Mar 31, 2015
A. Change in accounting policy
Presentation and disclosure of financial statements
Effective 1st April 2014, the Company has revised the usefull life of
fixed assets based on Schedule II to the Companies Act, 2013 for the
purpose of providing depreciation on fixed assets. Accordingly the
carrying amount of fixed assets as on 1st April 2014 has been
depreciated over the remaining usefull life of fixed assets. The
Company has also reclassified the previous year figures in accordance
with the requirements applicable in the current year.
B. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcome
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
C. Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price. In case of revaluation of fixed
assets, any revaluation surplus is credited to the revaluation reserve,
except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the statement of profit and loss,
in which case the increase is recognized in the statement of profit and
loss. A revaluation deficit is recognized in the statement of profit
and loss, except to the extent that it offsets an existing surplus on
the same asset recognized in the asset revaluation reserve. Subsequent
expenditure related to an item of fixed asset is added to its book
value only if it increases the future benefits from the existing asset
beyond its previously assessed standard of performance. All other
expenses on existing fixed assets, including day-to-day repair and
maintenance expenditure and cost of replacing parts, are charged to the
statement of profit and loss for the period during which such expenses
are incurred. The Company did not elect to exercise an irrevocable
option to amortize exchange rate fluctuation on long term foreign
currency monetary asset / liability over the life of the asset /
liability or by March 31, 2012, whichever is earlier, subsequent to the
amendment to AS-11 by the Ministry of Corporate affairs.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
D. Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated on a straight line value -
single shift basis using the rates those prescribed under the Schedule
II to the Companies Act, 2013. The company has used the following
useful life to provide depreciation on its fixed assets. Building
(Factory) - 30 years
Building (Other than Factory) - 60 years Plant and Machinery - 15 years
or based on usage of the assets Office Equipments - 5 years
Furniture and Fittings - 10 years
Computers -3 Years
(Servers & Networks) Computers (Others) - 6 Years
Vehicles - 10 Years (Two Wheelers) &
6 Years (Four Wheelers) The management may carry out the internal
assessment and independent technical evaluation by the external valuers
to estimate the useful lives of the above assets which may represent
the period over which management expects to use these assets.
E. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a Written Down Value basis over the
estimated useful economic life. The company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to affect that useful life of an intangible
asset exceeds ten years, the Company amortizes the intangible asset
over the best estimate of its useful life. Such intangible assets and
intangible assets not yet available for use are tested for impairment
annually, either individually or at the cash-generating unit level. All
other intangible assets are assessed for impairment whenever there is
an indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS-5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Research and Development costs Research costs are expensed as incurred.
Development expenditure incurred on an individual project is recognized
as an intangible asset when the company can demonstrate all the
following:
1) The technical feasibility of completing the intangible asset so that
it will be available for use or sale
2) Its intention to complete the asset
3) Its ability to use or sell the asset
4) How the asset will generate future economic benefits
5) The availability of adequate resources to complete the development
and to use or sell the asset
6) The ability to measure reliably the expenditure attributable to the
intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete
and the asset is available for use. It is amortized on a Written Down
Value basis over the period of expected future benefit from the related
project, i.e., the estimated useful life of ten years. Amortization is
recognized in the statement of profit and loss. During the period of
development, the asset is tested for impairment annually.
A summary of amortization policies applied to the company's intangible
assets is as below:
Goodwill -60%
Brands / Trademarks - 20%
Patents and Intellectual Property - 20% Rights (IPR)
Technical know now - 20%
Computer Software - 40% or based on
use of the asset
The residuel Value if any after amortising at the above rate ie.,based
on the estimated usefull life of the asset is amortised in the final
year of the estimated life of the asset.
F. Leases
Where the company is lessee
Finance leases, which effectively transfer to the company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a Written Down Value basis over the
useful life of the asset or the useful life envisaged in Schedule II to
the Companies Act, 2013, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
Written Down Value basis over the shorter of the estimated useful life
of the asset, the lease term or the useful life envisaged in Schedule
II to the Companies Act, 2013.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Where the company is the lessor Leases in which the company transfers
substantially all the risks and benefits of ownership of the asset are
classified as finance leases. Assets given under finance lease are
recognized as a receivable at an amount equal to the net investment in
the lease. After initial recognition, the company apportions lease
rentals between the principal repayment and interest income so as to
achieve a constant periodic rate of return on the net investment
outstanding in respect of the finance lease. The interest income is
recognized in the statement of profit and loss. Initial direct costs
such as legal costs, brokerage costs, etc. are recognized immediately
in the statement of profit and loss.
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
Presently the company has taken on lease its operating premises which
is renewed on a 6 months basis.
G. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
H. Impairment of tangible and intangible assets
The company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the company
estimates the asset recoverable amount. An asset recoverable amount is
the higher of an asset or Cash Generating Units (CGU) net selling price
and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
company's CGU to which the individual assets are allocated. These
budgets and forecast calculations are generally covering a period of
five years. For longer periods, a long term growth rate is calculated
and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible fixed assets, where the revaluation
was taken to revaluation reserve. In this case, the impairment is also
recognized in the revaluation reserve up to the amount of any previous
revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the company
estimates the assets or CGUs recoverable amount. A previously
recognized impairment loss is reversed only if there has been a change
in the assumptions used to determine the asset's recoverable amount
since the last impairment loss was recognized. The reversal is limited
so that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognized
for the asset in prior years. Such reversal is recognized in the
statement of profit and loss unless the asset is carried at a revalued
amount, in which case the reversal is treated as a revaluation
increase.
I. Grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the company will comply with the
conditions attached to them, and (ii) the grant / subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and released to income in equal amounts
over the expected useful life of the related asset.
Where the company receives non-monetary grants, the asset is accounted
for on the basis of its acquisition cost. In case a non-monetary asset
is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters' contribution are credited
to capital reserve and treated as a part of the shareholders' funds.
Grants received on agreed terms to perform research activites are
recognized when there is reasonable assurance that (i) the company will
comply with the conditions attached to them, and (ii) the grant will be
received. Research costs are expensed as incurred.
J. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
Investment property
An investment in land or buildings, which is not intended to be
occupied substantially for use by, or in the operations of, the
company, is classified as investment property. Investment properties
are stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any.
The cost comprises purchase price, borrowing costs if capitalization
criteria are met and directly attributable cost of bringing the
investment property to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Depreciation on building component of investment property is calculated
on a written down value basis using the rate prescribed under the
Schedule II to the Companies Act, 2013 as mentioned in point (d) above.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
K. Inventories & Quantitative Details
The Company is a service company primarily rendering information
technology services. Accordingly it doesnot hold any physical
inventories.
The Company is primarily engaged in development and maintenance of
computer software. The production and sale of such software cannot be
expressed in generic unit.
L. Revenue recognition
Operational Revenue
Revenue from software development services comprises revenue from time
and material and fixed-price contracts.
Revenue from time and material contracts are recognized as related
services are performed.
Revenue from fixed-price contracts are recognized in accordance with
the percentage of completion method / as per the terms of the contract.
Maintenance revenue is considered on acceptance of the contract and is
accrued over the period of the contract. Other income is recognized on
accrual basis.
Revenue from customer training, support and other services is
recognized as the related services are performed.
Cost and related earnings in excess of billings are classified as
'Unbilled revenues' under loans and advances while the billing in
excess of cost and related earnings is classified as 'Unearned revenue'
under current liabilities. Provision for estimated losses, if any, on
incomplete contracts are recorded in the period in which such losses
become probable based on the current contract estimates.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Dividends
Dividend income is recognized when the company's right to receive
dividend is established by the reporting date.
