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Accounting Policies of KPIT Technologies Ltd. Company

Mar 31, 2016

Company overview

KPIT Technologies Limited ("the Company") is a public company incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange and Bombay Stock Exchange. The Company''s registered office is in Pune and it has subsidiaries across geographies. Most of the revenue is generated from the export of services.

The Company provides Software Development, global IT consulting and Product Engineering solutions to its clients, predominantly in Automotive & Transportation, Manufacturing and Energy & Utilities verticals. The Company is also engaged in the production of Integrated Systems, under product engineering solutions vertical.

Basis for preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention as a going concern on accrual basis and to comply in all material aspects with the applicable accounting principles in India including the Accounting Standards specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. The Company has adopted the principles of Accounting Standard (AS 30) "Financial Instruments: Recognition and Measurement" issued by the Institute of Chartered Accountants of India (ICAI) to the extent the adoption of AS 30 does not conflict with the existing accounting standards prescribed by the Companies (Accounts) Rules, 2014 and other authoritative pronouncements. The financial statements are presented in million of Indian rupees, unless otherwise stated.

The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year.

Use of estimates

The preparation of financial statements requires the management of the Company to make judgments, estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenditure during the year. Actual results could differ from estimates. Differences between actual results and estimates are recognized in the year in which the results are known / materialized.

1.1 Revenue recognition

Revenue from software development and services, on time and material basis, is recognized based on software development, services rendered and related costs incurred based on timesheets and are billed to clients as per the contractual terms. Revenue from fixed price contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized based upon the proportionate completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Revenue from the sale of software products is recognized when the sale is completed with the passing of the ownership.

Revenue from sale of goods in the course of ordinary activities is recognised when property in the goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods and regarding its collection. The amount recognised as revenue is exclusive of excise duty, sales tax, value added taxes (VAT) and service tax, and is net of returns, trade discounts and quantity discounts.

Customer reimbursable expenses are recorded as a reduction from associated costs.

Interest income is recognized on time proportion basis.

Dividend income is recognized when the Company''s right to receive dividend is established.

1.2 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of cost of that asset. All other borrowing costs are charged to the Statement of Profit and Loss.

1.3 Current-non-current classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

a. it is expected to be realised in, or is intended for sale or consumption in, the Company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after the reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non- current financial assets. All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

a. it is expected to be settled in the Company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is due to be settled within 12 months after the reporting date; or

d. the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non- current financial liabilities. All other liabilities are classified as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. The operating cycle of the Company is less than twelve months.

1.4 Fixed assets

Tangible fixed assets:

Tangible fixed assets are carried at cost of acquisition or construction less accumulated depreciation and/ or accumulated impairment loss, if any. The cost of an item of tangible fixed asset comprises its purchase price, including import duties and other non- refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. Tangible fixed assets under construction are disclosed as capital work-in-progress.

Intangible fixed assets:

Goodwill that arises on an amalgamation or on the acquisition of a business is presented as an intangible asset. Goodwill arising from amalgamation / acquisition is measured at cost less accumulated amortisation and any accumulated impairment loss. Such goodwill is amortised over its estimated useful life or five years, whichever is shorter. Goodwill is tested for impairment periodically.

Development activities involve a plan or design for the production of new or substantially improved products or processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable borrowing costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognized in the Statement of Profit and Loss as incurred.

Non-compete fees are amortised on straight line method over the period of the agreement. The estimated useful life of intangible assets is reviewed by management at each Balance Sheet date.

Intangible fixed assets are derecognised on disposal or when no future economic benefit is expected from its use and subsequent disposal.

1.5 Depreciation and amortization :

Depreciation on tangible fixed assets is provided on the straight-line method over the useful lives of the assets. The estimated useful lives for tangible assets are as follows:

(1) For these class of assets, based on internal assessment, the useful lives as given above are believed to best represent the period over which the assets are expected to be used. Hence the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.

Leasehold land and vehicles taken on lease are amortized over the period of the lease.

Perpetual software licenses are amortized over 4 years. However, time-based software licenses are amortized over the license period. Capitalised development costs are amortized over a period of 4 to 5 years.

Improvements to leased premises are amortized over the remaining non-cancellable period of lease.

1.6 Impairment of fixed assets

The management periodically assesses, using external and internal sources, whether there is an indication that an asset may be impaired. Impairment loss is recognized when the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset''s net selling price and value in use. For the purpose of impairment testing, assets are grouped together into the smallest group of assets (cash generating unit or CGU) that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

Intangible assets which are not yet available for use are tested for impairment annually. Other fixed assets (tangible and intangible) are reviewed at each reporting date to determine if there is any indication of impairment. For assets in respect of which any such indication exists and for intangible assets mandatorily tested annually for impairment, the asset''s recoverable amount is estimated.

If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists or has decreased, the assets or CGU''s recoverable amount is estimated. For assets , the impairment loss is reversed to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Such a reversal is recognised in the Statement of Profit and Loss.

1.7 Investments

Investments that are readily realisable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long term investments which is expected to be realised within 12 months after the reporting date is also presented under ''current assets'' as "current portion of long term investments" in consonance with the current/ non-current classification.

Current investments are carried at lower of cost and fair value.

Long term Investments are stated at cost less provision for diminution, other than temporary, in the value of such investments.

Profit or loss on sale of investments is determined on the basis of weighted average carrying amount of investments disposed. Any reductions in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

1.8 Inventories

Inventories which comprise raw materials, work-in- progress, finished goods, stock-in-trade, stores and spares, and loose tools are carried at the lower of cost and net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, weighted average cost method is used. In the case of manufactured inventories and work in progress, fixed production overheads are allocated on the basis of normal capacity of production facilities.

1.9 Leases

Assets acquired under finance leases are recognized at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

Lease arrangements where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor, are classified as Operating Leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on straight line basis over the term of the lease.

1.10 Earnings per share

The Company reports its basic and diluted earnings per share in accordance with Accounting Standard - 20 Earnings per Share.

Basic earnings per share is computed by dividing the profit for the year by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit for the year by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares except where the results are anti-dilutive.

1.11 Foreign currency transactions

a. Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Monetary items are translated at the year-end rates and the exchange differences so determined and also the realised exchange differences are recognised in the Statement of Profit and Loss.

b. Derivative instruments and hedge accounting

The Company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measurement" of the Institute of Chartered Accountants of India (ICAI) to the extent the early adoption of AS 30 does not conflict with the existing accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 and other authoritative pronouncements.

The use of hedging instruments is governed by the Company''s policy approved by the Board of Directors, which provides written principles on the use of such financial derivatives consistent with the Company''s risk management strategy. The Company does not use derivative financial instruments for speculative purposes. The counter-party to the Company''s foreign currency forward contracts is generally a bank.

