Mar 31, 2023
CORPORATE INFORMATION
3i Infotech Limited (referred to as âThe Companyâ) is a Global Information Technology Company committed to Empowering Business TransformationThe business activities of The Company are broadly divided into two categories, viz. IT Solutions and Transaction Services. The IT Solutions business comprises of Cloud Computing, Application-Automation-Analytics (AAA), Platform Solutions (BPaaS, KPaaS, GRC), Infrastructure Management Services, Application Development, Digital Transformation Consulting and NextGen Business services (5G, SASE, Edge Computing, Cognitive Computing, IIoT, Cyber Security Services, etc.) while Transaction Services comprise of BPS and KPO services covering management of back office operations. The Company has sold its software products business on March 31, 2023, while it continues to operate its services business.
The Company is a public limited Company incorporated and domiciled in India. Its shares are listed on Bombay Stock Exchange and National Stock Exchange in India. The address of its registered office is International Infotech Park, Tower No.5, 3rd to 6th floors, Vashi, Navi Mumbai-400 703.
The financial statements for the year ended March 31, 2023 were approved by the Board of Directors and authorised for issue on May 06,2023
| SIGNIFICANT ACCOUNTING POLICIESa) Statement of compliance
The Standalone financial statements which comprises of Standalone Balance Sheet as at March 31, 2023, the Statement of Profit and Loss for the year ended March 31 2023, the Statement of Cash Flows for the year ended March 31 2023 and the Statement of Changes in Equity for the year ended March 31 2023 and accounting policies and other explanatory information (together hereinafter referred to as âStandalone Financial Statements'') and have been prepared in accordance with the Indian Accounting Standards (referred to as âInd ASâ) prescribed under Section 133 of the Companies Act, 2013 read with The Companies (Indian Accounting Standards) Rules as amended from time to time.
These financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally
based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
c) Critical accounting estimates and judgments
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
Key sources of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of impairment of investments, useful lives of property, plant and equipment, valuation of deferred tax assets, provisions and contingent liabilities.
(i) Impairment of investments in subsidaries
The Company reviews its carrying value of investments carried at cost / amortised cost annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the statement of profit and loss.
(ii) Useful lives of property, plant and equipment and Intangible Assets
The Company reviews the useful life of property, plant and equipment and intangible asset at the end of each reporting period. This reassessment may result in change in depreciation and amortisation expense in future periods.
(iii) Provision for Income Tax and Deferred Tax Assets
The Company uses estimates and judgements based on the relevant rulings in the areas of allocation of revenue, costs, allowances
and disallowances which is exercised while determining the provision for income tax. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Accordingly, the Company exercises its judgement to reassess the carrying amount of deferred tax assets at the end of each reporting period.
(iv) Provisions, Contingent liabilities and Contingent Assets
A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits and compensated absences) are not discounted to its present value unless the effect of time value of money is material and are determined based on best estimate required to settle the obligation at the Standalone Balance sheet date. These are reviewed at each Standalone Balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognised in the financial statements. A contingent asset is neither recognised nor disclosed in the Standalone financial statements.
The Company''s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.
Fixed-price maintenance revenue is recognised rateably on a straight-line basis when services
are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed-price maintenance contract is recognised rateably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and the Company''s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognise the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.
The Company uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Company to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information
Contracts with customers include subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Company is acting as an agent between the customer and the vendor, and gross when the Company is the principal for the transaction. In doing so, the Company first evaluates whether it controls the good or service before it is transferred to the customer. The Company considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore, is acting as a principal or an agent.
Provisions for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses become probable, based on the estimated efforts or costs to complete the contract.
The Company earns primarily from providing services of Information Technology (IT) solutions and Transaction services.
- Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of services rendered is net of variable consideration on account of discounts and schemes offered by the Company as an part of the contract.
Revenue from time and material and job contracts is recognised on output basis measured by units delivered, efforts expended, number of transactions processed, etc.
Revenue related to fixed price maintenance and support services contracts where the Company is standing ready to provide services is recognised based on time elapsed mode and revenue is straight lined over the period of performance.
Revenue from software development and related services have been recognised basis guidelines of Ind AS 115 - âRevenue from contract with customersâ, by applying the revenue recognition criteria for each distinct performance obligation based on the contractual arrangement in conjunction with the Company''s accounting policies.
Revenue from Licenses where customer obtains a â right to use â the license is recognised at the time when the license is made available to the customer.
When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling price.
Revenue from the sale of and Cost of, distinct third party hardware is recognised upon performance of the contractual obligation.
The Company recognises revenue in terms of the contracts with its customers, combined with its accounting policies. Revenue is measured based on the
transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Revenue recognition for fixed priced development contracts is based on percentage completion method. Invoicing to the client is based on milestones as stipulated in the contract.
Revenue from transaction services and other service contracts is recognised based on transactions processed or manpower deployed.
Revenue from sharing of infrastructure facilities is recognised based on usage of facilities.
Revenue recognised over and above the billings on a customer is classified as unbilled revenue.
Invoicing in excess of earnings are classified as unearned revenue.
Dividend income is recorded when the right to receive payment is established. Interest income is recognised using the effective interest method.
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The Company determines the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers all relevant facts and circumstances that create an economic incentive for the Company to excericise the option to extend the lease, or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the non-cancellable period of a lease. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics (Refer note 38).
Leases Accounting policy The Company as a lessee
The Company''s lease asset classes primarily consist of leases for buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether : (i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a right-of-use (ROU) asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low value leases. For these short-term and low-value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The ROU assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets.
In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortised cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination option.ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination option.
Lease liability and ROU assets have been separately presented in the Standalone Balance Sheet.
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the ROU asset arising from the head lease.
For operating leases, rental income is recognised on a straight line basis over the term of the relevant lease.
Costs and expenses are recognised when incurred and have been classified according to their nature.
The costs of the Company are broadly categorised in employee benefit expenses, cost of third party products and services, finance costs ,depreciation and amortisation and other expenses. Employee benefit expenses include employee compensation, allowances paid, contribution to various funds and staff welfare expenses. Cost of third party products and services mainly include purchase of software licenses and products ,fees to external consultants ,cost of running its facilities, cost of equipment and other operating expenses. Finance cost includes interest and other borrowing cost. Other expenses is an aggregation
of costs which are individually not material such as commission and brokerage, printing and stationery, legal and professional charges, communication, repairs and maintenance etc.
The functional currency of the Company is Indian rupee ('').
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in statement of profit and loss. A monetary item for which settlement is neither planned nor likely to occur in the foreseeable future is considered as a part of the entity''s net investment in that foreign operation.
