is lower.
8. Foreign Currency Transaction / Translation
Transactions in foreign currency are recorded at the original rate of
exchange in force at the time transactions are effected. Exchange
differences arising on settlement of foreign currency transactions are
recognized in the Profit and Loss Account.
Monetary items denominated in foreign currency are restated using the
exchange rate prevailing at the date of the Balance Sheet and the
resulting net exchange difference is recognized in the Profit and Loss
Account.
In respect of forward contracts entered into to hedge foreign currency
exposure in respect of recognized monetary items, the premium or
discount on such contracts is amortized over the life of the contract.
The exchange difference measured by the change in exchange rate between
the inception dates of the contract / last reporting date as the case
may be and the balance sheet date is recognized in the profit and loss
account. Any gain / loss on cancellation of such forward contracts are
recognised as income / expense of the period.
Foreign Branches
In respect of the foreign branches, being integral foreign operations,
all revenues and expenses (except depreciation) during the year are
reported at average rate prevailing during the period. Monetary assets
and liabilities are restated at the year-end exchange rate.
Non-monetary assets and liabilities are stated at the rate prevailing
on the date of the transaction. Balance in head office account
whether debit or credit is translated at the amount of the balance in
the foreign branch account in the books of the head office. Net gain
/ loss on foreign currency translation are recognised in the Profit and
Loss Account.
9. Translation and Accounting of Financial Statements of Foreign
subsidiaries.
The local accounts of the subsidiaries are maintained in local currency
of the country of incorporation.The financial statements are translated
to Indian Rupees.
1. All income and expenses are translated at the average rate of
exchange prevailing during the year.
2. Assets and liabilities are translated at the closing rate on the
Balance Sheet date.
3. Share Capital and share application money are translated at
historical rate.
4. The resulting exchange differences are accumulated in currency
translation reserve.
10. Derivative instruments and hedge accounting
The Company enters into foreign currency forward contracts and currency
options contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions and loan
liabilities.The Company designates these instruments as hedges applying
the recognition and measurement principles set out in the Accounting
Standard (AS) 30 "Financial Instruments: Recognition and Measurement".
Accordingly, the Company records the gain or loss on effective cash
flow hedges in the Hedging Reserve account until the forecasted
transaction materializes. Gain or loss on ineffective cash flow hedges
is recognized in the profit and loss account. (Refer note no. 12 of
schedule 13 B).
11. Employee Benefits
a) Post employment benefits and other long term benefit plans:
Payments to defined contribution retirement schemes and other similar
funds are expensed as incurred.
For defined benefit schemes and other long term benefit plans,
(compensated absences) the cost of providing benefits is determined
using the Projected Unit Credit Method, with actuarial valuations being
carried out at balance sheet date. Actuarial gains and losses are
recognized in full in the profit and loss account for the period in
which they occur. Past service cost is recognized immediately to the
extent that the benefits are already vested, and otherwise is amortized
on a straight line basis over the average period until the benefits
become vested.The retirement benefit liability recognized in the
balance sheet represents the present value of the defined benefit
obligation as adjusted for unrecognized past service cost, as reduced
by the fair value of scheme assets. Any asset resulting from this
calculation is limited to the lower of the amount determined as the
defined benefit liability and the present value of available refunds
and reduction in future contributions to the scheme.
b) Short term employee benefits:
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
as an expense during the period when the employee renders those
services.These benefits include compensated absences such as leave
expected to be availed within a year, statutory employee profit sharing
and bonus payable.
12. Borrowing Cost
Borrowing cost attributable to the acquisition or construction of
qualifying assets is capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use or sale. All other borrowing
costs are charged to revenue.
13. Leases
Finance Lease
Assets taken on finance lease are accounted for as fixed assets at
lower of present value of the minimum lease payments and the fair
value. Lease payments are apportioned between finance charge and
reduction in outstanding liability.
Operating Leases
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on straight line basis.
Furnished and equipped premises leased out under operating lease are
capitalised in the books of the Company. Lease income is recognised in
Profit and Loss Account over the lease term on a straight line basis.
14. Taxes on Income
Income Taxes are accounted for in accordance with Accounting Standard
22 (AS 22) on "Accounting for Taxes on Income". Tax expense comprises
of current tax and deferred tax. Current tax is measured at the amount
expected to be paid or recovered from the tax authorities using the
applicable tax rates. Deferred taxes are recognised for future tax
consequence attributable to timing difference between taxable income
and accounting income, measured at relevant enacted tax rates and in
the case of deferred tax assets, on consideration of prudence, are
recognized and carried forward to the extent of reasonable certainty/
virtual certainty, as the case maybe.
Minimum Alternate Tax (MAT) credit entitlement is recognized in
accordance with the Guidance Note on "Accounting for credit available
in respect of Minimum Alternate Tax under the Income Tax Act, 1961"
issued by ICAI. 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. At each balance sheet
date the Company reassesses MAT credit assets, to the extent they
become reasonably certain or virtually certain of realization, as the
case may be and adjusts the same accordingly.
15. Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as
impaired.The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
16. Grants
Grant (not related to fixed assets) are accounted in profit and loss
account in the year of accrual / receipt when it is reasonably certain
that ultimate collections will be made.
17. Share based compensation
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. difference between the market price
/ fair value of the Companys shares on the date of grant of options
and the exercise price to be paid by the option holders. The
compensation cost, if any, is amortised uniformly over the vesting
period of the options.
18. Provisions, Contingent Liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement
are recognised 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 recognised, but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the
financial statements.
Dec 31, 2009
1. Basis of preparation of financial statements
These consolidated financial statements of Hexaware Technologies
Limited ("the holding company") and its subsidiaries (together "the
Company / Group") are prepared under the historical cost convention in
accordance with generally accepted accounting principles applicable in
India, the provisions of the Companies Act, 1956 and the applicable
accounting standards, to the extent possible in the same format as that
adopted by the holding company for its separate financial statements.
The financial statements of subsidiaries used in the consolidation are
drawn upto the same reporting date as that of the holding company, viz.
December 31,2009
2. Principles of Consolidation
a) The financial statements of the holding company and its subsidiaries
have been consolidated on a line by line basis by adding together the
book value of like items of assets, liabilities, income and expenses,
after eliminating intra- group balances, intra-group transactions and
any unrealized gain or losses on balances remaining within the group in
accordance with the Accounting Standard (AS 21) "Consolidated Financial
Statements".
b) The financial statements of the holding company and its subsidiaries
have been consolidated using uniform accounting policies for like
transactions and other events in similar circumstances.
c) The excess of the cost to the holding company of its investments in
each of the subsidiaries over and above the share of equity in the
respective subsidiary, on the acquisition date, is recognized in the
financial statements as goodwill which is tested for impairment on an
annual basis.
d) Minority interest in the net assets of consolidated subsidiaries
consists of:
i) The amount of equity attributable to minorities at the date on which
investment in the subsidiary is made and
ii) the minorities share of movements in equity since the date the
parent-subsidiary relationship comes into existence Minority interests
in share of net profit/loss for the year is identified and adjusted
against the profit after tax of the Company. Excess of loss
attributable to the minority over the minority interest in the equity
of the subsidiary is absorbed by the Company.
3. Use of Estimates
The preparation of the financial statements in conformity with the
generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Difference
between actual results and estimates are recognized in the period in
which the results are known/materialize.
4. Revenue Recognition
i) Revenues from software solutions and consulting services are
recognized on specified terms of contract in case of contract on time
basis and in case of fixed price contracts revenue is recognized using
percentage of completion method of accounting. The cumulative impact of
any revision in estimates of the percentage of work completed is
reflected in the year in which the change becomes known. Provisions for
estimated losses on such engagements are made during the year in which
a loss becomes probable and can be reasonably estimated. Amount
received or billed in advance of services performed are recorded as
unearned revenue. Unbilled services included in loans and advances
represents amount recognized based on services performed in advance of
billing in accordance with contract terms.
ii) Revenue from business process outsourcing arises from unit - priced
contracts and engagement services. Such revenue is recognised on
completion of the related services and is billed in accordance with the
specific terms of the contract with the client. Revenue from per
incident services is based on the performance of specific criteria at
contracted rates.
iii) Dividend income is recognised when right to receive is
established.
iv) Interest Income is recognised on time proportion basis.
5. Fixed Assets
Fixed assets stated at cost of acquisition less accumulated
depreciation and impairment loss, if any. Cost includes all expenses
incurred for acquisition of assets.
Intangible assets are recorded at cost and are carried at cost less
accumulated amortization and accumulated impairment cost, if any.
6. Depreciation and Amortisation
Depreciation and amortisation on fixed assets is provided on
straight-line method based on the estimated useful lives of the assets
as determined by the management.
7. Investments
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments, if such decline is
other than temporary. Current investments are carried at cost or fair
value, which ever is lower.
8. Foreign Currency Transaction /Translation
Transactions in foreign currency are recorded at the original rate of
exchange in force at the time transactions are effected. Exchange
differences arising on settlement of foreign currency transactions are
recognized in the Profit and Loss Account.
Monetary items denominated in foreign currency are restated using the
exchange rate prevailing at the date of the Balance Sheet and the
resulting net exchange difference is recognized in the Profit and Loss
Account.
In respect of forward contracts entered into to hedge foreign currency
exposure in respect of recognized monetary items, the premium or
discount on such contracts is amortized over the life of the
contract.The exchange difference measured by the change in exchange
rate between the inception dates of the contract / last reporting date
as the case may be and the balance sheet date is recognized in the
profit and loss account. Any gain / loss on cancellation of such
forward contracts are recognised as income / expense of the period.