Hedging instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in fair value of these derivatives that are designated and effective as hedges of future cash flows are recognized directly in shareholder''s fund under Hedging Reserves and the ineffective portion, if any is recognized immediately in the Statement of Profit and Loss.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions any cumulative gain or loss on the hedging instrument recognized in shareholder''s fund is retained until the forecast transaction occurs. When a hedged transaction occurs or is no longer expected to occur, the net cumulative gain or loss recognized in shareholder''s fund is transferred to the Statement of Profit and Loss.

Forward exchange contracts outstanding at the Balance Sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognized in the Statement of Profit and Loss.

c. Translation of foreign operations

For translating the financial statements of foreign branches, these are classified into ''integral'' and ''non-integral'' foreign operations. Integral foreign operations are those which carry on their business as if they were an extension of the Company''s operations. Other foreign operations are classified as non-integral. Accordingly, the Company''s foreign operations have been classified as integral foreign operations.

The financial statements of these operations are translated into Indian Rupees as if the transactions of the foreign operation were those of the Company itself.

1.12 Employee benefits

i) Post-employment benefit plans Defined benefit plan

The Company''s gratuity scheme is a defined benefit plan. For defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with independent 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 or amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme.

Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards employee provident fund to Government administered provident fund scheme which is a defined contribution plan. The Company''s contribution is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.

Compensated absences

The employees of certain locations can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation carried out at each Balance Sheet date using the Projected Unit Credit Method.

ii) Other employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences (which cannot be carried forward) such as paid annual leave, overseas social security contributions and performance incentives.

1.13 Accounting for taxes on income

Income-tax

Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). Income-tax expense is recognised in the Statement of Profit or Loss. Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws.

Deferred tax

Deferred tax is recognised in respect of timing differences between taxable income and accounting income i.e. differences that originate in one period and are capable of reversal in one or more subsequent periods. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are reviewed as at each Balance Sheet date and written down or written-up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised.

Minimum Alternate Tax

Minimum Alternative Tax (''MAT'') under the provisions of the Income-tax Act, 1961 is recognised as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid 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 period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid convincing evidence no longer exists.

1.14 Provisions, Contingent liabilities and Contingent assets

The Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognized for -

(a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(b) Present obligations that arise from past events but are not recognized because-

1) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2) A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent assets are not recognized or disclosed in the financial statements since this may result in the recognition of income that may never be realized.

Warranty

The Company has an obligation by way of warranty to maintain the software during the period of warranty, which may vary from contract to contract. Costs associated with such sales are accrued at the time when related revenues are recorded and included in cost of service delivery. The Company estimates such cost based on historical experience and the estimates are reviewed periodically for material changes in the assumptions.

1.15 Research and development

Costs incurred during the research phase of a project are expensed when incurred. Costs incurred in the development phase are recognized as an intangible asset in accordance with policy defined in 1.4.

1.16 Employee stock option

In respect of stock options granted pursuant to the Company''s Employee Stock Option Scheme, the excess of the market price of the shares, at the date of grant of options, over the exercise price is regarded as employee compensation, and recognized on straight line basis over the period over which the employees would become unconditionally entitled to apply for the shares.


Mar 31, 2015

Basis for preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention as a going concern on the accrual basis and to comply in all material aspects with all the applicable accounting principles in India including the Accounting Standards specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. The Company has adopted the principles of Accounting Standard (AS 30) "Financial Instruments: Recognition and Measurement" issued by the Institute of Chartered Accountants of India (ICAI) to the extent the adoption of AS 30 does not conflict with the existing accounting standards prescribed by the Companies (Accounts) Rules, 2014 and other authoritative pronouncements. The financial statements are presented in Indian rupees rounded off to the nearest rupee.

The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year.

Use of estimates

The preparation of financial statements requires the management of the Company to make judgments, estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenditure during the year. Actual results could differ from estimates. Differences between actual results and estimates are recognized in the year in which the results are known / materialized.

1.1 Revenue recognition

Revenue from software development and services, on time and material basis, is recognized based on software development, services rendered and related costs incurred based on timesheets and are billed to clients as per the contractual obligations. Revenue from

fixed price contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized based upon the proportionate completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Revenue from the sale of software products is recognized when the sale is completed with the passing of the ownership.

Revenue from sale of goods in the course of ordinary activities is recognised when property in the goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods and regarding its collection. The amount recognised as revenue is exclusive of sales tax, value added taxes (VAT) and service tax, and is net of returns, trade discounts and quantity discounts.

Interest income is recognized on time proportion basis.

Dividend income is recognized when the Company's right to receive dividend is established.

1.2 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of cost of that asset. All other borrowing costs are charged to the Statement of Profit and Loss.

1.3 Current-non-current classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

a. it is expected to be realised in, or is intended for sale or consumption in, the Company's normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after the reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non- current financial assets. All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

a. it is expected to be settled in the Company's normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is due to be settled within 12 months after the reporting date; or

d. the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non- current financial liabilities. All other liabilities are classified as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. The operating cycle of the Company is less than twelve months.

1.4 Fixed assets

Tangible fixed assets:

Tangible fixed assets are carried at cost of acquisition or construction less accumulated depreciation and/ or accumulated impairment loss, if any. The cost of an item of tangible fixed asset comprises its purchase price, including import duties and other non- refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. Tangible fixed assets under construction are disclosed as capital work-in-progress.

Intangible fixed assets:

Goodwill that arises on an amalgamation or on the acquisition of a business is presented as an intangible asset. Goodwill arising from amalgamation/acquisition is measured at cost less accumulated amortisation and any accumulated impairment loss. Such goodwill is amortised over its estimated useful life or five years, whichever is shorter. Goodwill is tested for impairment periodically.

Development activities involve a plan or design for the production of new or substantially improved products or processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly

attributable to preparing the asset for its intended use, and directly attributable borrowing costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognized in the Statement of Profit and Loss as incurred.

Non-compete fees are amortised on straight line method over the period of the agreement. The estimated useful life of intangible assets is reviewed by management at each Balance Sheet date.

1.5 Depreciation and amortization :

Depreciation on tangible fixed assets is provided on the straight-line method over the useful lives of the assets. The estimated useful lives for tangible assets are as follows:

Type of asset Useful life (Number of years)

Buildings'11 25

Plant and equipment111 4

Office equipment111 10

Owned vehicle111 5

Furniture and fixtures'11 8

(1)For these class of assets, based on internal assessment, the useful lives as given above are believed to best represent the period over which the assets are expected to be used. Hence the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.