Non monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined
Income tax expense comprises current and deferred income tax. Income tax expense is recognised in net profit in the Statement of Profit and Loss, except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or other comprehensive income. Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognised for all temporary differences arising between the tax bases of assets and liabilities, and their carrying amounts in the financial statements.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. These are expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognised as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised. Deferred income taxes are not provided on the undistributed earnings of subsidiaries and branches where it is expected that the earnings of the subsidiary or branch will not be distributed in the foreseeable future. The Company offsets current tax assets and current tax liabilities; deferred tax assets and deferred tax liabilities; where it has a legally enforceable right to set off the recognised amounts and where it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to equity.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
(ii) Financial assetsInitial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset. However, trade receivables that do not contain a significant financing component are measured at transaction price. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the
market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortised cost
A âdebt instrument'' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
- Debt instrument at fair value through other comprehensive income (FVTOCI)
A âdebt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
(a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
(b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain or loss in the Statement of Profit and Loss. On derecognition of the asset, cumulative gain or loss previously recognised in
OCI is reclassified from the equity to Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
- Debt instrument at fair value through profit and loss (FVTPL)
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatch''). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by- instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to statement of profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all
changes recognised in the statement of profit and Loss.
Interest in subsidiaries, associates and joint ventures are accounted at cost.
A financial asset (or, where applicable, a part of a financiaL asset or part of a group of simiLar financial assets) is primarily derecognised (i.e. removed from the Company''s standalone balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
-The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-through'' arrangement; and either (a) the Company has transferred substantiaLLy aLL the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantiaLLy aLL the risks and rewards of the asset, but has transferred control of the asset.
(iii) Financial liabilitiesInitial recognition and measurement
Financial liabilities are classified, at initial recognition, as financiaL LiabiLities at fair vaLue through profit and Loss, Loans and borrowings or payabLes as appropriate.
All financial liabilities are recognised initially at fair vaLue and, in the case of Loans and borrowings and payabLes, net of directLy attributabLe transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings incLuding bank overdrafts and financiaL guarantee contracts.
The measurement of financial liabilities depends on their classification, as described below:
- Financial Liabilities at fair value through profit and loss
Financial liabilities at fair value through profit and loss include financial liabilities held for trading
and financiaL LiabiLities designated upon initiaL recognition as at fair vaLue through profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category aLso incLudes derivative financiaL instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are aLso cLassified as heLd for trading unLess they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair vaLue through profit and loss are designated as such at the initial date of recognition, and onLy if the criteria in Ind AS 109 are satisfied. These gains / loss are not subsequently transferred to Statement of Profit and Loss. However, the Company may transfer the cumuLative gain or Loss within equity. ALL other changes in fair vaLue of such LiabiLity are recognised in the Statement of Profit and Loss. The Company has not designated any financiaL liability as at FVTPL.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and Losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
- Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a Loss it incurs because the specified debtor faiLs to make a payment when due in accordance with the terms of a debt instrument. FinanciaL guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs
that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
(iv) Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
(v) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the standalone balance sheet if there is a currently enforceable
legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
k) Compound financial instruments
Compound financial instruments are separated into liability and equity components based on the terms of the contract.
On issuance of the compound financial instruments, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption.
The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity since conversion option meets Ind AS 32 criteria for fixed to fixed classification. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the compound financial instruments based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised.
l) Investments in subsidiaries
Investments in subsidiaries are measured at cost less impairment.
m) Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalised until the property, plant and equipment are ready for use, as intended by the Management. The charge in respect of periodic depreciation is derived at after determining an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to statment of profit and loss during the reporting period in which they are incurred.
The estimated useful lives of assets are as follows:
Category of Assets |
Useful lives adopted by Company |
Useful Lives prescribed under Schedule II of the Act |
Computers |
5 years |
3-6 years |
Plant and Machinery, Electrical Installation |
5 years |
15 years |
Office Equipment |
5 years |
5 years |
Furniture and Fixtures |
5 years |
10 years |
Vehicles |
5 years |
10 years |
Based on technical evaluation, the Management believes that the useful lives, as given above, best represent the period over which the Management expects to use these assets. Hence, the useful lives for these assets are different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end. The useful lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under other non-current assets. The cost of assets not ready to use before such date are disclosed under âCapital work-in-progress''. Subsequent expenditures relating to property, plant and equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit and loss.
Intangible assets acquired separately are measured on initial recognition at cost. Subsequently, following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Intangible assets are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss.
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 recognised in the statement of profit and loss when the asset is derecognised.
Research costs are expensed as incurred. Development expenditure, on an individual project, is recognised as an intangible asset when the Company can demonstrate:
¦ The technical feasibility of completing the intangible asset so that it will be available for use or sale
¦ Its intention to complete and its ability and intention to use or sell the asset
¦ How the asset will generate future economic benefits
¦ The availability of resources to complete the asset
¦ The ability to measure reliably the expenditure during development
Subsequently, following 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 amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is
available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss. During the period of development, the asset is tested for impairment annually.
o) Impairment(i) Financial assets (other than at fair value)
The Company assesses at each date of Standalone Balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and/or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk or the financial asset has increased significantly since initial recognition.
As at the end of each financial year, the carrying amounts of Property, Plant and Equipment, Intangible assets and Investments in Subsidiaries and Joint Ventures are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the as\set does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The amount of value-in-use is determined as the present value of estimated future cash flows from the continuing use of an asset, which may vary based on the future performance of the Company and from its disposal at the end of its useful life. For this purpose, the discount rate (pre-tax) is determined based on the weighted average cost of capital of the Company suitably adjusted for risks specified to the estimated cash flows of the asset.
If such assets are considered to be impaired, the impairment to be recognised in the Statement of Profit and Loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the 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 depreciation) had no impairment loss been recognised for the asset in prior years.
p) Employee benefits(i) Short-term obligations
Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. These liabilities are presented as current liabilities in the standalone balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation.
The obligations are presented as current liabilities in the standalone balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following postemployment schemes:
(a) defined benefit plans such as gratuity; and
(b) defined contribution plans such as provident fund.
(c) superannuation contribution plans.
The liability or asset recognised in the standalone balance sheet in respect of defined benefit pension and gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The benefits which are denominated in currency other than INR, the cash flows are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in OCI. They are included in retained earnings in the statement of changes in equity and in the standalone balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in statement of profit and loss as past service cost.
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
- Superannuation contribution plan
Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.
(iv) Share-based payments Employee Benefits in Foreign Branch
In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment / entitlement as applicable for employees in foreign branch are provided on the basis of actuarial valuation and based on estimates.
(v) Share-based payments
Share-based compensation benefits are provided to employees via the Employee Option Plan.
The fair value of options granted under the Employee Option Plan is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
- including any market performance conditions
- excluding the impact of any service and nonmarket performance vesting conditions, and
- including the impact of any non-vesting conditions.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in statement of profit and loss, with a corresponding adjustment to equity.
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred and are recognised in the statement of profit and loss.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
t) Contingent liabilities recognised in a business combination
A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with the requirements for provisions above or the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the requirements for revenue recognition.
u) Contributed equity
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
w) Earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
x) Current/non current classification
The Company presents assets and liabilities in the standalone balance sheet based on current/ noncurrent classification. An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing the inventory to its present location and condition are included in the cost of inventories.