M. Foreign currency translation
Foreign currency transactions and balances
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences
From accounting periods commencing on or after 7 December 2006, the
company accounts for exchange differences arising on translation /
settlement of foreign currency monetary items as below:
1) Exchange differences arising on a monetary item that, in substance,
forms part of the company's net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
2) The Company did not elect to exercise an irrevocable option to
amortize exchange rate fluctuation on long term foreign currency
monetary asset / liability over the life of the asset / liability or by
March 31, 2012, whichever is earlier, subsequent to the amendment to
AS-11 by the Ministry of Corporate affairs.
3) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.
4) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
Forward exchange contracts are entered into to hedge foreign currency
risk of an existing asset / liability.
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense / income over the
life of the contract. Exchange differences on such contracts, except
the contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period. Any gain / loss arising on forward
contracts which are long-term foreign currency monetary items is
recognized in accordance with paragraph 2 and 3. During the year
company have not entered into any forward exchange contracts.
Translation of integral and non-integral foreign operation
The company classifies all its foreign operations as either "integral
foreign operations" or "non-integral foreign operations."
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the company itself.
The assets and liabilities of a non-integral foreign operation are
translated into the reporting currency at the exchange rate prevailing
at the reporting date and their statement of profit and loss are
translated at exchange rates prevailing at the dates of transactions or
weighted average weekly rates, where such rates approximate the
exchange rate at the date of transaction. The exchange differences
arising on translation are accumulated in the foreign currency
translation reserve. On disposal of a non-integral foreign operation,
the accumulated foreign currency translation reserve relating to that
foreign operation is recognized in the statement of profit and loss.
When there is a change in the classification of a foreign operation,
the translation procedures applicable to the revised classification are
applied from the date of the change in the classification.
N. Retirement and other employee benefits
(i) Short term employee benefit obligations are estimated and provided
for.
(ii) Post employment benefits and other long-term employee benefits.
a) Defined Contribution plans
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The company has no obligation, other than the
contribution payable to the provident fund.
b) Defined benefit plans and compensated absences The company operates
defined benefit plans for its employees, viz., gratuity. The costs of
providing benefits under these plans are determined on the basis of
actuarial valuation at each year-end. Separate actuarial valuation is
carried out for each plan using the projected unit credit method.
Actuarial gains and losses for defined benefit plans are recognized in
full in the period in which they occur in the statement of profit and
loss.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company treats accumulated
leave expected to be carried forward beyond twelve months, as long-term
employee benefit for measurement purposes. Such long-term compensated
absences are provided for based on the actuarial valuation using the
projected unit credit method at the year-end. Actuarial gains / losses
are immediately taken to the statement of profit and loss and are not
deferred. The company presents the entire leave as a current liability
in the balance sheet, since it does not have an unconditional right to
defer its settlement for 12 months after the reporting date.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
Presently Company's liability towards gratuity, other retirement
benefits and compensated absences are not actuarially determined. In
accordance with the Payment of Gratuity Act, 1972 the Company provides
for a lump sum payment to eligible employees, at retirement or
termination of employment based on the last drawn salary and year of
employment with the company. The gratuity fund is managed by SBI
Gratuity Fund. The gratuity obligation is provided for based on
estimates from SBI Gratuity Fund.
O. Accounting for Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the company's
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred
taxes, the timing differences which originate first are considered to
reverse first. At each reporting date, the company re-assesses
unrecognized deferred tax assets. It recognizes unrecognized deferred
tax asset to the extent that it has become reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which such deferred tax assets can be
realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it
becomes reasonably certain or virtually certain, as the case may be,
that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Exchange differences arising out of deferred tax assets pertain to
branch profit tax have been recognised in foreign exchange
translational reserve.
Minimum Alternate Ta x (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the company does not have
convincing evidence that it will pay normal tax during the specified
period.
P. Employee stock compensation cost
In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines,1999 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of equity-
settled transactions is measured using the intrinsic value method and
recognized, together with a corresponding increase in the "Stock
options outstanding account" in reserves. The cumulative expense
recognized for equity- settled transactions at each repor ting date
until the vesting date reflects the extent to which the vesting period
has expired and the company's best estimate of the number of equity
instruments that will ultimately vest.
The expense or credit recognized in the statement of profit and loss
for a period represents the movement in cumulative expense recognized
as at the beginning and end of that period and is recognized in
employee benefits expense.
Where the terms of an equity-settled transaction award are modified,
the minimum expense recognized is the expense as if the terms had not
been modified, if the original terms of the award are met. An
additional expense is recognized for any modification that increases
the total intrinsic value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of
modification.
Q. Segment reporting
As per AS-17, 'Segment Reporting' issued pursuant to the companies
(Accounting standard) Rules, 2006, the company operates in single
business segment and from one geographical area (exports are not
considered as seperate geographical area) hence seperate disclosure of
segmental information is not warranted.
R Earnings Per Share (EPS)
Basic EPS
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
Diluted EPS
The number of equity shares used in computing diluted earnings per
share comprises the weighted average equity shares considered for
deriving basic earnings per share, and also the weighted average number
of equity shares that could have been issued on the conversion of all
dilutive potential equity shares. Dilutive potential equity shares are
deemed converted as of the beginning of the period, unless issued at a
later date. The number of equity shares and potentially dilutive equity
shares are adjusted for any stock splits and bonus shares issued if
any.
S. Provisions
A provision is recognized when the company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Where the company expects some or all of a provision to be reimbursed
the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of profit and loss net of any
reimbursement.
T. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does
not recognize a contingent liability but discloses its existence in the
financial statements.
U. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short- term investments with an
original maturity of three months or less.
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing
and financing activities of the Company are segregated.
V. Financial instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS-11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
The company does not have any risk management policy with respect to
risk of foreign exchange fluctuations and is not a party to the
contractual provisions of the instrument.
Presently the company do not hold any derivative instruments.
W. Amalgamation accounting
The company treats an amalgamation in the nature of merger if it
satisfies all the following criteria:
i. All the assets and liabilities of the transferor company become,
after amalgamation, the assets and liabilities of the transferee
company.
ii. Shareholders holding not less than 90% of the face value of the
equity shares of the transferor company (other than the equity shares
already held therein, immediately before the amalgamation, by the
transferee company or its subsidiaries or their nominees) become equity
shareholders of the transferee company.
iii. The consideration for amalgamation receivable by those equity
shareholders of the transferor company who agree to become shareholders
of the transferee company is discharged by the transferee company
wholly by the issue of equity shares, except that cash may be paid in
respect of any fractional shares.
iv. The business of the transferor company is intended to be carried
on, after the amalgamation, by the transferee company.
v. The transferee company does not intend to make any adjustment to
the book values of the assets and liabilities of the transferor
company, except to ensure uniformity of accounting policies.
All other amalgamations are in the nature of purchase.
The company accounts for all amalgamations in the nature of merger
using the pooling of interest method. The application of this method
requires the company to recognize any non-cash element of the
consideration at fair value. The company recognizes assets, liabilities
and reserves, whether capital or revenue, of the transferor company at
their existing carrying amounts and in the same form as at the date of
the amalgamation. The balance in the statement of profit and loss of
the transferor company is transferred to the general reserve. The
difference between the amount recorded as share capital issued, plus
any additional consideration in the form of cash or other assets, and
the amount of share capital of the transferor company is adjusted in
reserves.