Based on the internal evaluation by the Company, the useful life of Buildings has been reassessed from 15 years to 25 years. The impact of this change on the depreciation for the year is not expected to be material.

Leasehold land and vehicles taken on lease are amortized over the period of the lease.

Perpetual Software licenses are amortized over 4 years. However, time-based software licenses are amortized over the license period. Capitalised development costs are amortized over a period of4to5 years.

1.6 Impairment of fixed assets

The Management periodically assesses, using external and internal sources, whetherthere is an indication that an asset may be impaired. Impairment loss is recognized when the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset's net selling price and value in use. For the purpose of impairment testing, assets are grouped together into the smallest group of assets (cash generating unit or CGU) that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

Intangible assets which are not yet available for use are tested for impairment annually. Other fixed assets (tangible and intangible) are reviewed at each reporting date to determine if there is any indication of impairment. For assets in respect of which any such indication exists and for intangible assets mandatorily tested annually for impairment, the asset's recoverable amount is estimated.

If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists or has decreased, the assets or CGU's recoverable amount is estimated. For assets, the impairment loss is reversed to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Such a reversal is recognised in the Statement of Profit and Loss.

1.7 Investments

Investments that are readily realisable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long term investments which is expected to be realised within 12 months after the reporting date is also presented under 'current assets' as "current portion of long term investments" in consonance with the current/non- current classification.

Current investments are carried at lower of cost and fair value.

Long term Investments are stated at cost less provision for diminution, other than temporary, in the value of such investments.

Profit or loss on sale of investments is determined on the basis of weighted average carrying amount of investments disposed. Any reductions in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

1.8 Inventories

Inventories which comprise raw materials, work-in- progress, finished goods, stock-in-trade, stores and spares, and loose tools are carried at the lower of cost and net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, weighted average cost method is used. In the case of manufactured inventories and work in progress, fixed production overheads are allocated on the basis of normal capacity of production facilities.

1.9 Leases

Assets acquired under finance leases are recognized at the lower of the fair value of the leased assets

at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance ofthe liability.

Lease arrangements where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor, are classified as Operating Leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on straight line basis over the term of the lease.

1.10 Earnings per share

The Company reports its basic and diluted earnings per share in accordance with Accounting Standard - 20 Earnings per Share.

Basic earnings per share is computed by dividing the profit for the year by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit for the year by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares except where the results are anti-dilutive.

1.11 Foreign currency transactions

a. Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Monetary items are translated at the year-end rates and the exchange differences so determined as also the realised exchange differences are recognised in the Statement of Profit and Loss.

b. Derivative instruments and hedge accounting

The Company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measurement" ofthe Institute of Chartered Accountants of India (ICAI) to the extent the early adoption of AS 30 does not conflict with the existing accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 and other authoritative pronouncements.

The use of hedging instruments is governed by the Company's policy approved by the Board of Directors, which provides written principles on the use of such financial derivatives consistent with the Company's risk management strategy.

The Company does not use derivative financial instruments for speculative purposes. The counter-party to the Company's foreign currency forward contracts is generally a bank.

Hedging instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in fair value of these derivatives that are designated and effective as hedges of future cash flows are recognized directly in shareholder's fund under Hedging Reserves and the ineffective portion, if any is recognized immediately in the Statement of Profit and Loss.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions any cumulative gain or loss on the hedging instrument recognized in shareholder's fund is retained until the forecast transaction occurs. When a hedged transaction occurs or is no longer expected to occur, the net cumulative gain or loss recognized in shareholder's fund is transferred to the Statement of Profit and Loss.

Forward exchange contracts outstanding at the Balance Sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognized in the Statement of Profit and Loss.

c. Translation of foreign operations

For translating the financial statements of foreign branches, these are classified into 'integral' and 'non-integral' foreign operations. Integral foreign operations are those which carry on their business as if they were an extension of the Company's operations. Other foreign operations are classified as non-integral. Accordingly, the Company's foreign operations have been classified as integral foreign operations.

The financial statements of these operations are translated into Indian Rupees as if the transactions of the foreign operation were those of the Company itself.

1.12 Employee benefits

i) Post-employment benefit plans Defined benefit plan

The Company's gratuity scheme is a defined benefit plan. For defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with independent 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 or amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme.

Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards employee provident fund to Government administered provident fund scheme which is a defined contribution plan. The Company's contribution is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.

Compensated absences

The employees of certain locations can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation carried out at each Balance Sheet date using the Projected Unit Credit Method.

ii) Other employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences (which cannot be carried forward) such as paid annual leave, overseas social security contributions and performance incentives.

1.13 Accounting for taxes on income

Income tax

Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). Income-tax expense is recognised in the Statement of Profit or Loss. Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws.

Deferred tax

Deferred tax is recognised in respect of timing differences between taxable income and accounting income i.e. differences that originate in one period and are capable of reversal in one or more subsequent periods. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised.

Minimum alternate tax

Minimum Alternative Tax ('MAT') under the provisions of the Income-tax Act, 1961 is recognised as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid 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 period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid convincing evidence no longer exists.

1.14 Provisions, Contingent liabilities and Contingent assets

The Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognized for -

(a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(b) Present obligations that arise from past events but are not recognized because-

1) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2) A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent assets are not recognized or disclosed in the financial statements since this may result in the recognition of income that may never be realized.

Warranty

The Company has an obligation by way of warranty to maintain the software during the period of warranty, which may vary from contract to contract. Costs associated with such sales are accrued at the time when related revenues are recorded and included in cost of service delivery. The Company estimates such cost based on historical experience and the estimates are reviewed periodically for material changes in the assumptions.

1.15 Research and development

Costs incurred during the research phase of a project are expensed when incurred. Costs incurred in the development phase are recognized as an intangible asset in accordance with policy defined in 1.4.

1.16 Employee stock option

In respect of stock options granted pursuant to the Company's Employee Stock Option Scheme, the excess of the market price of the shares, at the date of grant of options, over the exercise price is regarded as employee compensation, and recognized on straight line basis over the period over which the employees would become unconditionally entitled to apply for the shares.

2.2 The Company has only one class of shares referred to as equity shares having a par value of Rs. 2. Each shareholder of equity shares is entitled to one vote per share.

