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Notes to Accounts of Nucleus Software Exports Ltd.

Mar 31, 2015

Note 1:

1.1 Company Overview

Nucleus Sofware Exports Limited (''Nucleus'' or ''the Company'') was incorporated on 9 January, 1989 in India as a private limited company. It was subsequently converted into a public limited company on 10 October, 1994. The Company made an inital public ofer in August 1995. As at 31 March, 2015, the Company is listed on two stock exchanges in India namely Natonal Stock Exchange and Bombay Stock Exchange. The Company has wholly owned subsidiaries in Singapore, USA, Japan, Netherlands, Australia and India. The Company''s business consists of sofware product development and marketng and providing support services mainly for corporate business enttes in the banking and financial services sector.

2.1 OPERATING LEASE

Obligatons on long-term, non-cancellable operatng leases

The Company has acquired ofce premises under cancellable and non-cancellable operatng lease. Operatng lease rentals paid during the year ended 31 March, 2015 is Rs. 36,702,024/- (year ended 31 March, 2014 is Rs. 29,975,165) . The future minimum lease payments in respect of non-cancellable leases as at 31 March, 2015 is Rs. Nil (As at 31 March, 2014, Rs. Nil).

2.2 Tax Expense

The Company has been accorded inital recogniton for the in-house R&D unit by the Department of Scientfc and Industrial Research (DSIR) for its R&D center at Noida effective 31 December, 2012 which is valid tll 31 March, 2015. The Company had thereafer applied to DSIR for the approval of weighted deducton under secton 35(2AB) of the Income Tax Act, 1961, which was received by the Company in the year ended 31 March, 2014. Accordingly, the Company has during the year ended 31 March , 2015 availed and recognised tax benefit under secton 35 (2AB) aggregatng to Rs. 55,233,750. This has resulted in decrease in income tax liability of the Company for the year ended 31 March , 2015.

2.3 Advance Tax (Net of provision)

Advance Tax (Net of provision) aggregatng to Rs. 110,341,548 (As at 31 March, 2014 : Rs. 140,338,603) has been classifed as Long-Term Loans and Advances as the same represents amount recoverable from Income Tax Department afer the completon of Income Tax Assessments.

2.4 Contngent liabilites and Commitments (to the extent not provided for)

(Amount in Rs.) Particulars As at As at 31 Mar 2015 31 Mar 2014

a. Contngent liabilites

Claims against the Company not acknowledged as debts 6,922,050 -

b. Capital Commitments

Estmated amount of contracts remaining to be executed on capital account and not 3,149,016 22,725,415 provided for in the books of account (net of advances).

c. other Commitments

The Company is commited to provide financial support to its subsidiary companies, as and when required.

As at 31 March 2015, the Company has given an undertaking to repay the amounts due to Nucleus Sofware Solutons Pte Limited, Singapore (subsidiary company) by Nucleus Sofware Japan Kabushiki Kaisha, Japan (subsidiary company), in the event that the later party is unable to repay the same, as and when it falls due. (Also see note 2.31)

As on 31 March, 2015, the Company has outstanding bank guarantee and leter of credits of Rs. 23,444,551 (As at 31 March, 2014 Rs. 13,617,899). These are secured to the extent of Rs. 15 crores against all present and future receivables of the Company.

2.5 Research and development expenditure

Expenditure on research and development as per Accounting Standard 26

Revenue 190,208,441 164,556,919

The Company had been accorded inital recogniton for the in-house R&D unit by the Department of Scientfc and Industrial Research (DSIR) for its R&D center at Noida effective 31 December, 2012 which is valid tll 31 March, 2015. The Company had thereafer applied to DSIR for the approval of weighted deducton under secton 35(2AB) of the Income Tax Act, 1961, which was been received by the Company in the year ended 31 March, 2014. (Also see note 2.23)

2.6 Segment reportng – Basis of preparaton

a. Segment Accounting policies

The Segment reportng policy complies with the Accounting policies adopted for preparaton and presentaton of financial statements of the Company and is in conformity with Accounting Standard-17 on "Segment Reportng" specified as per Secton 133 of the Companies Act, 2013 ("the 2013 Act") read with Rule 7 of Companies (Accounts) Rules, 2014. The segmentaton is based on the Geographies (reportable primary segment) in which the Company operates and internal reportng systems. The secondary segmentaton is based on the nature and type of services rendered.

b. Compositon of reportable segments

The Company operates in seven main geographical segments: India, Far East, South East Asia, Europe, Middle East, Africa and Australia which individually contribute 10% or more of the Company''s revenue and segment assets.