Carried at lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated. The company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
aa) Notes to Standalone Financials: RBI Application Under FEMA Act, 1999
The company has long outstanding receivables and payable balances from/to its foreign subsidiaries. The company has made RBI Application for seeking approval for set-off of Trade Receivables from its 100% foreign subsidiaries against Trade Payables to its 100% foreign subsidiaries under the Foreign Exchange Management Act, 1999, and regulations thereunder.
The subsidiaries receivables were accrued pursuant to the software development services provided by the Company to the above mentioned subsidiaries. The subsidiaries were unable to generate enough business for payment of dues to the Company. Due to this reason the management has applied for set off of intercompany receivables and payables to reserve bank of India under FEMA regulations.
ab) Recent accounting pronouncements:
Standards issued but not yet effective
In March 2023, the Ministry of Corporate Affairs (MCA) issued the Companies (Indian Accounting Standards) Amendment Rules, 2023,which amended certain IND AS as expained below:
(i) Ind AS 1- Presentation of Financial Statements - the amendment prescribes disclosure of material accounting policies
Mar 31, 2018
a) Statement of compliance
These standalone financial statements have been prepared in accordance with the Indian Accounting Standards (referred to as âInd ASâ) prescribed under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules as amended from time to time.
b) Basis of preparation
These financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
c) Use of estimates and judgments
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected. Key sources of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of impairment of investments, useful lives of property, plant and equipment, valuation of deferred tax assets, provisions and contingent liabilities.
(i) Impairment of investments
The Company reviews its carrying value of investments carried at cost / amortised cost annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
(ii) Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
(iii) Valuation of deferred tax assets
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note (i) below.
(iv) Provisions and Contingent liabilities
A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits and compensated absences) are not discounted to its present value unless the effect of time value of money is material and are determined based on best estimate required to settle the obligation at the Balance sheet date. These are reviewed at each Balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognised in the financial statements.
d) Revenue Recognition
The Company earns primarily from providing services of Information Technology (IT) solutions and Transaction services.
(i) Revenue from IT solutions
The Company earns revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.
- Revenue from Software Products is recognized on delivery/installation, as per the predetermined/ laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.
- Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provisions for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.
- Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/ Term License/Other Materials incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.
Unbilled and unearned revenue :
Revenue recognized over and above the billings on a customer is classified as âunbilled revenueâ and advance billing to customer is classified as âadvance from customer/unearned revenueâ and included in other liabilities.
(ii) Revenue from Transaction Services:
- Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.
(iii) Revenue from Sharing of Infrastructure Facilities:
- Revenue from sharing of infrastructure facilities is recognised based on usage of facilities.
e) Interest / Dividend Income
Dividend income is recorded when the right to receive payment is established. Interest income is recognised using the effective interest method.
f) Leases
(i) Finance lease
Assets taken on lease by the Company in its capacity as a lessee, where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalised at the inception of the lease at the lower of the fair value or the present value of the minimum lease payments and a liability is recognised for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
(ii) Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as operating lease. Operating lease payments are recognised on a straight line basis over the lease term in the statement of profit and loss, unless the lease agreement explicitly states that increase is on account of inflation.
g) Cost recognition
Costs and expenses are recognised when incurred and have been classified according to their nature. The costs of the Company are broadly categorised in employee benefit expenses, cost of third party products and services, finance costs depreciation and amortisation and other expenses. Employee benefit expenses include employee compensation, allowances paid, contribution to various funds and staff welfare expenses. Cost of third party products and services mainly include purchase of software licenses and products fees to external consultants ,cost of running its facilities, cost of equipment and other operating expenses. Finance cost includes interest and other borrowing cost. Other expenses is an aggregation of costs which are individually not material such as commission and brokerage, printing and stationery, legal and professional charges, communication, repairs and maintenance etc.
h) Foreign currency
The functional currency of the Company is Indian rupee (â).
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in statement of profit and loss. A monetary item for which settlement is neither planned nor likely to occur in the foreseeable future is considered as a part of the entityâs net investment in that foreign operation.
Non monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined
i) Income taxes Current income taxes
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside statement of profit and loss is recognised outside statement of profit and loss (either in other comprehensive income (OCI) or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
Deferred income taxes
Deferred income tax is recognised using the Balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable statement of profit and loss at the time of the transaction.
Deferred income tax asset are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis. Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future economic tax liability. Accordingly, MAT is recognised as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
The Company recognises interest levied and penalties related to income tax assessments in finance costs.
j) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(i) Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
(ii) Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortised cost
A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
- Debt instrument at fair value through other comprehensive income (FVTOCI)
A âdebt instrumentâ is classified as at the FVTOCI if both of the following criteria are met:
(a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
(b) The assetâs contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the OCI. However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the statement of profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to statement of profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
- Debt instrument at fair value through profit and loss (FVTPL)
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
- Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by- instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to statement of profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
Interest in subsidiaries, associates and joint ventures are accounted at cost.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
(iii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit and loss, loans and borrowings or payables as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and financial guarantee contracts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
- Financial Liabilities at fair value through profit and loss
Financial liabilities at fair value through profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss. Financial liabilities designated upon initial recognition at fair value through profit and loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. These gains / loss are not subsequently transferred to Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit and loss. The Company has not designated any financial liability as at FVTPL.
- Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
- Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
(iv) Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
(v) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. k) Compound financial instruments Compound financial instruments are separated into liability and equity components based on the terms of the contract.
On issuance of the compound financial instruments, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption.
The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity since conversion option meets Ind AS 32 criteria for fixed to fixed classification. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the compound financial instruments based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised.
l) Investments in subsidiaries
Investments in subsidiaries are measured at cost less impairment. m) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to statment of profit and loss during the reporting period in which they are incurred. Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives adopted by Company
The property, plant and equipment acquired under finance leases is depreciated over the assetâs usefu life or over the shorter of the assetâs useful life and the lease term if there is no reasonable certainty that the Company will obtain ownership at the end of the lease term.
The useful lives have been determined based on technical evaluation done by the managementâs expert which are different than those specified by Schedule II to the Companies Act; 2013, in order to reflect the actual usage of the assets. The residual values are not more than 5% of the original cost of the asset.
The assetsâ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An assetâs carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in statement of profit and loss within other gains/(losses). n) Intangible assets
(i) Software Products - Meant for Sale
Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as intangible assets when the following criteria are met:
- it is technically feasible to complete the software so that it will be available for use
- management intends to complete the software and use or sell it
- there is an ability to use or sell the software
- it can be demonstrated how the software will generate probable future economic benefits
- adequate technical, financial and other resources to complete the development and to use or sell the software are available, and
- the expenditure attributable to the software during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and are tested for impairment from the point at which the asset is available for use.
(ii) Software Products-Others
Purchased software meant for in house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.
(iii) Patents, copyrights , Business commercial rights and other rights
Separately acquired patents and copyrights are shown at historical cost. Patents, copyrights and non-compete acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses.