2.3 Number of equity shares held by each shareholder holding more than 5% shares in the Company are as follows:

2.4 5,273,643 equity shares (Previous year 8,169,543) ofRs. 2 each are reserved for issuance towards outstanding employee stock options granted (Refer note 45)

2.5 Aggregate number of equity shares allotted as fully paid up by way of bonus shares for the period of five years immediately preceding the Balance Sheet date 44,789,985 (Previous year 88,971,438)

2.6 Also refer note 28

Notes:

(i) The ECB loan is secured by pari passu charge over Company's Land and Building located at Plot No. 35,36 & 45, MIDC area of Rajiv Gandhi Infotech Park, Phase I, Hinjawadi excluding charge over R&D Centre developed in the premises. The term loan carries interest rate of 6 months LIBOR 300 basis points. The ECB loan is repayable in eight equal semi-annual installments of USD 2,500,000 each, with a moratorium of 1 year, upto November 2017.

(ii) Other term loans from bank are secured against fixed assets obtained under the loan arrangement. The loan carries interest upto 10.25 % p.a. and is repayable in equated monthly installments of INR 169,060 each upto August 2016.

(iii) Term loans from other than banks are secured by way of first and exclusive charge on fixed assets acquired under the loan arrangement. The loan is to be repaid in April 2015.

Notes:

(i) The above loan is secured by way of "First charge by way of hypothecation of Company's entire book debts, both present and future", on pari passu basis, carrying an average interest rate upto 6 months LIBOR plus 2% per annum.

(ii) The loan amount carries interest rate upto 6 months LIBOR plus 0.75% per annum.


Mar 31, 2013

Basis for preparation of financial statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (''GAAP'') under the historical cost convention on accrual basis.GAAP comprises mandatory accounting standards notified under section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended]and the other relevant provisions of Companies Act, 1956.

1.1 Revenue recognition

Revenue from software development and services on time and material basis is recognized based on software development, services rendered and related costs incurred based on timesheets and are billed to clients as per the contractual obligations. In case of fixed price contracts, revenue is recognized over the life of contract based on the milestone/s achieved as agreed upon in the contract on proportionate completion basis and where there is no uncertainty as to the measurement or collectability of the consideration. Revenue from the sale of software products is recognized when the sale is completed with the passing of the ownership.

Interest income is recognized on time proportion basis.

Dividend income is recognized when the Company''s right to receive dividend is established.

1.2 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of cost of that asset.All other borrowing costs are charged to the Statement of Profit and Loss.

1.3 Trade receivables and advances

Specific debts and advances identified as irrecoverable or doubtful are written off or provided for, respectively.

1.4 Fixed Assets

(a) Fixed Assets are stated at the cost of acquisition, less depreciation /amortization /diminution. Costs comprises of the purchase price and other attributable costs.

(b) Product development cost are recognized as fixed assets,when feasibility has been established, the Company has committed technical, financial and other resources to complete the development and it is probable that asset will generate probable future benefits.

1.5 Depreciation / Amortization / Diminution

Depreciation on tangible fixed assets is provided for on the straight-line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956 except in respect of the following assets where the rates are higher:

Perpetual Software licenses are amortized over 4 years. However, time-based software licenses are amortized over the license period.

1.6 Impairment of Fixed Assets

The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. Impairment loss is recognized when the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset''s net selling price and value in use. For the purpose of impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

1.7 Investments

Current investments are carried at lower of cost and fair value.

Long term Investments are stated at cost less provision for diminution, other than temporary, in the value of such investments.

1.8 Leases

Assets acquired under finance leases are recognized at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

Lease arrangements where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor, are classified as Operating Leases. Lease Rentals under operating leases are recognised in the Statement of Profit and Loss on straight line basis over the term of the lease.

1.9 Earnings per share

The Company reports its basic and diluted earnings per share in accordance with Accounting Standard (AS) -20 "Earnings Per Share".

Basic earnings per share is computed by dividing the profit for the period after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit for the period after tax by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares except where the results are anti-dilutive.

1.10 Foreign currency transactions

(a) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Monetary items are translated at the year-end rates and the exchange differences so determined as also the realised exchange differences are recognised in the Statement of Profit and Loss.

Premiums or discount on forward exchange contracts are amortized and recognized in the Statement of Profit and Loss over the period of the contract. Forward exchange contracts outstanding at the balance sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognized in the Statement of Profit and Loss.

(b) Derivative instruments and hedge accounting

The Company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard(AS) 30 "Financial Instruments: Recognition and Measurement" of the Institute of Chartered Accountants of India (ICAI).

The use of hedging instruments is governed by the Company''s policy approved by the Board of Directors, which provides written principles on the use of such financial derivatives consistent with the Company''s risk management strategy. The Company does not use derivative financial instruments for speculative purposes. The counter-party to the Company''s foreign currency forward contracts is generally a bank.

Hedging instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in fair value of these derivatives that are designated and effective as hedges of future cash flows are recognized directly in shareholder''s fund and the ineffective portion, if any is recognized immediately in the Statement of Profit and Loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the Statement of Profit and Loss as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions any cumulative gain or loss on the hedging instrument recognized in shareholder''s fund is retained there until the forecast transaction occurs. When a hedged transaction occurs or is no longer expected to occur, the net cumulative gain or loss recognized in shareholder''s fund is transferred to the Statement of Profit and Loss.

1.11 Retirement benefits to employees

Employee benefits includes gratuity, provident fund and leave encashment benefits under the approved schemes of the Company.

In respect of defined contribution plans, the contribution payable for the year is charged to the Statement of Profit and Loss.

In respect of defined benefit plans, the employee benefit costs are accounted for based on actuarial valuation as at the Balance Sheet date.

The liability for leave carried forward has been accounted for on actual basis for all eligible employees except for employees at the Bangalore location, where the leave liability is calculated on the basis of an actuarial valuation as of the Balance Sheet date, as per the policy of the Company.

1.12 Accounting for Taxes on Income

Tax expense comprises of current and deferred tax.

(a) Income Tax Provision

Current tax is computed on taxable income determined in accordance with the provisions of the applicable tax rates and tax laws. Current tax is net of credit for entitlement for Minimum Alternative tax (MAT).

(b) Deferred Tax Provision

Deferred tax arising on account of timing differences and which are capable of reversal in one or more subsequent periods is recognised using the tax rates and tax laws that have been enacted or substantively enacted. Deferred tax assets are not recognised unless there is virtual certainty with respect to the reversal of the same in future years.

1.13 Provisions, Contingent Liabilities and Contingent Assets

As per Accounting Standard (AS) 29, ''Provisions, Contingent Liabilities and Contingent Assets'', the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No Provisions is recognized for -

(a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the Company; or

(b) Present obligations that arise from past events but are not recognized because-

1. It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2. A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

1.14 Research and Development

Costs incurred during the research phase of a project are expensed when incurred. Costs incurred in the development phase are recognized as an intangible asset in accordance with policy defined in 1.4B. Capitalized costs are amortized over a period of 4 years.