An amalgamation in the nature of purchase is accounted for using the
purchase method. The cost of an acquisition / amalgamation is measured
as the aggregate of the consideration transferred, measured at fair
value. Other aspects of accounting are as below:
The assets and liabilities of the transferor company are recognized at
their fair values at the date of amalgamation. The reserves, whether
capital or revenue, of the transferor company, except statutory
reserves, are not recognized. Any excess consideration over the value
of the net assets of the transferor company acquired is recognized as
goodwill. If the amount of the consideration is lower than the value of
the net assets acquired, the difference is treated as capital reserve.
The goodwill arising on amalgamation is amortized to the statement of
profit and loss on a systematic basis over its useful life not
exceeding five years.
Presently no amalgamation have been entered into by the Company.
X. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule III to the
Companies Act, 2013, the company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBITDA on the basis of profit / (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortization expense, finance costs and tax expense.
Mar 31, 2014
A. Change in accounting policy
Presentation and disclosure of financial statements
There is no change in accounting policy during the year and company has
also reclassified the previous year figures in accordance with the
requirements applicable in the current year.
B. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
C. Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price. In case of revaluation of fixed
assets, any revaluation surplus is credited to the revaluation reserve,
except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the statement of profit and loss,
in which case the increase is recognized in the statement of profit and
loss. A revaluation deficit is recognized in the statement of profit
and loss, except to the extent that it offsets an existing surplus on
the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
The Company did not elect to exercise an irrevocable option to amortize
exchange rate fluctuation on long term foreign currency monetary asset/
liability over the life of the asset/ liability or by March 31, 2012,
whichever is earlier, subsequent to the amendment to AS-11 by the
Ministry of Corporate affairs.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
D. Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated on a straight line value -
single shift basis using the rates those prescribed under the Schedule
XIV to the Companies Act, 1956. The company has used the following
rates to provide depreciation on its fixed assets. Building (Factory)
- 3.34 %
Building (Other than Factory) - 1.63 % Plant and Machinery - 4.75 % or
based on
usage of the assets Office Equipments - 4.75 %
Furniture and Fittings - 6.33 %
Computers - 16.21 % or based on
usage of the assets
Vehicles -9.5 %
E. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a Written Down Value basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Research and Development costs Research costs are expensed as incurred.
Development expenditure incurred on an individual project is recognized
as an intangible asset when the company can demonstrate all the
following:
1) The technical feasibility of completing the intangible asset so that
it will be available for use or sale
2) Its intention to complete the asset
3) Its ability to use or sell the asset
4) How the asset will generate future economic benefits
5) The availability of adequate resources to complete the development
and to use or sell the asset
6) The ability to measure reliably the expenditure attributable to the
intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete
and the asset is available for use. It is amortized on a Written Down
Value basis over the period of expected future benefit from the related
project, i.e., the estimated useful life of ten years. Amortization is
recognized in the statement of profit and loss. During the period of
development, the asset is tested for impairment annually.
A summary of amortization policies applied to the company''s intangible
assets is as below:
Goodwill -60%
Brands/trademarks - 20%
Patents and intellectual property
rights (IPR) -20%
Technical know-how - 20%
Computer software - 40% or based on
use of the asset
The residuel Value if any after amortising at the above rate ie.,based
on the estimated usefull life of the asset is amortised in the final
year of the estimated life of the asset.
F. Leases
Where the company is lessee
Finance leases, which effectively transfer to the company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a Written Down Value basis over the
useful life of the asset or the useful life envisaged in Schedule XIV
to the Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
Written Down Value basis over the shorter of the estimated useful life
of the asset, the lease term or the useful life envisaged in Schedule
XIV to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Where the company is the lessor Leases in which the company transfers
substantially all the risks and benefits of ownership of the asset are
classified as finance leases. Assets given under finance lease are
recognized as a receivable at an amount equal to the net investment in
the lease. After initial recognition, the company apportions lease
rentals between the principal repayment and interest income so as to
achieve a constant periodic rate of return on the net investment
outstanding in respect of the finance lease. The interest income is
recognized in the statement of profit and loss. Initial direct costs
such as legal costs, brokerage costs, etc. are recognized immediately
in the statement of profit and loss.
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
Presently the company lease out its surplus place in its operating
premises which is renewed on a 11 months basis.
G. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
H. Impairment of tangible and intangible assets
The company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
company''s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible fixed assets, where the revaluation
was taken to revaluation reserve. In this case, the impairment is also
recognized in the revaluation reserve up to the amount of any previous
revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
I. Grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the company will comply with the
conditions attached to them, and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and released to income in equal amounts
over the expected useful life of the related asset.
Where the Company receives non-monetary grants, the asset is accounted
for on the basis of its acquisition cost. In case a non-monetary asset
is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters'' contribution are credited
to capital reserve and treated as a part of the shareholders'' funds.
Grants received on agreed terms to perform research activites are
recognized when there is reasonable assurance that (i) the company will
comply with the conditions attached to them, and (ii) the grant will be
received. Research costs are expensed as incurred.
J. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
Investment property
An investment in land or buildings, which is not intended to be
occupied substantially for use by, or in the operations of, the
company, is classified as investment property. Investment properties
are stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any.
The cost comprises purchase price, borrowing costs if capitalization
criteria are met and directly attributable cost of bringing the
investment property to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Depreciation on building component of investment property is calculated
on a written down value basis using the rate prescribed under the
Schedule XIV to the Companies Act, 1956 as mentioned in point (d)
above.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
K. Inventories & Quantitative Details
The Company is a service company primarily rendering information
technology services. Accordingly it doesnot hold any physical
inventories.
The Company is primarily engaged in development and maintenance of
computer software. The production and sale of such software cannot be
expressed in generic unit. Hence it is not possible to give the
quantitative details of sales and certain information as required under
paragraphs 5 (viii)(c) of general instructions for the preparation of
statement of Profit and Loss as per revised Schedule VI to the
Companies Act, 1956.
L. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Operational Revenue
Revenue from software development services comprises revenue from time
and material and fixed-price contracts. Revenue from time and material
contracts are recognized as related services are performed.
Revenue from fixed-price contracts are recognized in accordance with
the percentage of completion method / as per the terms of the contract.
Maintenance revenue is considered on acceptance of the contract and is
accrued over the period of the contract. Other income is recognized on
accrual basis.
Revenue from customer training, support and other services is
recognized as the related services are performed.
Cost and related earnings in excess of billings are classified as
''Unbilled revenues'' under loans and advances while the billing in
excess of cost and related earnings is classified as ''Unearned revenue''
under current liabilities.
Provision for estimated losses, if any, on incomplete contracts are
recorded in the period in which such losses become probable based on
the current contract estimates.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Dividends
Dividend income is recognized when the company''s right to receive
dividend is established by the reporting date.
M. Foreign currency translation
Foreign currency transactions and balances
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non- monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non- monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences
From accounting periods commencing on or after 7 December 2006, the
company accounts for exchange differences arising on
translation/settlement of foreign currency monetary items as below:
1) Exchange differences arising on a monetary item that, in substance,
forms part of the company''s net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
Mar 31, 2013
A. Change in accounting policy
Presentation and disclosure of financial statements
There is no change in accounting policy during the year and company has
also reclassified the previous year figures in accordance with the
requirements applicable in the current year.
B. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
C. Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
In case of revaluation of fixed assets, any revaluation surplus is
credited to the revaluation reserve, except to
the extent that it reverses a revaluation decrease of the same asset
previously recognized in the statement of profit and loss, in which
case the increase is recognized in the statement of profit and loss. A
revaluation deficit is recognized in the statement of profit and loss,
except to the extent that it offsets an existing surplus on the same
asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
The Company did not elect to exercise an irrevocable option to amortize
exchange rate fluctuation on long term foreign currency monetary asset/
liability over the life of the asset/ liability or by March 31, 2012,
whichever is earlier, subsequent to the amendment to AS-11 by the
Ministry of Corporate affairs.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
D. Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated on a straight line value -
single shift basis using the rates those prescribed under the Schedule
XIV to the Companies Act, 1956. The company has used the following
rates to provide depreciation on its fixed assets. Building (Factory)
- 3.34 %
Building (Other than Factory) - 1.63 % Plant and Machinery - 4.75 % or
based on usage of the assets Office Equipments - 4.75 %
Furniture and Fittings - 6.33 %
Computers - 16.21 % or based on usage of the assets Vehicles -9.5 %
E. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a Written Down Value basis over the
estimated useful economic life. The company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the effect that useful life of an
intangible asset exceeds ten years, the company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Research and Development costs Research costs are expensed as incurred.
Development expenditure incurred on an individual project is recognized
as an intangible asset when the company can demonstrate all the
following:
1) The technical feasibility of completing the intangible asset so that
it will be available for use or sale
2) Its intention to complete the asset
3) Its ability to use or sell the asset
4) How the asset will generate future economic benefits
5) The availability of adequate resources to complete the development
and to use or sell the asset
6) The ability to measure reliably the expenditure attributable to the
intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete
and the asset is available for use. It is amortized on a Written Down
Value basis over the period of expected future benefit from the related
project, i.e., the estimated useful life of ten years. Amortization is
recognized in the statement of profit and loss. During the period of
development, the asset is tested for impairment annually.
A summary of amortization policies applied to the company''s intangible
assets is as below: Goodwill -60%
Brands/trademarks - 20%
Patents and intellectual property
rights (IPR) -20%
Technical know-how - 20%
Computer software - 40% or based on
use of the asset
The residual Value if any after amortising at the above rate ie. based
on the estimated usefull life of the asset is amortised in the final
year of the estimated life of the asset.
F. Leases
Where the company is lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a Written Down Value basis over the
useful life of the asset or the useful life envisaged in Schedule XIV
to the Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
Written Down Value basis over the shorter of the estimated useful life
of the asset, the lease term or the useful life envisaged in Schedule
XIV to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Where the company is the lessor Leases in which the company transfers
substantially all the risks and benefits of ownership of the asset are
classified as finance leases. Assets given under finance lease are
recognized as a receivable at an amount equal to the net investment in
the lease. After initial recognition, the company apportions lease
rentals between the principal repayment and interest income so as to
achieve a constant periodic rate of return on the net investment
outstanding in respect of the finance lease. The interest income is
recognized in the statement of profit and loss. Initial direct costs
such as legal costs, brokerage costs, etc. are recognized immediately
in the statement of profit and loss.
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
Presently the company lease out its surplus place in its operating
premises which is renewed on a 11 months basis.
G. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
H. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists or
when annual impairment testing for an asset is required, the company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
company''s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible fixed assets, where the revaluation
was taken to revaluation reserve. In this case, the impairment is also
recognized in the revaluation reserve up to the amount of any previous
revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
I. Grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the company will comply with the
conditions attached to them, and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and released to income in equal amounts
over the expected useful life of the related asset.
Where the company receives non-monetary grants, the asset is accounted
for on the basis of its acquisition cost. In case a non-monetary asset
is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters'' contribution are credited
to capital reserve and treated as a part of the shareholders'' funds.
Grants received on agreed terms to perform research activites are
recognized when there is reasonable assurance that (i) the company will
comply with the conditions attached to them, and (ii) the grant will be
received. Research costs are expensed as incurred.
J. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
Investment property
An investment in land or buildings, which is not intended to be
occupied substantially for use by, or in the operations of, the
Company, is classified as investment property. Investment properties
are stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any.
The cost comprises purchase price, borrowing costs if capitalization
criteria are met and directly attributable cost of bringing the
investment property to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Depreciation on building component of investment property is calculated
on a written down value basis using the rate prescribed under the
Schedule XIV to the Companies Act, 1956 as mentioned in point (d)
above.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
K. Inventories & Quantitative Details
The Company is a service company primarily rendering information
technology services. Accordingly it doesnot hold any physical
inventories.
The Company is primarily engaged in development and maintenance of
computer software. The production and sale of such software cannot be
expressed in generic unit. Hence it is not possible to give the
quantitative details of sales and certain information as required under
paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act,
1956.
L. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Operational Revenue
Revenue from software development services comprises revenue from time
and material and fixed-price contracts.
Revenue from time and material contracts are recognized as related
services are performed.
Revenue from fixed-price contracts are recognized in accordance with
the percentage of completion method / as per the terms of the contract.
Maintenance revenue is considered on acceptance of the contract and is
accrued over the period of the contract. Other income is recognized on
accrual basis. Revenue from customer training, support and other
services is recognized as the related services are performed.
Cost and related earnings in excess of billings are classified as
''Unbilled revenues'' under loans and advances while the billing in
excess of cost and related earnings is classified as ''Unearned revenue''
under current liabilities.
Provision for estimated losses, if any, on incomplete contracts are
recorded in the period in which such losses become probable based on
the current contract estimates.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Dividends
Dividend income is recognized when the company''s right to receive
dividend is established by the reporting date.
M. Foreign currency translation
Foreign currency transactions and balances
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences
From accounting periods commencing on or after 7 December 2006, the
company accounts for exchange differences arising on
translation/settlement of foreign currency monetary items as below:
1) Exchange differences arising on a monetary item that, in substance,
forms part of the company''s net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
2) The Company did not elect to exercise an irrevocable option to
amortize exchange rate fluctuation on long term foreign currency
monetary asset/ liability over the life of the asset/ liability or by
March 31, 2012, whichever is earlier, subsequent to the amendment to
AS-11 by the Ministry of Corporate affairs.
3) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.
4) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
Forward exchange contracts are entered into to hedge foreign currency
risk of an existing asset/liability. The premium or discount arising
at the inception of forward exchange contract is amortized and
recognized as an expense/income over the life of the contract. Exchange
differences on such contracts, except the contracts which are long-term
foreign currency monetary items, are recognized in the statement of
profit and loss in the period in which the exchange rates change. Any
profit or loss arising on cancellation or renewal of such forward
exchange contract is also recognized as income or as expense for the
period. Any gain/ loss arising on forward contracts which are long-term
foreign currency monetary items is recognized in accordance with
paragraph 2 and 3. During the year company have not entered into any
forward exchange contracts.
Translation of integral and non-integral foreign operation
The Company classifies all its foreign operations as either "integral
foreign operations" or "non-integral foreign operations."
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the company itself.
The assets and liabilities of a non-integral foreign operation are
translated into the reporting currency at the exchange rate prevailing
at the reporting date and their statement of profit and loss are
translated at exchange rates prevailing at the dates of transactions or
weighted average weekly rates, where such rates approximate the
exchange rate at the date of transaction. The exchange differences
arising on translation are accumulated in the foreign currency
translation reserve. On disposal of a non-integral foreign operation,
the accumulated foreign currency translation reserve relating to that
foreign operation is recognized in the statement of profit and loss.
When there is a change in the classification of a foreign operation,
the translation procedures applicable to the revised classification are
applied from the date of the change in the classification.
N. Retirement and other employee benefits
(i) Short term employee benefit obligations are estimated and provided
for.