Income and direct expenses in relaton to segments are categorised based on items that are individually identfable to that segment, while the remainder of the costs are categorised in relaton to the associated turnover and/or man months. Certain expenses such as depreciaton, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practcable to provide segment disclosures relatng to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets and liabilites represent the net assets and liabilites of that segment. All the fixed assets of the Company are located in India. These have not been identfed to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly atributable to any partcular segment and which cannot be reasonably allocated to various segments are consolidated under "Unallocated" head.

The secondary segmentaton is based on the nature and type of services rendered. Accordingly, Secondary Segmentaton has been classifed under Products and Sofware Projects and Services. Products revenue includes Income from sale of licenses and all other related customizaton, implementaton, tme and material contracts, fixed price contracts and annual technical service for these licenses. Sofware projects and services includes other tme and material contracts and fixed price contracts, whereby no license sale is made by the Company.

2.34 Employee benefit Obligatons

Defned contributon plans

An amount of Rs. 68,862,235 for the year ended 31 March, 2015 (Year ended 31 March, 2014 Rs. 60,315,334), have been recognized as an expense in respect of Company''s contributon for Provident Fund and Rs. 50,172 (Year ended 31 March, 2014 Rs. 43,412) for Employee State Insurance Fund deposited with the government authorites and has been shown under employee benefit expenses in the Statement of Profit and Loss.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retrement, death while in employment or on terminaton of employment of an amount equivalent to 15 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs. 1,000,000 in terms of the provisions of the Payment of Gratuity Act, 1972. Vestng occurs upon completon of 5 years of service.

Provision in respect of gratuity and compensated absence has been determined using the Projected Unit Credit method, with actuarial valuatons being carried out at the balance sheet date.

During the year, the Company has made contributons to Nucleus Sofware Export Limited Employees Group Gratuity Assurance Scheme, which has made further contributons to Employees Group Gratuity Scheme of Life Insurance Corporaton of India.

2.7 Other current liabilites includes Rs. 91,306,938 received by the Company during the year ended 31 March, 2015 against insurance claim fled on behalf of one of its overseas subsidiary company towards claim setlement with its customer and expenses incurred in this regard by the subsidiary Company. The above insurance claim is to be reimbursed to the subsidiary company.

2.8 The Company had during the year ended 31 March, 2014 reclassified investment in bonds of Indian Railway Finance Corporaton Limited - Trache 1 Series I as non-current investments which was originally held as current investment. Due to this change in classification and in accordance with Accounting Standard (AS) 13, the diference in the fair value of the investment as on the date of transfer and the cost at which these were recorded earlier aggregatng to Rs. 9,350,000 had been recognised as an adjustment to the carrying value of the investment.

2.9 trANSFEr PriCiNG

The Company has established a comprehensive system of maintenance of informaton and documents as required by transfer pricing legislaton under secton 92D for its internatonal transactons and specified domestc transactons. The Company will further update above informaton and records and expects these to be in existence latest by due date of the fling of return, as required under law. The management is of the opinion that all above transactons are at arm''s length so that aforesaid legislaton will not have any impact on the financial statements, partcularly on the amount of tax expense and that of provision for taxaton.

2.10 During the year ended 31 March, 2015 as per provision of Income-tax Act, 1961, the Company has taken credit of corporate dividend tax aggregatng Rs. Nil (Year ended 31 March, 2014 : Rs. 15,963,730) on account of tax paid on dividend received from one of its subsidiaries.