1.15 Provision for Warranty

The Company has an obligation by way of warranty to maintain the software during the period of warranty, which may vary from contract to contract. Costs associated with such sale are accrued at the time when related revenues are recorded and included in cost of service delivery. The Company estimates such cost based on historical experience and the estimates are reviewed periodically for material changes in the assumptions.

1.16 Employee Stock Option

In respect of stock options granted pursuant to the company''s Employee Stock Option Scheme, the intrinsic value of the option is treated as discount and accounted as employee compensation cost over the vesting period.

1.17 Use of Estimates

The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenditure during the year. Differences between actual results and estimates are recognized in the year in which the results are known / materialized.


Mar 31, 2012

Basis for preparation of financial statements

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

1.1 Revenue recognition

Revenue from software development and services on time and material basis is recognized based on software development, services rendered and related costs are incurred i.e. based on certification of timesheets and are billed to clients as per the contractual obligations. In case of fixed price contracts, revenue is recognized over the life of contract based on the milestone/s achieved as agreed upon in the contract on proportionate completion basis and where there is no uncertainty as to measurement or collectability of consideration. Revenue from the sale of software products is recognized when the sale is completed with the passing of the ownership.

Interest income is recognized on time proportion basis

Dividend income is recognized when the Company's right to receive dividend is established.

1.2 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of cost of that asset. All other borrowing costs are charged to the Statement of Profit and Loss.

1.3 Trade receivables and advances:

Specific debts and advances identified as irrecoverable or doubtful are written off or provided for, respectively.

1.4 Fixed Assets

(a) Fixed Assets are stated at the cost of acquisition, less depreciation/amortization/diminution. Costs comprises of the purchase price and other attributable costs.

(b) Product development cost are recognised as fixed assets,when feasibility has been established, the Company has committed technical, financial and other resources to complete the development and it is probable that asset will generate probable future benefits.

1.5 Depreciation/ Amortization/ Diminution

Depreciation on tangible fixed assets is provided for on the straight-line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956 except in respect of the following assets where the rates are higher:

- Certain Buildings - 7.5%

- Plant and Equipment (Computers) - 25%

- Certain Office Equipments - 10% and 33.33% as applicable

- Certain Furniture and Fixtures - 12.5%

Leasehold land and vehicles taken on lease are amortized over the period of the lease.

Intangible Assets are amortized on the straight line method at the following rates:

- Goodwill - Amortized over period of 3/5 years.

- Product Development Cost - Amortized over period of 3/4 years.

Perpetual Software licenses are amortized over 4 years. However, time- based software licenses are amortized over their duration.

1.6 Impairment of Fixed Assets

The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. Impairment loss is recognised when the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset's net selling price and value in use. For the purpose of impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

1.7 Investments

Current investments are carried at lower of cost and fair value.

Long-term Investments are stated at cost less provision for diminution, other than temporary, in the value of such investments.

1.8 Leases

Assets acquired under finance leases are recognized at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

Lease arrangements where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor, are classified as Operating Leases. Lease Rentals under operating leases are recognised in the statement of Profit and Loss on straight line basis over the term of the lease.

1.9 Earnings per share

Basic earnings per share is computed by dividing the profit for the period after tax by the weighted number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit for the period after tax by the weighted number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares except where the results are anti-dilutive.

1.10 Foreign currency transactions

(a) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Monetary items are translated at the year-end rates and the exchange differences so determined as also the realised exchange differences are recognised in the statement of profit and loss.

Premiums or discount on forward exchange contracts are amortized and recognized in the Statement of Profit and Loss over the period of the contract. Forward exchange contracts and currency option contracts outstanding at the balance sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognized in the Statement of Profit and Loss.

(b) Derivative instruments and hedge accounting

The Company uses foreign currency forward contracts and currency options to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measurement"of the Institute of Chartered Accountants of India (ICAI).

The use of hedging instruments is governed by the Company's policy approved by the Board of Directors, which provides written principles on the use of such financial derivatives consistent with the Company's risk management strategy. The Company does not use derivative financial instruments for speculative purposes. The counter-party to the Company's foreign currency forward contracts is generally a bank.

Hedging instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in fair value of these derivatives that are designated and effective as hedges of future cash flows are recognized directly in shareholder's fund and the ineffective portion, if any is recognized immediately in the Statement of Profit and Loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the Statement of Profit and Loss as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions any cumulative gain or loss on the hedging instrument recognized in shareholder's fund is retained there until the forecast transaction occurs. When a hedged transaction occurs or is no longer expected to occur, the net cumulative gain or loss recognized in shareholder's fund is transferred to the Statement of Profit and Loss.

1.11 Retirement benefits to employees

Employee benefits includes gratuity, provident fund and leave encashment benefits under the approved schemes of the Company.

In respect of defined contribution plans, the contribution payable for the year is charged to the Statement of Profit and Loss.

In respect of defined benefit plans, the employee benefit costs are accounted for based on actuarial valuation as at the Balance Sheet date.

The liability for leave carried forward has been accounted for on actual basis for all eligible employees except for employees at the Bangalore location, where the leave liability is calculated on the basis of an actuarial valuation as of the Balance Sheet date, as per the policy of the Company.

1.12 Accounting for Taxes on Income

Tax expense comprises current and deferred tax.

(a) Income Tax Provision

Current tax is computed on taxable income determined in accordance with the provisions of the applicable tax rates and tax laws. Current tax is net of credit for entitlement for Minimum Alternative Tax (MAT).

(b) Deferred Tax Provision

Deferred tax arising on account of timing differences and which are capable of reversal in one or more subsequent periods is recognised using the tax rates and tax laws that have been enacted or substantively enacted. Deferred tax assets are not recognised unless there is virtual certainty with respect to the reversal of the same in future years.

1.13 Provisions, Contingent Liabilities and Contingent Assets

As per Accounting Standard (AS) 29, 'Provisions, Contingent Liabilities and Contingent Assets', the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No Provisions is recognized for -

(a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(b) Present obligations that arise from past events but are not recognized because -

1) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2) A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

1.14 Provision for Warranty:

The Company has an obligation by way of warranty to maintain the software during the period of warranty, which may vary from contract to contract. Costs associated with such sale are accrued at the time when related revenues are recorded and included in cost of service delivery. The Company estimates such cost based on historical experience and the estimates are reviewed periodically for material changes in the assumptions.

1.15 Employee Stock Option:

In respect of stock options granted pursuant to the company's Employee Stock Option Scheme, the intrinsic value of the option is treated as discount and accounted as employee compensation cost over the vesting period.