(ii) Post employment benefits and other long term employee benefits.
a) Defined Contribution plans
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The company has no obligation, other than the
contribution payable to the provident fund.
b) Defined benefit plans and compensated absences The company operates
defined benefit plans for its employees, viz., gratuity. The costs of
providing benefits under these plans are determined on the basis of
actuarial valuation at each year-end. Separate actuarial valuation is
carried out for each plan using the projected unit credit method.
Actuarial gains and losses for defined benefit plans are recognized in
full in the period in which they occur in the statement of profit and
loss.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long- term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based
on the actuarial valuation using the projected unit credit method at
the year-end. Actuarial gains/ losses are immediately taken to the
statement of profit and loss and are not deferred. The Company presents
the entire leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
Presently Company''s liability towards gratuity, other retirement
benefits and compensated absences are not actuarially determined. In
accordance with the Payment of Gratuity Act, 1972 the company provides
for a lump sum payment to eligible employees, at retirement or
termination of employment based on the last drawn salary and year of
employment with the company. The gratuity fund is managed by SBI
Gratuity Fund. The gratuity obligation is provided for based on
estimates from SBI gratuity fund.
O. Accounting for Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred
taxes, the timing differences which originate first are considered to
reverse first.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it
becomes reasonably certain or virtually certain, as the case may be,
that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax.
The Company recognizes MAT credit available as an asset only to the
extent that there is convincing evidence that the company will pay
normal income tax during the specified period, i.e., the period for
which MAT credit is allowed to be carried forward. In the year in which
the company recognizes MAT credit as an asset in accordance with the
Guidance Note on Accounting for Credit Available in respect of Minimum
Alternative Tax under the Income- tax Act, 1961, the said asset is
created by way of credit to the statement of profit and loss and shown
as "MAT Credit Entitlement." The company reviews the "MAT credit
entitlement" asset at each reporting date and writes down the asset to
the extent the company does not have convincing evidence that it will
pay normal tax during the specified period.
P. Employee stock compensation cost
In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines,1999 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of equity-
settled transactions is measured using the intrinsic value method and
recognized, together with a corresponding increase in the "Stock
options outstanding account" in reserves. The cumulative expense
recognized for equity- settled transactions at each reporting date
until the vesting date reflects the extent to which the vesting period
has expired and the company''s best estimate of the number of equity
instruments that will ultimately vest.
The expense or credit recognized in the statement of profit and loss
for a period represents the movement in cumulative expense recognized
as at the beginning and end of that period and is recognized in
employee benefits expense.
Where the terms of an equity-settled transaction award are modified,
the minimum expense recognized is the expense as if the terms had not
been modified, if the original terms of the award are met. An
additional expense is recognized for any modification that increases
the total intrinsic value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of
modification.
Q. Segment reporting
The Segment reporting of the company has been prepared in accordance
with the AS 17 "Segment Reporting" issued pursuant to the Companies
(Accounting Standard) Rules, 2006 and by The Institute of Chartered
Accountants of India.
The Company''s operation was focused on BFSI, QASS, Other emerging
verticals. Accordingly, these three business divisions comprise a
significant portion of the primary basis for the segmental information
set out in these financial statements.
Secondary Segmental reporting is reported on the basis of the
Geographical location of the customers. Geographical revenues are
segregated based on the location of the customer who is invoiced or in
relation to which the revenue is otherwise recognized.
R Earnings Per Share (EPS)
Basic EPS
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
Diluted EPS
The number of equity shares used in computing diluted earnings per
share comprises the weighted average equity shares considered for
deriving basic earnings per share, and also the weighted average number
of equity shares that could have been issued on the conversion of all
dilutive potential equity shares. Dilutive potential equity shares are
deemed converted as of the beginning of the period, unless issued at a
later date. The number of equity shares and potentially dilutive equity
shares are adjusted for any stock splits and bonus shares issued if
any.
S. Provisions
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed
the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of profit and loss net of any
reimbursement.
T. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably.
The company does not recognize a contingent liability but discloses its
existence in the financial statements.
U. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing
and financing activities of the Company are segregated.
V. Financial instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
The Company does not have any risk management policy with respect to
risk of foreign exchange fluctuations and is not a party to the
contractual provisions of the instrument.
Presently the company do not hold any derivative instruments.
W. Amalgamation accounting
The Company treats an amalgamation in the nature of merger if it
satisfies all the following criteria:
i. All the assets and liabilities of the transferor company become,
after amalgamation, the assets and liabilities of the transferee
company.
ii. Shareholders holding not less than 90% of the face value of the
equity shares of the transferor company (other than the equity shares
already held therein, immediately before the amalgamation, by the
transferee company or its subsidiaries or their nominees) become equity
shareholders of the transferee company.
iii. The consideration for amalgamation receivable by those equity
shareholders of the transferor company who agree to become shareholders
of the transferee company is discharged by the transferee company
wholly by the issue of equity shares, except that cash may be paid in
respect of any fractional shares.
iv. The business of the transferor company is intended to be carried
on, after the amalgamation, by the transferee company.
v. The transferee company does not intend to make any adjustment to the
book values of the assets and liabilities of the transferor company,
except to ensure uniformity of accounting policies.
All other amalgamations are in the nature of purchase.
The Company accounts for all amalgamations in the nature of merger
using the pooling of interest method. The application of this method
requires the company to recognize any non-cash element of the
consideration at fair value. The company recognizes assets, liabilities
and reserves, whether capital or revenue, of the transferor company at
their existing carrying amounts and in the same form as at the date of
the amalgamation. The balance in the statement of profit and loss of
the transferor company is transferred to the general reserve. The
difference between the amount recorded as share capital issued, plus
any additional consideration in the form of cash or other assets, and
the amount of share capital of the transferor company is adjusted in
reserves.
An amalgamation in the nature of purchase is accounted for using the
purchase method. The cost of an acquisition/ amalgamation is measured
as the aggregate of the consideration transferred, measured at fair
value. Other aspects of accounting are as below:
The assets and liabilities of the transferor company are recognized at
their fair values at the date of amalgamation.
The reserves, whether capital or revenue, of the transferor company,
except statutory reserves, are not recognized. Any excess
consideration over the value of the net assets of the transferor
company acquired is recognized as goodwill. If the amount of the
consideration is lower than the value of the net assets acquired, the
difference is treated as capital reserve. The goodwill arising on
amalgamation is amortized to the statement of profit and loss on a
systematic basis over its useful life not exceeding five years.
Presently no amalgamation have been entered into by the company.
X. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortization expense, finance costs and tax expense.
Mar 31, 2012
A. Change in accounting policy
During the year ended 31st March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
B. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
C. Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost
of bringing the asset to its working condition for the intended use.
Any trade discounts and rebates are deducted in arriving at the
purchase price.
In case of revaluation of fixed assets, any revaluation surplus is
credited to the revaluation reserve, except to the extent that it
reverses a revaluation decrease of the same asset previously recognized
in the statement of profit and loss, in which case the increase is
recognized in the statement of profit and loss. A revaluation deficit
is recognized in the statement of profit and loss, except to the extent
that it offsets an existing surplus on the same asset recognized in the
asset revaluation reserve. Subsequent expenditure related to an item
of fixed asset is added to its book value only if it increases the
future benefits from the existing asset beyond its previously assessed
standard of performance. All other expenses on existing fixed assets,
including day-to-day repair and maintenance expenditure and cost of
replacing parts, are charged to the statement of profit and loss for
the period during which such expenses are incurred.