2.11 During the year, the Corporate Social Responsibility (CSR) commitee has been formed by the Company to monitor CSR related actvites. The Company has contributed Rs. 7,050,000 out of the total contributable amount of Rs. 11,853,562 for the year ended 31 March, 2015 in accordance with secton 135 read with schedule VII of the Companies Act, 2013 to various trusts and NGOs. The contributons have been made towards promotng educaton and sanitaton. The management has not spent the remaining amount of Rs. 4,803,562.

2.12 Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year classification/ disclosure.


Mar 31, 2013

1.1. Company overview

Nucleus Software Exports Ltd. (''Nucleus'' or ''the Company'') was incorporated on 9 January 1989 in India as a private limited company. It was subsequently converted into a public limited company on 10 October, 1994. The Company made an initial public offer in August 1995. As at 31 March, 2013, the Company is listed on two stock exchanges in India namely National Stock Exchange and Bombay Stock Exchange. The Company has wholly owned subsidiaries in Singapore, USA, Japan, Netherlands and India. The Company''s business consists of software product development and marketing and providing support services mainly for corporate business entities in the banking and financial services sector.

The shares of the Company have been voluntarily delisted from Madras Stock Exchange w.e.f. 16 September, 2011.

2.1 EMPLOYEES STOCK OPTION PLAN ("ESOP")

a. Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999, issued by the SEBI, is effective for all stock option schemes established after 19 June 1999. In accordance with these Guidelines, the excess of the market price of the underlying equity shares as of the date of grant of options over the exercise price of the option, including up-front payments, if any, is to be recognized and amortised on graded vesting basis over the vesting period of the options.

b. The Company currently has three ESOP schemes, ESOP scheme - 2002 (instituted in 2002), ESOP scheme - 2005 (instituted in 2005) and ESOP scheme - 2006 (instituted in 2006). These schemes were duly approved by the Board of Directors and Shareholders in their respective meetings. The 2002 scheme provides for the issue of 225,000 options, 2005 scheme for 600,000 options and 2006 scheme for 1,000,000 options to eligible employees. These schemes are administered by the Compensation Committee comprising four members, the majority of whom are independent directors.

2.2 OPERATING LEASE

Obligations on long-term, non-cancelable operating leases

The Company has acquired office premises under cancellable and non-cancellable operating lease. Operating lease rentals paid during the year ended 3I March, 20I3 is Rs. 30,655,263 (Year ended 3I March, 20I2 : Rs. 29,224,530). The future minimum lease expense in respect of non-cancellable leases is as follows:

2.3 TAX EXPENSE

a. The Company had set up SEZ unit, which has commenced operations during the year ended 3I March, 20I2. Income from SEZ unit is eligible for exemption under section I0 AA. This has resulted in decrease in income tax liability of the Company as income earned from SEZ unit is not liable to tax under Income tax Act, I96I.

b. During earlier years, the Company had calculated its tax liability under Minimum Alternative Tax (MAT) as its liability under MAT was higher than normal tax liability. The excess of tax payable under MAT over normal tax payable (MAT Credit entitlement) was carried forward to be set off against the future tax liabilities. During the year ended 3I March, 20I3, the Company is liable to Normal Tax as its Normal Tax is higher than MAT Tax Liability. The Company has utilised the balance MAT Credit Entitlement of Rupees 20,937,7I5 during the year ended 3I March, 20I3, to set off its liability for payment of Income Tax.

2.4 ADVANCE TAX (NET OF PROVISION) AND MAT CREDIT ENTITLEMENT

a. Advance Tax (Net of provision) aggregating to Rs. I37,535,009 (As at 3I March, 20I2 : Rs. I04,758,287) has been classified as Long- Term Loans and Advances as the same represents amount recoverable from Income Tax Department after the completion of Income Tax Assessments.

b. MAT Credit Entitlement balance aggregating to Rs. Nil (As at 3I March, 20I2 : Rs. 20,937,7I5) which the Company expects to set off against Income Tax payable for the year ending 3I March, 20I3 has been considered to be Short-Term Loans and Advances.