1.16 Use of Estimates:

The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenditure during the year. Differences between actual results and estimates are recognized in the year in which the results are known/materialized.


Mar 31, 2011

Company Overview

The Company, along with its wholly owned subsidiaries in the USA, UK, Germany, France and branches at Japan, Singapore and South Africa provides software services and IT enabled services to its clients. The Company predominantly provides services in Manufacturing and Financial services sectors. Most of the revenue is generated from the export of services.

1. Significant Accounting Policies

Basis for preparation of financial statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis. All items of income and expenditure having a material bearing on the financial statements are recognized on the accrual basis. GAAP comprises mandatory accounting standards as prescribed by the Companies (Accounting Standards) Rules, 2006, the provisions of Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India (SEBI).

Use of Estimates

The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenditure during the year.

1.1 Revenue recognition

Revenue from software development and services on time and material basis is recognized based on software development, services rendered and billed to clients as per the contractual obligations. In case of fixed price contracts, revenue is recognized based on the milestone/s achieved as agreed upon in the contract on proportionate completion basis and where there is no uncertainty as to measurement or collect ability of consideration. Revenue from the sale of software products is recognized when the sale is completed with the passing of the ownership.

Interest income is recognized on time proportion basis.

Dividend income is recognized when the Companys right to receive dividend is established.

1.2 Expenditure

Expenses are accounted on the accrual basis and provisions are made for all probable losses and liabilities.

a) Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which takes a substantial time in getting ready for its intended use are capitalized as part of cost of that asset till the date it is put to use. All other borrowing costs are charged to the Statement of Profit and Loss.

b) Provision for Doubtful Debts

The Company periodically carries out an exercise to evaluate recovery of its receivables. While making such provision, various other factors like probable recovery of the dues, business risks, economic factors, legal status of the customers/partners are taken into account.

1.3 Fixed Assets, Intangible Assets and Capital Work-in-Progress

a) Fixed Assets are stated at the cost of acquisition, less accumulated depreciation and impairment loss, if any. Direct costs are capitalized till the assets are put to use. Vehicles taken on Lease have been capitalized in accordance with the Accounting Standard (AS) 19 ‘Accounting for Leases.

b) Intangible Assets

If Company incurs expenditure which meets criteria of intangible asset as mentioned in Accounting Standard (AS) 26, such expenditure is capitalized and is amortized over its useful life as estimated by the Management.

However, in some instances, technical feasibility is completed and the market release status is reached in the same period. Therefore, such intangible assets are amortized in the same period.

c) Capital Work-in-Progress

Capital Work-in-Progress includes capital advances and the cost of fixed assets that are not yet ready for the intended use at the reporting date.

1.4 Depreciation/Amortization

Depreciation on fixed assets is provided using straight-line method over the useful life of the fixed assets as estimated by the Management. Depreciation is charged on all assets purchased and sold during the year on a proportionate basis. The rates of depreciation are as per or above minimum rates prescribed under Schedule XIV of the Companies Act, 1956. The Rates of Depreciation are as follows:

Individual assets costing less than X 5,000/- and mobile phones issued to employees are charged off to the Statement of Profit and Loss in the year of purchase.

- Leasehold land - Amortized over the lease period.

- Buildings - 1.63%

- Buildings (Hinjewadi) - 7.50%

- Plant and machinery

- Office equipments - 4.75%

- Office equipments (Hinjewadi) - 10.00%

- Electrical systems - 33.33%

- Electrical systems (Hinjewadi) - 10.00%

- Computers - 25.00%

(including software and peripherals)

- Furniture and fittings - 6.33%

Furniture and fittings (Hinjewadi) - 12.50%

- Vehicles - 9.50%

- Vehicles on lease - Amortized over the lease period

Perpetual Software licenses are amortized over their useful lives as stated above. However, time-based software licenses are amortized over their duration.

1.5 Goodwill

Goodwill on acquisition is amortized over a period of its useful life as estimated by the management.

1.6 Impairment of Fixed Assets

The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. Impairment loss is recognised when the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the assets net selling price and value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal.

1.7 Investments

Investments are either classified as current or long-term, based on Managements intention at the time of purchase. Current investments are carried at lower of cost and fair value. Cost for overseas investment comprises the Indian rupee value of the consideration paid for the investment translated at the exchange rate prevalent at the date of investment. Long-term Investments are stated at cost less provisions recorded to recognise any decline, other than temporary, in the carrying value of each investment. Such costs are inclusive of acquisition costs directly attributable to the Investments such as legal expenses, professional fees etc. incurred during the course of such acquisition.

1.8 Leases

Assets leased by the Company in the capacity of their lessee, where the Company has substantially all the risks and rewards of ownership are classified as Finance Leases. Such leases are capitalized at the inception of lease at the lower of their fair value or the present value

of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.

Lease arrangements where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor, are recognised as Operating Leases. Lease Rentals under operating leases are recognised in the statement of Profit and Loss on straight-line-basis

1.9 Earnings per share

Basic earnings per share is computed by dividing the net profit after tax by the weighted number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit after tax by the weighted number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value which is the average market value of the outstanding shares.

1.10 Foreign currency transactions

a) Foreign currency denominated monetary assets and liabilities are translated at exchange rates in effect at the balance sheet date. The gains or losses resulting from such transactions are included in the Statement of Profit and Loss. Income and Expenses denominated in foreign currencies are translated using exchange rate in effect on the date of transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining the net profit for the period in which the transaction is settled.

Premiums or discount on forward exchange contracts are amortized and recognized in the Statement of Profit and Loss over the period of the contract. Forward exchange contracts and currency option contracts outstanding at the balance sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognized in the Statement of Profit and Loss.

b) Derivative instruments and hedge accounting

The Company uses foreign currency forward contracts and currency options to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measurement” of the Institute of Chartered Accountants of India (ICAI).

The use of hedging instruments is governed by the Companys policy approved by the Board of Directors, which provides written principles on the use of such financial derivatives consistent with the Companys risk management strategy. The Company does not use derivative financial instruments for speculative purposes. The counter-party to the Companys foreign currency forward contracts is generally a bank.

Hedging instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in fair value of these derivatives that are designated and effective as hedges of future cash flow are recognized directly in shareholders fund and the ineffective portion, if any is recognized immediately in the Statement of Profit and Loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the Statement of Profit and Loss as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions any cumulative gain or loss on the hedging instrument recognized in shareholders fund is retained there until the forecast transaction occurs. When a hedge transaction occurs or, is no longer expected to occur, the net cumulative gain or loss recognized in shareholders fund is transferred to the Statement of Profit and Loss.