The Company did not elect to exercise an irrevocable option to amortize
exchange rate fluctuation on long term foreign currency monetary asset/
liability over the life of the asset/ liability or by March 31, 2011,
whichever is earlier, subsequent to the amendment to AS-11 by the
Ministry of Corporate affairs.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
D. Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated on a straight line value -
single shift basis using the rates those prescribed under the Schedule
XIV to the Companies Act, 1956. The company has used the following
rates to provide depreciation on its fixed assets.
E. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not
capitalized and expenditure is reflected in the statement of profit and
loss in the year in which the expenditure is incurred.
Intangible assets are amortized on a Written Down Value basis over the
estimated useful economic life. The company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Research and Development costs Research costs are expensed as incurred.
Development expenditure incurred on an individual project is recognized
as an intangible asset when the company can demonstrate all the
following:
1) The technical feasibility of completing the intangible asset so that
it will be available for use or sale
2) Its intention to complete the asset
3) Its ability to use or sell the asset
4) How the asset will generate future economic benefits
5) The availability of adequate resources to complete the development
and to use or sell the asset
6) The ability to measure reliably the expenditure attributable to the
intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete
and the asset is available for use. It is amortized on a Written Down
Value basis over the period of expected future benefit from the related
project, i.e., the estimated useful life of ten years. Amortization is
recognized in the statement of profit and loss. During the period of
development, the asset is tested for impairment annually.
The residuel Value if any after amortising at the above rate ie.,based
on the estimated usefull life of the asset is amortised in the final
year of the estimated life of the asset.
F. Leases
Where the company is lessee
Finance leases, which effectively transfer to the company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a Written Down Value basis over the
useful life of the asset or the useful life envisaged in Schedule XIV
to the Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
Written Down Value basis over the shorter of the estimated useful life
of the asset, the lease term or the useful life envisaged in Schedule
XIV to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Where the company is the lessor Leases in which the company transfers
substantially all the risks and benefits of ownership of the asset are
classified as finance leases. Assets given under finance lease are
recognized as a receivable at an amount equal to the net investment in
the lease. After initial recognition, the company apportions lease
rentals between the principal repayment and interest income so as to
achieve a constant periodic rate of return on the net investment
outstanding in respect of the finance lease. The interest income is
recognized in the statement of profit and loss. Initial direct costs
such as legal costs, brokerage costs, etc. are recognized immediately
in the statement of profit and loss.
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
Presently the company lease out its surplus place in its operating
premises which is renewed on a 11 months basis.
G. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
H. Impairment of tangible and intangible assets
The company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used. The company bases its impairment calculation
on detailed budgets and forecast calculations which are prepared
separately for each of the company's cash-generating units to which the
individual assets are allocated. These budgets and forecast
calculations are generally covering a period of five years. For longer
periods, a long term growth rate is calculated and applied to project
future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible
fixed assets, where the revaluation was taken to revaluation reserve.
In this case, the impairment is also recognized in the revaluation
reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life. An assessment is
made at each reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the company estimates the asset's
or cash-generating unit's recoverable amount. A previously recognized
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since the
last impairment loss was recognized. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognized for the
asset in prior years. Such reversal is recognized in the statement of
profit and loss unless the asset is carried at a revalued amount, in
which case the reversal is treated as a revaluation increase.
I. Grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the company will comply with the
conditions attached to them, and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and released to income in equal amounts
over the expected useful life of the related asset.
Where the company receives non-monetary grants, the asset is accounted
for on the basis of its acquisition cost. In case a non-monetary asset
is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters' contribution are credited
to capital reserve and treated as a part of the shareholders' funds.
Grants received on agreed terms to perform research activites are
recognized when there is reasonable assurance that (i) the company will
comply with the conditions attached to them, and (ii) the grant will be
received. Research costs are expensed as incurred.
J. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees
and duties. If an investment is acquired, or partly acquired, by the
issue of shares or other securities, the acquisition cost is the fair
value of the securities issued. If an investment is acquired in
exchange for another asset, the acquisition is determined by reference
to the fair value of the asset given up or by reference to the fair
value of the investment acquired, whichever is more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
Investment property
An investment in land or buildings, which is not intended to be
occupied substantially for use by, or in the operations of, the
company, is classified as investment property. Investment properties
are stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any. The cost comprises purchase price,
borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the investment property to its working
condition for the intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.
Depreciation on building component of investment property is calculated
on a written down value basis using the rate prescribed under the
Schedule XIV to the Companies Act, 1956 as mentioned in point (d)
above.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
K. Inventories & Quantitative Details
The company is a service company primarily rendering information
technology services. Accordingly it does not hold any physical
inventories.
The company is primarily engaged in the development and maintenance of
computer software. The production and sale of such software cannot be
expressed in generic unit. Hence it is not possible to give the
quantitative details of sales and certain information as required under
paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act,
1956.
L. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Operational Revenue
Revenue from software development services comprises revenue from time
and material and fixed-price contracts. Revenue from time and material
contracts are recognized as related services are performed.
Revenue from fixed-price contracts are recognized in accordance with
the percentage of completion method / as per the terms of the contract.
Maintenance revenue is considered on acceptance of the contract and is
accrued over the period of the contract. Other income is recognized on
accrual basis.
Revenue from customer training, support and other services is
recognized as the related services are performed.
Cost and related earnings in excess of billings are classified as
ÃUnbilled revenues' under loans and advances while the billing in
excess of cost and related earnings is classified as ÃUnearned
revenue' under current liabilities.
Provision for estimated losses, if any, on incomplete contracts are
recorded in the period in which such losses become probable based on
the current contract estimates.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head Ãother incomeà in the
statement of profit and loss.
Dividends
Dividend income is recognized when the company's right to receive
dividend is established by the reporting date.
M. Foreign currency translation
Foreign currency transactions and balances
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non- monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non- monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences
From accounting periods commencing on or after 7 December 2006, the
company accounts for exchange differences arising on
translation/settlement of foreign currency monetary items as below:
1) Exchange differences arising on a monetary item that, in substance,
forms part of the company's net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal
of such net investment, the cumulative amount of the exchange
differences which have been deferred and which relate to that
investment is recognized as income or as expenses in the same period in
which the gain or loss on disposal is recognized.
2) The Company did not elect to exercise an irrevocable option to
amortize exchange rate fluctuation on long term foreign currency
monetary asset/ liability over the life of the asset/ liability or by
March 31, 2011, whichever is earlier, subsequent to the amendment to
AS-11 by the Ministry of Corporate affairs.
3) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the ÃForeign Currency Monetary Item
Translation Difference Accountà and amortized over the remaining life
of the concerned monetary item.
4) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
Forward exchange contracts are entered into to hedge foreign currency
risk of an existing asset/liability.
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense/income over the life
of the contract. Exchange differences on such contracts, except the
contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period. Any gain/ loss arising on forward
contracts which are long-term foreign currency monetary items is
recognized in accordance with paragraph 2 and 3.
During the year company have not entered into any forward exchange
contracts
Translation of integral and non-integral foreign operation
The company classifies all its foreign operations as either Ãintegral
foreign operationsà or Ãnon-integral foreign operations.Ã
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the company itself.
The assets and liabilities of a non-integral foreign operation are
translated into the reporting currency at the exchange rate prevailing
at the reporting date and their statement of profit and loss are
translated at exchange rates prevailing at the dates of transactions or
weighted average weekly rates, where such rates approximate the
exchange rate at the date of transaction. The exchange differences
arising on translation are accumulated in the foreign currency
translation reserve. On disposal of a non-integral foreign operation,
the accumulated foreign currency translation reserve relating to that
foreign operation is recognized in the statement of profit and loss.