(iv) Research and development
Research expenditure and development expenditure that do not meet the criteria specified above are recognised as an expense as incurred in the statement of profit and loss. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Amortisation methods and periods
The Company amortises intangible assets with a finite useful life using the straight-line method over the following periods:
Intangible Assets with indefinite useful lives
Based on the analysis of product life cycle studies, market and competitive trends, it is assessed that âSoftware Products - meant for saleâ would generate net cash flows for an indefinite period.
o) Impairment
(i) Financial assets (other than at fair value)
The Company assesses at each date of Balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and/or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk or the financial asset has increased significantly since initial recognition.
(ii) Non-financial assets Tangible and intangible assets
Property, plant and equipment and intangible assets within finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss.
p) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. These liabilities are presented as current liabilities in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following post-employment schemes:
(a) defined benefit plans such as gratuity; and
(b) defined contribution plans such as provident fund.
(c) superannuation contribution plans.
- Gratuity obligations
The liability or asset recognised in the balance sheet in respect of defined benefit pension and gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The benefits which are denominated in currency other than INR, the cash flows are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in OCI. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in statement of profit and loss as past service cost.
- Defined contribution plans
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
- Superannuation contribution plan
Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.
(iv) Employee Benefits in Foreign Branch
In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment / entitlement as applicable for employees in foreign branch are provided on the basis of actuarial valuation and based on estimates.
(v) Share-based payments
Share-based compensation benefits are provided to employees via the Employee Option Plan. Employee option Plan
The fair value of options granted under the Employee Option Plan is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
- including any market performance conditions
- excluding the impact of any service and non-market performance vesting conditions and
- including the impact of any non-vesting conditions.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in statement of profit and loss, with a corresponding adjustment to equity.
q) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
r) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred and are recognised in the statement of profit and loss.
s) Provisions
General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
t) Contingent liabilities recognised in a business combination
A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with the requirements for provisions above or the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the requirements for revenue recognition.
u) Contributed equity
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
v) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
w) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
x) Current/non current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
y) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing the inventory to its present location and condition are included in the cost of inventories.
Hardware and Supplies
Carried at lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
z) Cash Flow Statement
Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.
aa) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirement of Schedule III, unless otherwise stated.
The Company has acquired certain Land and Building under a lease arrangement for a period of sixty years at a premium of Rs. 0.50 crores starting from December 4, 2000 for Land, Rs. 15.62 crores starting from March 13, 2000 and Rs. 5.05 crores March 1, 2003 for building and the same are being amortized over the lease period.
ii. Property, Plant and Equipment pledged as security against borrowings by the Company
Refer to Note 35 for information on property, plant and equipment pledge as security by the Company
iii. Contractual Obligations
Refer to Note 30 for disclosure of contractual commitments for the acquisition of property, plant and equipment.
i. Significant Estimate : Useful life of Intangible Assets
Refer to sub note (n) of Note 2 âSignificant Accounting Policiesâ .
ii. Intangible Assets with indefinite useful lives
The Entity provides IT based software solutions to variety of industry verticals which includes softwares meant for Banking industry, Insurance industry, Enterprise Resource Panning (ERP) softwares and softwares meant for financial services industry. These softwares have been capitalised as âSoftware Products - meant for saleâ category under intangible assets. The Company based on the analysis of product life cycle studies, market and competitive trends assesses that the âSoftware Products - meant for saleâ products will generate net cash flows for an indefinite period.
iii. Impairment testing of assets with indefinite lives Software Products - meant for sale
Software Products - meant for sale with indefinite lives have been allocated to the CGUs below forming part of IT Solution segment which is Companyâs operating and reportable segment, for impairment testing :
- Banking
- Insurance
- ERP
- Financial Services
The Entity tests whether softwares have suffered any impairment periodically. The recoverable amount of a cash generating unit (CGU) is determined based on value in use of the underlying asset. The valuation is considered to be level 3 in the fair value hierarchy due to unobservable inputs used in the valuation. The calculations use cash flow projections based on financial budgets approved by management covering a five-year period.
The recoverable amount of CGUs (business units) based on value in use as at December 31, 2017 Rs. 1,123 Crores (December 31, 2016: Rs. 1,034 Crores). The recoverable amounts represent the fair value of the business of the software products over the period of budgeted five years.
Based on estimates of the management, though the fair valuation of the product businesses are much higher than the carrying amount of the software products, these intangibles are carried at amounts which the management estimates to be the residual value of the development costs.
Mar 31, 2017
1 Corporate Information
3i Infotech Limited (referred to as âthe Companyâ) is a Global Information Technology Company committed to Empowering Business Transformation. A comprehensive set of IP based software solutions, coupled with a wide range of IT services, uniquely positions the Company to address the dynamic requirements of a variety of industry verticals of Banking and Financial Services Industry (BFSI), predominantly Banking, Insurance, Capital Markets, Asset & Wealth Management. The Company also provides solutions for other verticals such as Government, Manufacturing, Retail, Distribution, Telecom and Healthcare.
The Company is a public limited Company incorporated and domiciled in India. Its shares are listed on Bombay Stock Exchange and National Stock Exchange in India. The address of its registered office is at International Infotech Park, Tower No.5, 3rd to 6th floors, Vashi, Navi Mumbai-400703.
The financial statements for the year ended March 31,2017 were approved by the Board of Directors and authorized for issue on April 30,2017.
2 Significant Accounting Policies
a) Statement of compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted with effect from April 1,2016 Indian Accounting Standards (referred to as "Ind AS")notified under the Companies (Indian Accounting Standards) Rules, 2015 read with Section 133 of the Companies Act 2013. These financial statements for the year ended March 31,2017 are the first ; the Company has prepared in accordance with Ind AS .Previous periods have been restated to Ind AS. (Refer to Note 3 for information on how the Company adopted Ind AS.)
b) Basis of preparation
These financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
c) Use of estimates and judgments
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.
Key sources of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of impairment of investments, useful lives of property, plant and equipment, valuation of deferred tax assets, provisions and contingent liabilities.
(i) Impairment of investments
The Company reviews its carrying value of investments carried at amortized cost annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
(ii) Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
(iii) Valuation of deferred tax assets
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note (i) below.
(iv) Provisions and Contingent liabilities
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits and compensated absences) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance sheet date. These are reviewed at each Balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognized in the financial statements. A contingent asset in neither recognized nor disclosed in the financial statements.
d) Revenue Recognition
The Company earns primarily from providing services of Information Technology (IT) solutions and Transaction services.
(i) Revenue from IT solutions
The Company earns revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.
- Revenue from Software Products is recognized on delivery/installation, as per the predetermined/ laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.
- Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provisions for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.
- Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/Term License/Other Materials incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.
- Unbilled and unearned revenue :
Revenue recognized over and above the billings on a customer is classified as âunbilled revenueâ and advance billing to customer is classified as âadvance from customer/unearned revenueâ and included in other liabilities.
(ii) Revenue from Transaction Services:
- Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.