1.11 Retirement benefits to employees

Gratuity:

In accordance with the payment of Gratuity Act, 1972, the Company provides a liability for gratuity, a defined benefit retirement plan. The amount of gratuity is computed based on respective employees salary and the tenure of employment with the Company. Gratuity is accrued based on actuarial valuation as at the balance sheet date, carried out by an independent actuary using projected unit credit method. The amount is funded from internal accruals.

For employees of erstwhile KPIT Cummins Infosystems (Bangalore) Pvt. Ltd. who were on the roll as at March 31, 2007 (before the date of the merger) the amount is funded through an employees group gratuity trust, managed by Kotak Mahindra Old Mutual Life Insurance Limited.

Actuarial gains and losses in respect of defined benefit plans are recognized in the Statement of Profit and Loss for the year in which they occur.

Provident Fund:

Eligible employees receive benefits from provident fund, which is a defined contribution plan. Provident Fund Contribution of covered employees basic salary is deducted and paid along with Companys Contribution of an equal amount on a monthly basis to the appropriate authority.

Leave Accrual:

The liability for leave carried forward has been accounted for on actual basis.

1.12 Accounting for Taxes on Income

a) Income Tax Provision

Current income tax expense comprises taxes on income from operations in India and in foreign jurisdictions. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961. Tax expense relating to foreign operations is determined in accordance with tax laws applicable in countries where such operations are domiciled.

Provisions are also recorded when it is estimated that a liability due to disallowances or other matters is probable.

The Company has provided for Minimum Alternate Tax (MAT) in accordance with the provisions of Section 115JB of the Income Tax Act, 1961.

In accordance with the Guidance Note on Accounting for Credit Available in Respect of Minimum Alternative Tax under the Income- tax Act, 1961 the Company recognizes MAT credit, where there is convincing evidence that the Company will pay normal tax after the tax holiday period.

The Company offsets, on an year-on-year basis, the current tax assets and liabilities, where it has a legally enforceable right to offset and where it intends to settle such assets and liabilities on a net basis.

Tax on distributed profits payable in accordance with the provisions of the Income Tax Act, 1961 is disclosed in accordance with the Guidance Note on Accounting for Corporate Dividend Tax issued by the ICAI.

b) Deferred Tax Provision

- Pursuant to the Accounting Standard (AS) 22 on "Accounting for taxes on income”, the Company has considered the effect of timing differences in the tax expenses in the Statement of Profit and Loss as deferred tax asset/liability in the Balance Sheet.

Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

In respect 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 realize 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 realize these assets.

- As the Company is currently under the tax holiday period, no deferred tax asset/liability is recognized for the timing differences arising during the tax holiday period and reversing within the tax holiday period.

- However, deferred tax asset/liability is recognized on the timing differences which arise during the tax holiday period and reverse after the tax holiday period is over.

1.13 Provisions, Contingent Liabilities and Contingent Assets

As per Accounting Standard (AS) 29, ‘Provisions, Contingent Liabilities and Contingent Assets, the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No Provisions is recognized for -

A. Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

B. Present obligation that arises from past events but are not recognized because -

1. It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2. A reliable estimate of the amount of obligation cannot be made are disclosed as Contingent Liabilities. These are assessed periodically and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

1.14 Research and Development

Costs incurred during the research phase of a project are expensed when incurred. Costs incurred in the development phase are recognised as an intangible asset if it is demonstrated that: the project is technically feasible, the Company has the intent and the ability to complete the development of the asset for use or sale, it is probable that the asset will generate future economic benefits, resources to complete the development and to use or sell the asset are available, and such costs are reliably measurable. Capitalized costs are amortized over a period depending upon the assets market release status. Where the release is soon after the asset is completed, costs are amortized in the same period; otherwise, over the assets useful life.

2. Disclosures as required by Schedule VI of the Companies Act, 1956

2.7 Capital Commitments:

a) Tangible Assets

Estimated amounts of contracts remaining to be executed on Capital Account and not provided for (net of advances) is Rs. 19,586,026/- as at March 31, 2011 (Previous Year Rs. 1,802,992/-).

b) Intangible Assets

Estimated amounts of contracts remaining to be executed on Capital Account and not provided for (net of advances) is Rs. 4,555,716/- as at March 31, 2011 (Previous Year Rs. 3,184,906/-).


Mar 31, 2010

Basis for preparation of financial statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis. All items of income and expenditure having a material bearing on the financial statements are recognized on the accrual basis. GAAP comprises mandatory accounting standards as prescribed by the Companies (Accounting Standards) Rules, 2006, the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India (SEBI).

Use of Estimates

The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenditure during the year.

1.1 Revenue recognition

Revenue from software development and services on time and material basis is recognized based on software development, services rendered and billed to clients as per the contractual obligations. In case of fixed price contracts, revenue is recognized based on the milestone(s) achieved as agreed upon in the contract on proportionate completion basis and where there is no uncertainty as to measurement or collectability of consideration. Revenue from the sale of software products is recognized when the sale is completed with the passing of the ownership.

Interest income is recognized on time proportion basis.

Dividend income is recognised when the Companys right to receive dividend is established.

1.2 Expenditure

Expenses are accounted on the accrual basis and provisions are made for all known losses and liabilities.

a) Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which takes a substantial time in getting ready for its intended use are capitalized as part of cost of that asset till the date it is put to use. All other borrowing costs are charged to Profit 6t Loss Account During the current year, the Company has capitalized borrowing cost of Rs. 2,355,223/- (PY Nil).

b) Provision for Doubtful Debts

The Company carries out the periodic exercise to evaluate its receivables. While making such provision, various other factors like probable recovery of the dues, business risks, economic factors, legal status of the Customer/Partners are taken into account.

1.3 Fixed Assets, Intangible Assets and Capital Work in Progress

a) Fixed Assets are stated at the cost of acquisition, less accumulated depreciation and impairment loss, if any. Direct costs are capitalized till the assets are put to use. Vehicles taken on Lease have been capitalized in accordance with the Accounting Standard -19 Accounting for Leases issued by the Institute of Chartered Accountants of India.

Capital Work in Progress includes capital advances amounting to Rs 836,488/- towards purchase of assets (PY Rs. 236,581,160/-).

b) Intangible Assets

If Company incurs expenditure which meets criteria of intangible asset as mentioned in Accounting Standard 26, such expenditure is capitalized and is amortized over its useful life as estimated by the Management.

1.4 Depreciation/Amortization

Depreciation on fixed assets is provided using straight-line method based on useful life of assets as estimated by the Management. Depreciation is charged on all assets purchased and sold during the year on a proportionate basis. The rates of depreciation are as per or above minimum rates prescribed under Schedule XIV of the Companies Act, 1956. The Rates of Depreciation are as follows:

Individual assets costing less than Rs. 5,000/- and mobile phones issued to employees are charged off to Profit and Loss Account in the year of purchase.