When there is a change in the classification of a foreign operation,
the translation procedures applicable to the
revised classification are applied from the date of the
change in the classification.
N. Retirement and other employee benefits
(i) Short term employee benefit obligations are estimated and provided
for.
(ii) Post employment benefits and other long term employee benefits
a) Defined Contribution plans
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The company has no obligation, other than the
contribution payable to the provident fund.
b) Defined benefit plans and compensated absences The company operates
defined benefit plans for its employees, viz., gratuity. The costs of
providing benefits under these plans are determined on the basis of
actuarial valuation at each year-end. Separate actuarial valuation is
carried out for each plan using the projected unit credit method.
Actuarial gains and losses for defined benefit plans are recognized in
full in the period in which they occur in the statement of profit and
loss.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The company treats accumulated
leave expected to be carried forward beyond twelve months, as long-
term employee benefit for measurement purposes. Such long-term
compensated absences are provided for based on the actuarial valuation
using the projected unit credit method at the year-end. Actuarial
gains/ losses are immediately taken to the statement of profit and loss
and are not deferred. The company presents the entire leave as a
current liability in the balance sheet, since it does not have an
unconditional right to defer its settlement for 12 months after the
reporting date.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
Presently Company's liability towards gratuity, other retirement
benefits and compensated absences are not actuarially determined. In
accordance with the Payment of Gratuity Act, 1972 the company provides
for a lump sum payment to eligible employees, at retirement or
termination of employment based on the last drawn salary and year of
employment with the company. The gratuity fund is managed by SBI
Gratuity Fund. The gratuity obligation is provided for based on
estimates from SBI gratuity fund.
O. Accounting for Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the company's
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred
taxes, the timing differences which originate first are considered to
reverse first.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be
available against which deferred tax asset can be realized. Any such
write-down is reversed to the extent that it becomes reasonably certain
or virtually certain, as the case may be, that sufficient future
taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as ÃMAT Credit Entitlement.Ã
The company reviews the ÃMAT credit entitlementà asset at each
reporting date and writes down the asset to the extent the company does
not have convincing evidence that it will pay normal tax during the
specified period.
P. Employee stock compensation cost
In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of equity-
settled transactions is measured using the intrinsic value method and
recognized, together with a corresponding increase in the ÃStock
options outstanding accountà in reserves. The cumulative expense
recognized for equity- settled transactions at each reporting date
until the vesting date reflects the extent to which the vesting period
has expired and the company's best estimate of the number of equity
instruments that will ultimately vest.
The expense or credit recognized in the statement of profit and loss
for a period represents the movement in cumulative expense recognized
as at the beginning and end of that period and is recognized in
employee benefits expense.
Where the terms of an equity-settled transaction award are modified,
the minimum expense recognized is the expense as if the terms had not
been modified, if the original terms of the award are met. An
additional expense is recognized for any modification that increases
the total intrinsic value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of
modification.
Q. Segment reporting
As permitted by paragraph 4 of Accounting Standard-17 (AS-17), 'Segment
Reporting', if a single financial report contains both consolidated
financial statements and the
separate financial statements of the parent, segment information need
be presented only on the basis of the consolidated financial
statements. Thus, disclosures required by AS-17 are given in
consolidated financial statements.
R Earnings Per Share (EPS) Basic EPS
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding without a
corresponding change in resources.
Diluted EPS
The number of equity shares used in computing diluted earnings per
share comprises the weighted average equity shares considered for
deriving basic earnings per share and also the weighted average number
of equity shares that could have been issued on the conversion of all
dilutive potential equity shares. Dilutive potential equity shares are
deemed converted as of the beginning of the period, unless issued at a
later date. The number of equity shares and potentially dilutive equity
shares are adjusted for any stock splits and bonus shares issued if
any.
S. Provisions
A provision is recognized when the company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Where the company expects some or all of a provision to be reimbursed
the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of profit and loss net of any
reimbursement.
T. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a
present obligation that is not recognized because it is not probable
that an outflow of resources will be required to settle the obligation.
A contingent liability also arises in extremely rare cases where there
is a liability that cannot be recognized because it cannot be measured
reliably. The company does not recognize a contingent liability but
discloses its existence in the financial statements.
U. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short- term investments with an
original maturity of three months or less.
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities of the Company are segregated.
V. Financial instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
The company does not have any risk management policy with respect to
risk of foreign exchange fluctuations and is not a party to the
contractual provisions of the instrument.
Presently the company do not hold any derivative instruments.
W. Amalgamation accounting
The company treats an amalgamation in the nature of merger if it
satisfies all the following criteria:
i. All the assets and liabilities of the transferor company become,
after amalgamation, the assets and liabilities of the transferee
company.
ii. Shareholders holding not less than 90% of the face value of the
equity shares of the transferor company (other than the equity shares
already held therein, immediately before the amalgamation, by the
transferee company or its subsidiaries or their nominees) become equity
shareholders of the transferee company.
iii. The consideration for amalgamation receivable by those equity
shareholders of the transferor company who agree to become shareholders
of the transferee company is discharged by the transferee company
wholly by the issue of equity shares, except that cash may be paid in
respect of any fractional shares.
iv. The business of the transferor company is intended to be carried
on, after the amalgamation, by the transferee company.
v. The transferee company does not intend to make any adjustment to
the book values of the assets and liabilities of the transferor company
except to ensure uniformity of accounting policies.
All other amalgamations are in the nature of purchase. The company
accounts for all amalgamations in the nature of merger using the
pooling of interest method. The application of this method requires the
company to recognize any non-cash element of the consideration at fair
value. The company recognizes assets, liabilities and reserves, whether
capital or revenue, of the transferor company at their existing
carrying amounts and in the same form as at the date of the
amalgamation. The balance in the statement of profit and loss of the
transferor company is transferred to the general reserve. The
difference between the amount recorded as share capital issued plus any
additional consideration in the form of cash or other assets and the
amount of share capital of the transferor company is adjusted in
reserves.
An amalgamation in the nature of purchase is accounted for using the
purchase method. The cost of an acquisition/ amalgamation is measured
as the aggregate of the consideration transferred, measured at fair
value. Other aspects of accounting are as below:
Mar 31, 2010
1 Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis and in accordance with the accounting
principles generally accepted in India and comply with mandatory
accounting standards notified by the Central Government of India under
the Companies (Accounting Standards) Rules, 2006 and with the relevant
provisions of the Companies Act, 1956.
2. Use of Estimates
The preparation of the financial statements in conformity with the
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities on the date of the financial statements, disclosure of
contingent liabilities and reported amounts of revenues and expenses
for the year. Estimates are based on historical experience, where
applicable and other assumptions that management believes are
reasonable under the circumstances. Actual results could vary from
these estimates and any such differences are dealt within the period in
which results are known/materialize.
3. Fixed Assets and depreciation / amortization
3.1 Fixed assets are stated at historical cost. Cost includes related
taxes, duties, freight, insurance etc., attributable to acquisition,
installation and up-gradation of assets and borrowing cost incurred up
to date in which assets are ready for its installed use, but excludes
duties and taxes that are recoverable subsequently from taxing
authorities.
3.2 Intangible Assets are stated at development / acquisition cost less
accumulated amortization and impairment. Development expenses of the
following copyrights namely - EduCampus, HMIS, HBfX and IPIg have been
capitalized in the financials as Intangible Assets. The intangible
assets are amortized over a period of 5 years.