(iii) Revenue from Sharing of Infrastructure Facilities:
- Revenue from sharing of infrastructure facilities is recognized based on usage of facility
e) Interest / Dividend Income
Dividend income is recorded when the right to receive payment is established. Interest income is recognized using the effective interest method.
f) Leases
(i) Finance lease
Assets taken on lease by the Company in its capacity as a lessee, where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalized at the inception of the lease at the lower of the fair value or the present value of the minimum lease payments and a liability is recognized for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
(ii) Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognized as operating lease. Operating lease payments are recognized on a straight line basis over the lease term in the statement of profit and loss, unless the lease agreement explicitly states that increase is on account of inflation.
g) Cost recognition
Costs and expenses are recognized when incurred and have been classified according to their nature.
The costs of the Company are broadly categorized in employee benefit expenses, cost of third party products and services, finance costs depreciation and amortization and other expenses. Employee benefit expenses include employee compensation, allowances paid, contribution to various funds and staff welfare expenses. Cost of third party products and services mainly include purchase of software licenses and products ,fees to external consultants ,cost of running its facilities, cost of equipment and other operating expenses. Finance cost includes interest and other borrowing cost. Other expenses is an aggregation of costs which are individually not material such as commission and brokerage, printing and stationery, legal and professional charges, communication, repairs and maintenance etc.
h) Foreign currency
The functional currency of the Company is Indian rupee (Rs.).
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in statement of profit and loss. A monetary item for which settlement is neither planned nor likely to occur in the foreseeable future is considered as a part of the entity''s net investment in that foreign operation.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other gains/(losses).
Non monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined
i) Income taxes Current income taxes
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognized outside statement of profit and loss is recognized outside statement of profit and loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Advance taxes and provisions for current income taxes are presented in the Balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant taxpaying units intends to settle the asset and liability on a net basis.
Deferred income taxes
Deferred income tax is recognized using the Balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred income tax asset are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future economic tax liability. Accordingly, MAT is recognized as deferred tax asset in the Balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
The Company recognizes interest levied and penalties related to income tax assessments in finance costs.
j) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(i) Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
(ii) Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortized cost
A ''debt instrument'' is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the statement of profit and loss. The losses arising from impairment are recognized in the statement of profit and loss. This category generally applies to trade and other receivables.
- Debt instrument at fair value through other comprehensive income (FVTOCI)
A ''debt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
(a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
(b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the group recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the statement of profit and loss. On de-recognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified from the equity to statement of profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
- Debt instrument at fair value through profit and loss (FVTPL)
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch''). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
- Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to Statement of profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of profit and loss.
Interest in subsidiaries, associates and joint ventures are accounted at cost.
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
(iii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit and loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
- Financial Liabilities at fair value through profit and loss
Financial liabilities at fair value through profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit and loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to statement of profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit and loss. The Company has not designated any financial liability as at fair value through profit and loss.
- Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in Statement of profit and loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
- Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
De-recognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit and loss.
(iv) Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
(v) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
k) Compound financial instruments
Compound financial instruments are separated into liability and equity components based on the terms of the contract.
On issuance of the Compound financial instruments, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortized cost (net of transaction costs) until it is extinguished on conversion or redemption.
The remainder of the proceeds is allocated to the conversion option that is recognized and included in equity since conversion option meets Ind AS 32 criteria for fixed to fixed classification. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not re-measured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the Compound financial instruments based on the allocation of proceeds to the liability and equity components when the instruments are initially recognized.
l) Investments in subsidiaries
Investments in subsidiaries are measured at cost less impairment.
m) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to statement of profit and loss during the reporting period in which they are incurred.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives adopted by Company
The property, plant and equipment acquired under finance leases is depreciated over the asset''s useful life or over the shorter of the asset''s useful life and the lease term if there is no reasonable certainty that the Company will obtain ownership at the end of the lease term.
The useful lives have been determined based on technical evaluation done by the management''s expert which are higher than those specified by Schedule II to the Companies Act; 2013, in order to reflect the actual usage of the assets. The residual values are not more than 5% of the original cost of the asset.
The assets'' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other gains/(losses).
n) Intangible assets
(i) Goodwill
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortized but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, which in our case are the operating segments.
(ii) Software Products - Meant for Sale
Costs associated with maintaining software programmes are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognized as intangible assets when the following criteria are met:
- it is technically feasible to complete the software so that it will be available for use
- management intends to complete the software and use or sell it
- there is an ability to use or sell the software
- it can be demonstrated how the software will generate probable future economic benefits
- adequate technical, financial and other resources to complete the development and to use or sell the software are available, and
- the expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalized as part of the software include employee costs and an appropriate portion of relevant overheads.
Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is available for use.
(iii) Software Products-Others
Purchased software meant for in house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.
(iv) Patents, copyrights , Business commercial rights and other rights
Separately acquired patents and copyrights are shown at historical cost. Patents, copyrights and non-compete acquired in a business combination are recognized at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortization and impairment losses.
(v) Research and development
Research expenditure and development expenditure that do not meet the criteria specified above are recognized as an expense as incurred in the statement of profit and loss. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Amortization methods and periods
The Company amortizes intangible assets with a finite useful life using the straight-line method over the following periods:
Intangible Assets with indefinite useful lives
Based on the analysis of product life cycle studies, market and competitive trends, it is assessed that ''Software Products - meant for sale'' would generate net cash flows for an indefinite period.
o) Impairment
(i) Financial assets (other than at fair value)
The Company assesses at each date of Balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognizes lifetime expected losses for all contract assets and/or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk or the financial asset has increased significantly since initial recognition.
(ii) Non-financial assets Tangible and intangible assets
Property, plant and equipment and intangible assets within finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
p) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following post-employment schemes:
(a) defined benefit plans such as gratuity; and
(b) defined contribution plans such as provident fund.
- Gratuity obligations
The liability or asset recognized in the balance sheet in respect of defined benefit pension and gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in '' is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The benefits which are denominated in currency other than '', the cash flows are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in OCI. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in statement of profit and loss as past service cost.
- Defined contribution plans
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
- Superannuation contribution plan
Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.
(iv) Employee Benefits in Foreign Branch
In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment / entitlement as applicable for employees in foreign branch are provided on the basis of actuarial valuation and based on estimates.
(v) Share-based payments
Share-based compensation benefits are provided to employees via the Employee Option Plan and share-appreciation rights.
Employee Option Plan
The fair value of options granted under the Employee Option Plan is recognized as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
- including any market performance conditions (e.g., the entity''s share price)
- excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period), and
- including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a specific period of time).
The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
q) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.
r) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are expensed in the period in which they are incurred and are recognized in the statement of profit and loss.
s) Provisions
General
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
t) Contingent liabilities recognized in a business combination
A contingent liability recognized in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognized in accordance with the requirements for provisions above or the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with the requirements for revenue recognition.
u) Contributed equity
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
v) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
w) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
x) Current/non current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
- Expected to be realized or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
y) Inventories
Inventories are valued at the lower of cost and net realizable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
Hardware and Supplies
Carried at lower of cost and net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
z) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crores as per the requirement of Schedule III, unless otherwise stated.