1.5 Goodwill

During the previous year, the Company had taken over substantial part of the Mechanical Design Engineering Service Business of Harita TVS Technologies (known as TVS Technologies Ltd., in India) vide its agreement dated July 9, 2008. Goodwill of Rs. 56,888,437/- represents amount paid towards acquisition of Customers based out of US/Germany/India. Goodwill on acquisition is being amortized over a period of five years.

1.6 Impairment of Fixed Assets

The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. Impairment loss is recognised when the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the assets net selling price and value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal.

During the year under consideration, there was no indication, either internal or external as to the impairment of any of the assets.

1.7 Investments

Investments are either classified as current or long term, based on Managements intention at the time of purchase. Current investments are carried at lower of cost and fair value. Cost for overseas investment comprises the Indian Rupee value of the consideration paid for the investment translated at the exchange rate prevalent at the date of investment. Long-term Investments are stated at cost, less provisions recorded to recognise any decline, other than temporary, in the carrying value of each investment. Such costs are inclusive of acquisition costs directly attributable to the Investments such as legal expenses, professional fees, etc., incurred during the course of such acquisition.

1.8 Leases

Assets leased by the Company in the capacity of the Lessee, where the Company has substantially all the risks and rewards of ownership are classified as Finance Lease. Such leases are capitalized at the inception of Lease at lower of the Fair Value or the present value of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and interest cost so as to obtain a constant period rate of interest on the outstanding liability for each year.

Lease arrangement where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor, are recognised as Operating Lease. Lease Rentals under operating lease are recognised in the Profit & Loss Account on straight-line basis.

1.9 Foreign currency transactions

a) Foreign currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such transactions are included in the Profit & Loss Account. Income & expenses denominated in foreign currencies are translated using exchange rate in effect on the date of transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining the net profit for the period in which transaction is settled.

Premium or discount on forward exchange contracts are amortized and recognized in Profit & Loss Account over the period of the contract. Forward exchange contracts and currency option contracts outstanding at the Balance Sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognized in the Profit and Loss account.

b) Derivative instruments and hedge accounting

The Company uses foreign currency forward contracts and currency options to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 "Financial Instruments: Recognition and Measurement" (AS 30).

The use of hedging instrulnents is governed by the Companys policy approved by the Board of Directors, which provides written principles on the use of such financial derivatives consistent with the Companys risk management strategy. The Company does not use Derivative financial instruments for speculative purposes. The counter party to the Companys foreign currency forward contracts is generally a bank.

Hedging instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in fair value of these derivatives that are designated and effective as hedges of future cash flow are recognized directly in shareholders fund and the ineffective portion, if any is recognized immediately in Profit and Loss Account.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the Profit & Loss Account as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At the time for forecasted transaction any cumulative gain or loss on the hedging instrument recognized in shareholders fund is retained there until, the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in reserves is transferred to profit and loss account.

1.10 Retirement benefits to employees

Gratuity

In accordance with the payment of Gratuity Act, 1972, the Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The amount of gratuity has been computed based on respective employees salary and the tenure of employment with the Company. Gratuity has been accrued based on actuarial valuation as at the Balance Sheet date, carried out by an independent actuary using projected unit credit method. The amount is funded from internal accruals.

For Employees of erstwhile KPIT Cummins Infosystems (Bangalore) Pvt. Ltd. who were on roll as at March 31, 2007 (before the date of the merger) the amount is funded through an employees group gratuity trust, managed by Kotak Mahindra Old Mutual Life Insurance Limited.

Actuarial gains and losses in respect of defined benefit plans are recognized in the Profit & Loss Account for the year in which they occur.

Provident Fund

Eligible employees receive benefits from provident fund, which is a defined contribution plan. Provident Fund Contribution of 12% of covered employees basic salary is deducted and paid along with Companys Contribution of an equal amount on a monthly basis to the appropriate authority.

Leave Accrual

As per Accounting Standard 15, the carry forward leaves have been accounted for as short term benefit on actual basis.

1.11 Accounting for Taxes on Income

a) Income Tax Provision

Current income tax expense comprises taxes on income from operations in India and in foreign jurisdictions. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961. Tax expense relating to foreign operations is determined in accordance with tax laws applicable in countries where such operations are domiciled.

Provisions are also recorded when it is estimated that a liability due to disallowances or other matters is probable.

The Company has provided for Minimum Alternate Tax (MAT) in accordance with the provisions of Section 115JB of the Income Tax Act, 1961.

In accordance with the Guidance Note on Accounting for Credit Available in Respect of Minimum Alternative Tax under the Income-tax Act, 1961 the Company has recognized MAT credit of Rs. 42,347,329/- (PY Rs. 23,836,361 /-) during the year, there being convincing evidence that the Company will pay normal tax after the tax holiday period.

The Company offsets, on year-on-year basis, the current tax assets and liabilities, where it has legally enforceable right and where it intends to settle such assets and liabilities on a net basis.

Tax on distributed profits payable in accordance with the provisions of the Income Tax Act, 1961 is disclosed in accordance with the guidance note on Accounting for Corporate Dividend Tax issued by the ICAI.

b) Deferred Tax Provision

• Pursuant to the Accounting Standard (AS-22) on "Accounting for taxes on income" issued by the Institute of Chartered Accountants of India which is mandatory, the Company has considered the effect of timing differences in the tax expenses in the Profit and Loss Account as deferred tax asset/liability in the Balance Sheet.

Deferred tax assets 6 liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet Date.

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 realize 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 realize these assets.

• As the Company is currently under the tax holiday period, no deferred tax asset / liability is recognized for the timing differences arising during the tax holiday period and reversing within the tax holiday period.

• However, deferred tax asset/liability is recognized on the timing differences which arise during the tax holiday period and reverse after the tax holiday period is over.

1.12 Provisions, Contingent Liabilities and Contingent Assets

As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No Provisions is recognized for -

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the Company; or

b) Any present obligation that arises from past events but is not recognized because -

1. It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2. A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed periodically and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

2.7 Capital Commitments:

a. Tangible Assets

Estimated amounts of contracts remaining to be executed on Capital Account and not provided for (net of advances) is Rs. 1,802,992/- as at March 31, 2010 (previous year Rs. 46,251,277/-).

b. Intangible Assets

Estimated amounts of contracts remaining to be executed on Capital Account and not provided for (net of advances) is Rs. 3,184,906/- as at March 31, 2010 (previous year Rs. 40,608,649/-).