Foreign Branches
In respect of the foreign branches, being integral foreign operations,
all revenues and expenses (except depreciation) during the year are
reported at average rate prevailing during the period. Monetary assets
and liabilities are restated at the year-end exchange rate.
Non-monetary assets and liabilities are stated at the rate prevailing
on the date of the transaction. Balance in head office account
whether debit or credit is translated at the amount of the balance in
the "foreign branch account in the books of the head office. Net gain
/ loss on foreign currency translation are recognised in the Profit and
Loss Account.
9. Translation and Accounting of Financial Statements of Foreign
subsidiaries
The local accounts of the subsidiaries are maintained in local currency
of the country of incorporation.The financial statements are translated
to Indian Rupees.
1. All income and expenses are translated at the average rate of
exchange prevailing during the year.
2. Assets and liabilities are translated at the closing rate on the
Balance Sheet date.
3. Share Capital and share application money are translated at
historical rate.
4. The resulting exchange differences are accumulated in currency
translation reserve.
10. Derivative instruments and hedge accounting
The Company enters into foreign currency forward contracts and currency
options contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions and loan
liabilities.The Company designates these instruments as hedges applying
the recognition and measurement principles set out in the Accounting
Standard (AS) 30"Financial Instruments: Recognition and Measurement".
Accordingly, the Company records the gain or loss on fair valuation of
effective cash flow hedges in the Hedging Reserve account until the
forecasted transaction materializes. Gain or loss on fair valuation of
ineffective cash flow hedges is recognized in the profit and loss
account. (Refer Note No. 12 of Schedule 13 B).
11. Employee Benefits
a) Post employment benefits and other long-term benefit plans:
Payments to defined contribution retirement schemes and other similar
funds are expensed as incurred. For defined benefit schemes and other
long-term benefit plans, (compensated absences) the cost of providing
benefits is determined using the Projected Unit Credit Method, with
actuarial valuations being carried out at balance sheet date. Actuarial
gains and losses are recognized in full in the profit and loss account
for the period in which they occur. Past service cost is recognized
immediately to the extent that the benefits are already vested, and
otherwise is amortized on a straight line basis over the average period
until the benefits become vested. The retirement benefit liability
recognized in the balance sheet represents the present value of the
defined benefit obligation as adjusted for unrecognized past service
cost, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to the lower of the amount
determined as the defined benefit liability and the present value of
available refunds and reduction in future contributions to the scheme.
b) Short-term employee benefits:
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
as an expense during the period when the employee renders those
services. These benefits include compensated absences such as leave
expected to be availed within a year, statutory employee profit sharing
and bonus payable.
12. Borrowing Cost
Borrowing cost attributable to the acquisition or construction of
qualifying assets is capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use or sale.AII other borrowing
costs are charged to revenue.
13. Leases
Finance Lease
Assets taken on finance lease are accounted for as fixed assets at
lower of present value of the minimum lease payments and the fair
value. Lease payments are apportioned between finance charge and
reduction in outstanding liability.
Operating Leases
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on straight line basis.
Furnished and equipped premises leased out under operating lease are
capitalised in the books of the Company.
Lease income is recognised in Profit and Loss Account over the lease
term on a straight line basis.
14. Taxes on Income
Income Taxes are accounted for in accordance with Accounting Standard
22 (AS 22) on "Accounting for Taxes on lncome".Tax expense comprises of
current tax, deferred tax and fringe benefits tax. Current tax is
measured at the amount expected to be paid or recovered from the tax
authorities using the applicable tax rates. Deferred taxes are
recognised for future tax consequence attributable to timing difference
between taxable income and accounting income, measured at relevant
enacted tax rates and in the case of deferred tax assets, on
consideration of prudence, are recognized and carried forward to the
extent of reasonable certainty/virtual certainty, as the case maybe.
Fringe benefits tax is recognized in accordance with the relevant
provisions of the IncomeTaxAct, 1961 and the Guidance Note on Fringe
Benefits Tax issued by The Institute of Chartered Accountants of India
(ICAI).
MinimumAlternateTax (MAT) credit entitlement is recognized in
accordance with the Guidance Note on"Accounting for credit available in
respect of MinimumAlternateTax under the IncomeTax Act, 1961" issued by
ICAI. 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. At each balance sheet date the Company
reassesses MAT credit assets, to the extent they become reasonably
certain or virtually certain of realization, as the case may be and
adjusts the same accordingly.
15. Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as
impaired.The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
16. Grants
Grant (not related to fixed assets) are accounted in profit and loss
account in the year of accrual / receipt when it is reasonably certain
that ultimate collections will be made.
17. Share based compensation
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. difference between the market
price / fair value of the Companys shares on the date of grant of
options and the exercise price to be paid by the option holders. The
compensation cost, if any, is amortised uniformly over the vesting
period of the options.
18. Provisions, Contingent Liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement
are recognised 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 recognised, but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the
financial statements.
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