3. FIRST TIME ADOPTION OF IND AS
These are the Company''s first financial statements prepared in accordance with Ind AS. The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended March 31, 2017, the comparative information presented in these financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS balance sheet at April 1, 2015 (the Company''s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Section 133 of the Companies Act, 2013 Read with Rule 7 of the Companies (Accounts) Rules 2014 as amended and other relevant provisions of the Act (previous GAAP or Indian GAAP). The explanations of how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows are set out in the following tables and notes.
A. Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
1. Ind AS optional exemptions
i. Deemed cost
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment and intangible assets covered by Ind AS 38 - Intangible Assets as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
ii. Estimates
The estimates at April 1, 2015 and at March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:
- FVTOCI - unquoted equity shares
- FVTOCI - debt securities
- Impairment of financial assets based on expected credit loss model
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 1, 2015, the date of transition to Ind AS and as of March 31, 2016.
iii. Investments in subsidiaries
In separate financial statements, a first-time adopter that subsequently measures an investment in a subsidiary at cost , may measure such investment at cost (determined in accordance with Ind AS 27) or deemed cost (fair value or previous GAAP carrying amount) in its separate opening Ind AS balance sheet.
Selection of fair value or previous GAAP carrying amount for determining deemed cost can be done for each subsidiary. The Company elects to carry all its investments in subsidiaries at previous GAAP carrying amount as deemed cost.
iv. Compound financial instruments
When the liability component of a compound financial instrument is no longer outstanding at the date of transition to Ind AS, a first-time adopter may elect not to apply Ind AS 32 retrospectively to split the liability and equity components of the instrument.
v. Extinguishing financial liabilities with equity instruments
Appendix D to Ind AS 109 addresses accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor to extinguish all or part of the financial liability. It broadly requires that equity instruments issued to a creditor to extinguish all or part of a financial liability is treated as consideration paid and measured at their fair value at the date of extinguishment. The difference between the carrying amount of the financial liability and the consideration paid (including any cash or other financial asset) should be recognized in profit or loss. The consideration amount is the fair value of the equity shares issued, and if that is not reliably measurable, the fair value of the liability that is being redeemed. A first-time adopter may apply these requirements either retrospectively or from the date of transition to Ind AS.
vi. Share based payment transactions
A first-time adopter is encouraged, but not required, to apply Ind AS 102 Share-based Payment to equity instruments which were vested on or before the date of transition to Ind AS. However, if a first-time adopter elects to apply Ind AS 102 to such equity instruments, it may do so only if the entity has disclosed publicly the fair value of those equity instruments determined at the measurement date as defined in Ind AS 102. If a first-time adopter modifies the terms or conditions of a grant of equity instruments to which Ind AS 102 has not been applied, the entity is also not required to apply Ind AS 102''s requirements for modifications of awards if the modification occurred before the date of transition to Ind AS.
Therefore, Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2015. For cash-settled share-based payment transactions, the Company has not applied Ind AS 102 to liabilities that were settled before April 1, 2015.
vii. Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
Mar 31, 2016
1.1 Basis of preparation of financial statements
The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (âGAAPâ) under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (''the Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting Policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
1.2 Use of estimates
The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities as on the date of the financial statements. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates. Any revision to these accounting estimates is recognized prospectively.
1.3 Revenue Recognition
a) Revenue from IT solutions:
Revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.
Revenue from Software Products is recognized on delivery/installation, as per the predetermined/laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.
Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provisions for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.
Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/Term License/Other Materials incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.
b) Revenue from Transaction Services:
Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.
c) Interest / Dividend Income:
Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable. Dividend Income is recognized as and when right to receive the same is established.
1.4 Unbilled and unearned revenue
Revenue recognized over and above the billings on a customer is classified as âunbilled revenueâ and advance billing to customer is classified as âadvance from customer/unearned revenueâ and included in other liabilities.
1.5 Fixed assets and depreciation/ amortization Tangible assets:
Fixed assets except leasehold building are stated at cost, which comprises the purchase consideration and other directly attributable costs of bringing an asset to its working condition for the intended use.
Leasehold Building has been revalued and is reinstated at updated revalued amount.
Advances given towards acquisition of fixed assets are disclosed as capital advances under âLong Term Loans and Advancesâ and the costs incurred on assets not ready for use as at the balance sheet date are disclosed as âCapital work in progressâ.
Intangible assets:
âSoftware products (meant for sale)â are products licensed to customers. Costs that are directly associated with such products whether acquired or developed or upgraded in partnership with others, and have a probable economic benefit exceeding one year are recognized as software products (meant for sale).
Costs related to further development of existing âsoftware products meant for saleâ are capitalized only if the costs result in a software product, whose life and value in use is in excess of its originally assessed standard of performance, which can be measured reliably, technological feasibility thereof has been established, future economic benefits of each of such products are probable and the Company intends to complete development and to use the software.
Software Products-Others: Purchased software meant for in house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.
Business and Commercial Rights are capitalized at the acquisition price.
Depreciation/Amortization:
Leasehold land and Leasehold building and improvements thereon and other leased assets are amortized over the primary period of lease or its life, whichever is lower.
Business and Commercial Rights are amortized over their estimated useful life or ten years, whichever is lower while Software Products-Others are amortized over a period of five years.
Software Products (meant for sale) are amortized over a period of 10 years after taking into consideration the residual value.
Depreciation on other fixed assets is systematic allocation of the depreciable amount over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset.
Depreciation on Tangible assets is provided on Straight Line Method (SLM) over the useful lives of assets determined based on internal technical assessments which are as follows :
1.6 Investments
Trade investments are the investments made to enhance the Company''s business interest. Investments are either classified as current or long-term based on the management''s intention at the time of purchase. Long-term investments are carried at cost and a provision is made to recognize any decline, other than temporary, in the value of such investments.
Current investments are carried at lower of the cost or fair value and a provision is made to recognize any decline in the carrying value.
Cost of overseas investments represents the Indian Rupee equivalent of the consideration paid for the investment.
1.7 Accounting for Taxes on Income
Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the Income Tax Act, 1961.
Minimum Alternate Tax (MAT) credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.
Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.
1.8 Translation of Foreign Currency Items other than hedged transactions
Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transaction. Exchange differences in respect of all current monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and all exchange gains / losses arising there from are recognized in the Statement of Profit and Loss.
Exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period or reported in previous financial statements, are accounted as below:
- In so far as they relate to the acquisition of depreciable capital assets, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset; and
- In other cases, they said exchange differences are accumulated in a Foreign Currency Monetary Item Translation Difference Account (''FCMITDA'') and amortized over the balance period of such long term asset/liability.
Foreign operations carried out with a significant degree of autonomy are classified as "non integral operationsâ as per the provisions of AS 11 âEffects of changes in foreign exchange ratesâ. All assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the âForeign Currency Translation Reserveâ.
Foreign operations other than non-integral operations are classified as integral. All monetary assets and liabilities are translated at closing rates while non monetary assets are translated at historical rates and income and expenses are translated at the average rates for the year and the resulting exchange differences are accounted in the Statement of Profit and Loss.