3.3 Depreciation on Buildings, Plant & Machinery, Vehicles, Computers,
Furniture and Office Equipments is calculated on straight line method -
single shift basis based on rates prescribed in Schedule XIV to the
Companies Act, 1956
3.4 Depreciation / amortization on additions during the year are
provided on a pro rata basis from the date, the assets are put to use.
In respect of assets sold or disposed off during the year, depreciation
/ amortization is provided till the date of sale or disposal of the
assets.
3.5 Fixed assets of the foreign branches have been reinstated at the
exchange rate prevailing on the date of balance sheet.
4 Impairment of assets
The management periodically assesses using external and internal
sources, whether there is an indication that an asset may be impaired.
An impairment loss is recognized wherever the carrying value of an
asset exceeds its recoverable amount. The recoverable amount is higher
than 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. An impairment
loss for an asset is reversed if and only if, the reversal can be
related objectively to an event occurring after the impairment loss was
recognized. The carrying amount of an asset is increased to its revised
recoverable amount, provided that this amount does not exceed the
carrying amount that would have been determined (net of any accumulated
amortization or depreciation) had no impairment loss been recognized
for the asset in prior years.
5 Goodwill ,
The excess cost of acquisition over the carrying value of the net
assets on the date of merger is recognized in the financial statements
as goodwill. The Company evaluates carrying value of its goodwill
whenever events or change in circumstance indicate that its carrying
value may be impaired for diminution other than temporary. The value of
the Goodwill in the books as at 31 March 2010 is Rs. 71.63 crores.
(Prev. year - Rs. 71.63 crores) However, the Company presently
reassessed that there are no circumstances or change in circumstances
to indicate any diminution in the carrying value of goodwill.
6 Investments
Investments are classified as either current or long-term based on
management intention at the time of purchase. Current investments are
carried at the lower of cost or market value. Long-term investments are
stated at cost less provisions recorded to recognize any decline, other
than temporary, in the carrying value of each investment. Cost of
overseas investments comprises the Indian rupee value of the
consideration paid for the investment translated at the exchange rate
prevalent at the date of investment. The wholly owned subsidiary
Pingho Associates Corporation (the Company) incorporated in USA ceased
its business operation during the year and filed a voluntary chapter 11
bankruptcy protection petition to reorganize its business with US
bankruptcy court, Eastern District of Virginia, USA.
7 Revenue Recognition
7.1 Revenue from software development services comprises revenue from
time and material and fixed-price contracts.
7.2 Revenue from time and material contracts are recognized as related
services are performed.
7.3 Revenue from fixed-price contracts are recognized in accordance
with the percentage of completion method / as per the terms of the
contract.
7.4 Maintenance revenue is considered on acceptance of the contract and
is accrued over the period of the contract. Other income is recognized
on accrual basis.
7.5 Revenue from customer training, support and other services is
recognized as the related services are performed.
7.6 Cost and related earnings in excess of billings are classified as
Unbilled revenues under loans and advances while the billing in
excess of cost and related earnings is classified as Unearned revenue
undercurrent liabilities.
7.7 Provision for estimated losses, if any, on incomplete contracts are
recorded in the period in which such losses become probable based on
the current contract estimates.
8 Foreign Currency transactions
The Company is exposed to currency fluctuations on foreign currency
transactions. Foreign currency transactions are accounted in the books
of accounts at the average rate for the month.
Transaction:
The difference between the rate at which foreign currency transactions
are accounted and the rate at which they are realized is recognized in
the profit and loss account.
Translation:
Monetary foreign currency assets and liabilities at period end are
restated at the closing rate. The difference arising from the
restatement is recognized in the profit and loss account.
The Company did not elect to exercise an irrevocable option to amortize
exchange rate fluctuation on long term foreign currency monetary asset/
liability over the life of the asset/ liability or by March 31, 2011,
whichever is earlier, subsequent to the amendment to
AS-11 by the Ministry of Corporate affairs.
Non integral Operations
The Standalone Financial Statements are prepared in Indian
Rupees, which is the functional currency for the Company.
The translation of the functional currencies into the reporting
currency is considered under the category "Non integral Operation" as
per Accounting Standard 11 - The Effects of changes in Foreign exchange
rates. While the revenues and expenses of the foreign branches have
been converted at average conversion rate for the year, Assets and
liabilities have been converted at closing exchange rate. The
difference arising from the restatement is recognized in the Exchange
reinstatement reserve under reserves and surplus.
9 Employee Benefits
a. Short term employee benefit obligations are estimated and provided
for.
b. Post employment benefits and other long term employee benefits
(i) Defined Contribution plans
Companys contribution to provident fund, superannuation fund, employee
state insurance and other funds are determined under the relevant
schemes and / or statute and charged to revenue.
(ii) Defined benefit plans and compensated absences Companys liability
towards gratuity, other retirement benefits and compensated absences
are not actuarially determined. In accordance with the Payment of
Gratuity Act, 1972 the company provides for a lump sum payment to
eligible employees, at retirement or termination of employment based on
the last drawn salary and year of employment with the company. The
gratuity fund is managed by SBI Gratuity Fund. The gratuity obligation
is provided for based on estimates from SBI gratuity fund. The company
records an obligation for compensated absences in the period in which
the employee renders services that increase this entitlement. The
company measures the expected cost of compensated absence as the
additional amount that the company expects to pay as a result of the
unused entitlement that has accumulated at the balance sheet date.
10 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized only when there is a present obligation as a
result of past events and when a reasonable estimate of the amount of
obligation can be made. Contingent liability is disclosed for (i)
Possible obligations which will be confirmed only by future events not
wholly within the control of the company or (ii) present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
assets are neither recognized nor disclosed in tjrie financial
statements.
11 Cash Flow Statement
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities of the Company are segregated.
12 Earnings per share
Basic
The number of equity shares used in computing basic earnings per share
is the weighted average number of shares outstanding during the period
excluding equity shares held by controlled trust. Diluted
The number of equity shares used in computing diluted earnings per
share comprises the weighted average equity shares considered for
deriving basic earnings per share, and also the weighted average number
of equity shares that could have been issued on the conversion of all
dilutive potential equity shares. Dilutive potential equity shares are
deemed converted as of the beginning of the period, unless issued at a
later date. The number of equity shares and potentially dilutive equity
shares are adjusted for any stock splits and bonus shares issued if
any.
13 Accounting for Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to timing differences that result between the
profit offered for income taxes and the profit as per the financial
statements of each entity in the Company. Deferred taxes are recognized
in respect of timing differences which originate during the tax holiday
period but reverse after the tax holiday period. For this purpose,
reversal of timing difference is determined using first in first out
method. 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. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that
includes the enactment/substantive enactment date. Deferred tax assets
on timing differences are recognized only if there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. However,
deferred tax assets on the timing differences when unabsorbed
depreciation and losses carried forward exist, are recognized only to
the extent that there is virtual certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realized.
Deferred tax assets are reassessed for the appropriateness of their
respective carrying amounts at each balance sheet date. The Company
offsets, on a year on year basis, the current tax assets and
liabilities, where it has a legally enforceable right and where it
intends to settle such assets and liabilities on a net basis.
14 Research and development cost
Research costs are expenses as incurred. Software product development
costs are expensed as incurred unless technical and commercial
feasibility of the project is demonstrated, future economic benefits
are probable, the company has an intention and ability to complete and
use or sell the software and the cost can be measured reliably.
15 Financial Instruments
The company does not have any risk management policy with respect to
risk of foreign exchange fluctuations and is not a party to the
contractual provisions of the instrument.