2.5 RELATED PARTY TRANSACTIONS

List of related parties - where control exists

a. Wholly owned subsidiary companies

- Nucleus Software Solutions Pte Ltd, Singapore

- Nucleus Software Japan Kabushiki Kaisha, Japan

- Nucleus Software Inc., USA

- Nucleus Software Netherlands B.V, Netherlands

- VirStra i -Technology Services Limited, India

- Nucleus Software Limited, India

b. other subsidiary company (wholly owned subsidiary of VirStra i Technology Services Limited)

- VirStra i -Technology (Singapore) Pte Ltd., Singapore

c. other related parties:

Key managerial personnel:

- Vishnu R Dusad (Managing Director)

2.6 SEGMENT REPORTING - BASIS OF PREPARATION

a. Segment accounting policies

The Segment reporting policy complies with the accounting policies adopted for preparation and presentation of financial statements of the Company and is in conformity with Accounting Standard-17 on "Segment Reporting", as specified in the Companies (Accounting Standards) Rules, 2006. The segmentation is based on the Geographies (reportable primary segment) in which the Company operates and internal reporting systems. The secondary segmentation is based on the nature and type of services rendered.

b. Composition of reportable segments

The Company operates in five main geographical segments: India, Far East, South east Asia, Europe and Middle East which individually contribute I0% or more of the Company''s revenue and segment assets.

Income and direct, expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remainder of the costs are categorised in relation to the associated turnover and/or man months. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably across geographies. The Company believes that it is not practicable to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets and liabilities represent the net assets and liabilities of that segment. All the fixed assets of the Company are located in India. These have not been identified to any of the reportable segments, as these are used interchangeably between segments and across geographies. Other items which are not directly attributable to any particular segment and which cannot be reasonably allocated to various segments are consolidated under "Unallocated" head.

The secondary segmentation is based on the nature and type of services rendered. Accordingly, Secondary Segmentation has been classified under Products and Software Projects and Services. Products revenue includes Income from sale of licenses and all other related customization, implementation, time and material contracts, fixed price contracts and annual technical service for these licenses. Software projects and services includes other time and material contracts and fixed price contracts, whereby no license sale is made by the Company.

2.7 EMPLOYEE BENEFIT OBLIGATIONS DEFINED CONTRIBUTION PLANS

An amount of Rs. 57,69I,669 for the year ended 3I March, 20I3 (Year ended 3I March, 20I2 : Rs. 58,330,038), have been recognized as an expense in respect of Company''s contribution for Provident Fund and Employee State Insurance Fund deposited with the government authorities and has been shown under employee benefit expenses in the Statement of Profit and Loss.

Defined benefit plans

The Gratuity scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to I5 days basic salary payable for each completed year of service or part thereof in excess of 6 months subject to a maximum limit of Rs I,000,000 in terms of the provisions of the Payment of Gratuity Act, I972. Vesting occurs upon completion of 5 years of service.

2.8 TRANSFER PRICING

The Company had during the previous year ended 31 March, 2012 set up an SEZ unit at Jaipur. The Income from SEZ unit is eligible for exemption under section 10 AA. The Company has established a comprehensive system of maintenance of information and documents as required by transfer pricing legislation under section 92D for its international transactions and is in the process of establishing such system for specified domestic transactions. The Company will further update above information and records and expects these to be in existence latest by due date of the filing of return, as required under law. The management is of the opinion that all above transactions are at arm''s length so that aforesaid legislation will not have any impact on the financial statement, particularly on the amount of tax expense and that of provision for taxation.

2.9 During the year ended 31 March, 2013, as per provision of Income-tax Act, 1961, the Company has taken credit of corporate dividend tax aggregating Rs. 4,864,702 (Year ended 31 March, 2012 : Rs. 5,839,693) on account of tax paid on dividend received from one of its subsidiaries.

2.10 Revenue recognised up to the reporting date in respect of contracts in progress at the reporting date aggregates to Rs. 764,470,880 (As at 31 March, 2012 : Rs. 951,240,690).

2.11 Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification/ disclosure.

 
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