1.9 Hedge Accounting
The Company enters into foreign currency and interest rate swap contracts to hedge its risks associated with foreign currency fluctuations relating to loan liabilities and highly probable forecast transactions. The Company designates these derivative instruments as hedges and records the gain or loss on effective cash flow hedges in the ''Hedging Reserve Account'' until the forecasted transaction materializes. Gain or loss on the ineffective portion of cash flow hedges is recognized in the Statement of Profit and Loss.
1.10 Accounting of Employee Benefits Employee Benefits in India Gratuity
The Company provides for gratuity, a defined benefit retirement plan, which covers eligible employees and the liability under the plan is determined based on actuarial valuation done by an independent value using the projected unit credit method.
Superannuation
Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.
Provident fund
Retirement benefit in the form of Provident Fund and ''Employer-Employee Scheme'' are defined contribution schemes. The Company''s contributions paid/payable to the 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 contributions payable to the provident fund.
Leave entitlement
Liability for leave entitlement for employees is provided on the basis of actuarial valuation semi-annually and based on estimates for interim financial reporting.
Employee Benefits in Foreign Branch
In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment/entitlement as applicable for employees in foreign branch are provided on the basis of actuarial valuation and based on estimates.
1.11 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources.
Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outflow of resources.
Contingent assets are neither recognized nor disclosed in the financial statements.
1.12 Borrowing costs
Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset upto the date of completion. Other borrowing costs are charged to the Statement of Profit and Loss.
1.13 Impairment of assets
In accordance with AS 28 on ''Impairment of Assets'', where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/depreciation) had no impairment loss been recognized.
1.14 Securities issue expenses
Securities issue expenses including expenses incurred on increase in authorized share capital are adjusted against Securities Premium Account.
1.15 Premium payable on redemption of Foreign Currency Convertible Bonds (FCCB)
Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.
1.16 Lease
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.
Leased assets are depreciated on a straight-line basis over the useful life of the asset or the useful life as prescribed under Part A in Schedule II of the Act, whichever is lower.
Leases, where the less or effectively retain substantially all the risks and benefits incidental to 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.
1.17 Earnings per share
In determining earnings per share, the Company considers the net profit/loss after tax and the post tax effect of any extra-ordinary, exceptional items and discontinuing operations on earnings per share is shown separately. The number of equity shares considered in computing basic earnings per share is the weighted average number of equity shares outstanding during the year. The number of equity shares considered for computing diluted earnings per share is the aggregate of the weighted average number of equity shares used for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares, which includes potential FCCB conversions and ESOS. The number of equity shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.
1.18 Cash and cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks and corporations. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
1.19 Cash Flow Statement
Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.
1.20 Exceptional items
When an item of income or expense within profit or loss from ordinary activity is of such size, nature or incidence that their disclosure is relevant to explain the performance of the Company for the year, the nature and amount of such items are disclosed as exceptional items.
Mar 31, 2015
1.1 Basis of preparation of financial statements
The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles ("GAAP") under the historical
cost convention on the accrual basis. GAAP comprises mandatory
accounting standards as prescribed under section 133 of the Companies
Act, 2013 ('the Act') read with Rule 7 of the Companies (Accounts)
Rules, 2014, the provisions of the Act (to the extent notified) and
guidelines issued by the Securities and Exchange Board of India (SEBI).
Accounting Policies have been consistently applied except where a
newly-issued accounting standard is initially adopted or a revision to
an existing accounting standard requires a change in the accounting
policy hitherto in use.
1.2 Use of esti mates
The preparation of financial statements in conformity with GAAP
requires the management to make estimates and assumptions that affect
the reported amount of assets, liabilities, revenues and expenses and
disclosure of contingent liabilities as on the date of the financial
statements. The recognition, measurement, classification or disclosure
of an item or information in the financial statements is made relying
on these estimates. Any revision to these accounting estimates is
recognized prospectively.
1.3 Revenue Recognition
a) Revenue from IT solutions:
Revenue from IT solutions comprises of revenue from the sale of
software products, providing IT services and sale of hardware and third
party software.
Revenue from Software Products is recognized on delivery/installation,
as per the predetermined/laid down policy across all geographies or a
lower amount as considered appropriate in terms of the contract.
Maintenance revenue in respect of products is deferred and recognized
ratably over the period of the underlying maintenance agreement.
Revenue from IT Services is recognized either on time and material
basis or fixed price basis or based on certain measurable criteria as
per relevant contracts. Revenue on Time and Material Contracts is
recognized as and when services are performed. Revenue on Fixed-Price
Contracts is recognized on the percentage of completion method.
Provisions for estimated losses, if any, on such uncompleted contracts
are recorded in the period in which such losses become probable based
on the current estimates.
Revenue from Supply of Hardware/Other Material and Sale of Third Party
Software License/Term License/Other Materials incidental to the
aforesaid services is recognized based on delivery/installation, as the
case may be. Recovery of incidental expenses is added to respective
revenue.
b) Revenue from Transaction Services:
Revenue from transaction services and other service contracts is
recognized based on transactions processed or manpower deployed.
c) Interest / Dividend Income:
Interest income is recognised on time proportion basis taking into
account the amount outstanding and rate applicable.
Dividend Income is recognized as and when right to receive the same is
established.
1.4 Unbilled and unearned revenue
Revenue recognized over and above the billings on a customer is
classified as "unbilled revenue" and advance billing to customer is
classified as "advance from customer/unearned revenue" and included in
other liabilities.
1.5 Fixed assets and depreciation/ amortization
Tangible assets:
Fixed assets except leasehold building are stated at cost, which
comprises the purchase consideration and other directly attributable
costs of bringing an asset to its working condition for the intended
use.
Leasehold Building has been revalued and is reinstated at updated
revalued amount
Advances given towards acquisition of fixed assets are disclosed as
capital advances under "Long Term Loans and Advances" and the costs
incurred on assets not ready for use as at the balance sheet date are
disclosed as "Capital work in progress".
Intangible assets:
"Software products (meant for sale)" are products licensed to
customers. Costs that are directly associated with such products
whether acquired or developed or upgraded in partnership with others,
and have a probable economic benefit exceeding one year are recognized
as software products (meant for sale).
Costs related to further development of existing "software products
meant for sale" are capitalized only if the costs result in a software
product, whose life and value in use is in excess of its originally
assessed standard of performance, which can be measured reliably,
technological feasibility thereof has been established, future economic
benefits of each of such products are probable and the Company intends
to complete development and to use the software.
Software Products-Others: Purchased software meant for in house
consumption and significant upgrades thereof which have a probable
economic benefit exceeding one year are capitalized at the acquisition
price.
Business and Commercial Rights are capitalized at the acquisition
price.
Depreciation/Amortization:
Leasehold land and Leasehold building and improvements thereon and
other leased assets are amortized over the period of lease or its life,
whichever is lower.
Business and Commercial Rights are amortized over their estimated
useful life or ten years, whichever is lower while Software
Products-Others are amortized over a period of five years.
Software Products (meant for sale) are amortized over a period of 10
years after taking into consideration the residual value.
Depreciation on other fixed assets is systematic allocation of the
depreciable amount over its useful life. The depreciable amount of an
asset is the cost of an asset or other amount substituted for cost,
less its residual value. The useful life of an asset is the period
over which an asset is expected to be available for use, or the number
of production or similar units expected to be obtained from the asset.
Depreciation on Tangible assets is provided on Straight Line Method
(SLM) over the useful lives of assets determined based on internal
technical assessments which are as follows :
1.6 Investments
Trade investments are the investments made to enhance the Company's
business interest. Investments are either classified as current or
long-term based on the management's intention at the time of purchase.
Long-term investments are carried at cost and a provision is made to
recognize any decline, other than temporary, in the value of such
investments.
Current investments are carried at lower of the cost or fair value and
a provision is made to recognize any decline in the carrying value.
Cost of overseas investments represents the Indian Rupee equivalent of
the consideration paid for the investment.
1.7 Accounting for Taxes on Income
Provision for current income tax is made on the basis of the estimated
taxable income for the year in accordance with the Income Tax Act,
1961.
Minimum Alternate Tax (MAT) credit asset is recognized and carried
forward only if there is a reasonable certainty of it being set off
against regular tax payable within the stipulated statutory period.
Deferred tax resulting from timing differences between book and tax
profits is accounted for under the liability method, at the current
rate of tax, to the extent that the timing differences are expected to
crystallize. Deferred tax assets are recognized and carried forward
only if there is a virtual/reasonable certainty that they will be
realized and are reviewed for the appropriateness of their respective
carrying values at each balance sheet date.
1.8 Translation of Foreign Currency Items other than hedged
transactions
Transactions in foreign currency are recorded at the rate of exchange
in force on the date of the transaction. Exchange differences in
respect of all current monetary assets and liabilities denominated in
foreign currency are restated at the rates ruling at the year end and
all exchange gains / losses arising there from are recognized in the
Statement of Profit and Loss.
Exchange differences arising on reporting of long term foreign currency
monetary items at rates different from those at which they were
initially recorded during the period or reported in previous financial
statements, are accounted as below:
In so far as they relate to the acquisition of depreciable capital
assets, are added to or deducted from the cost of the asset and are
depreciated over the balance life of the asset; and
In other cases, the said exchange differences are accumulated in a
Foreign Currency Monetary Item Translation Difference Account
('FCMITDA) and amortized over the balance period of such long term
asset/liability
Foreign operations carried out with a significant degree of autonomy
are classified as "non integral operations" as per the provisions of AS
11 "Effects of changes in foreign exchange rates". All assets and
liabilities, both monetary and non-monetary, are translated at the
closing rate while the income and expenses are translated at the
average rate for the year. The resulting exchange differences are
accumulated in the "Foreign Currency Translation Reserve".
Foreign operations other than non-integral operations are classified as
integral. All monetary assets and liabilities are translated at closing
rates while non monetary assets are translated at historical rates and
income and expenses are translated at the average rates for the year
and the resulting exchange differences are accounted in the Statement
of Profit and Loss.
1.9 Hedge Accounting
The Company enters into foreign currency and interest rate swap
contracts to hedge its risks associated with foreign currency
fluctuations relating to loan liabilities and highly probable forecast
transactions. The Company designates these derivative instruments as
hedges and records the gain or loss on effective cash flow hedges in
the 'Hedging Reserve Account' until the forecasted transaction
materializes. Gain or loss on the ineffective portion of cash flow
hedges is recognized in the Statement of Profit and Loss.
1.10 Accounting of Employee Benefits Employee Benefits in India
Gratuity
The Company provides for gratuity, a defined benefit retirement plan,
which covers eligible employees and the liability underthe plan is
determined based on actuarial valuation done by an independent valuer
using the projected unit credit method.
Superannuation
Certain employees of the Company are also participants in a defined
superannuation contribution plan. The Company contributes to the scheme
with Life Insurance Corporation of India on a monthly basis. The
Company has no further obligations to the scheme beyond its monthly
contributions.
Provident fund
Retirement benefit in the form of Provident Fund and 'Employer-Employee
Scheme' are defined contribution schemes. The company's contributions
paid/payable to the 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 contributions payable to the provident fund.
Leave entitlement
Liability for leave entitlement for employees is provided on the basis
of actuarial valuation semi-annually and based on estimates for interim
financial reporting.
Employee Benefits in Foreign Branch
In respect of employees in foreign branch, necessary provisions are
made based on the applicable local laws. Gratuity and leave
encashment/entitlement as applicable for employees in foreign branch
are provided on the basis of actuarial valuation and based on estimates
for interim financial reporting.
1.11 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be outflow of resources.
Disclosures for a contingent liability is made, without a provision in
books, when there is an obligation that may, but probably will not,
require outflow of resources.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.12 Borrowing costs
Borrowing costs directly attributable to acquisition, construction and
production of qualifying assets are capitalized as a part of the cost
of such asset upto the date of completion. Other borrowing costs are
charged to the Statement of Profit and Loss.
1.13 Impairment of assets
In accordance with AS 28 on 'Impairment of Assets', where there is an
indication of impairment of the Company's assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the Statement of Profit and Loss whenever the carrying
amount of such assets exceeds its recoverable amount. If at the balance
sheet date there is an indication that a previously assessed impairment
loss no longer exists, then such loss is reversed and the asset is
restated to the extent of the carrying value of the asset that would
have been determined (net of amortization/ depreciation) had no
impairment loss been recognized.
1.14 Securities issue expenses
Securities issue expenses including expenses incurred on increase in
authorized share capital are adjusted against Securities Premium
Account.
1.15 Premium payable on redemption of Foreign Currency Convertible
Bonds (FCCB)
Premium payable on redemption of FCCB is amortized proportionately till
the date of redemption and is adjusted against the balance in
Securities Premium account.
1.16 Lease
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.
Leased assets are depreciated on a straight-line basis over the useful
life of the asset or the useful life as prescribed under Part A in
Schedule II of the Act, whichever is lower.
Leases, where the lessor effectively retain substantially all the risks
and benefits incidental to 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.
1.17 Earnings per share
In determining earnings per share, the Company considers the net
profit/loss after tax and the post tax effect of any extra-ordinary,
exceptional items and discontinuing operations on earnings per share is
shown separately. The number of equity shares considered in computing
basic earnings per share is the weighted average number of equity
shares outstanding during the year. The number of equity shares
considered for computing diluted earnings per share is the aggregate of
the weighted average number of equity shares used for deriving the
basic earnings per share and the weighted average number of equity
shares that could have been issued on the conversion of all dilutive
potential equity shares, which includes potential FCCB conversions and
ESOS. The number of equity shares and potentially dilutive equity
shares are adjusted for any stock splits and bonus shares issues.
1.18 Cash and cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks
and corporations. The Company considers all highly liquid investments
with a remaining maturity at the date of purchase of three months or
less and that are readily convertible to known amounts of cash to be
cash equivalents.
1.19 Cash Flow Statement
Cash Flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and item of income or expenses associated with
investing or financing cash flows. The cash flows from operating,
investing and financing activities of the company are segregated.
Mar 31, 2014
1.1 Basis of preparation of financial statements
The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles ("GAAP") under the
historical cost convention on the accrual basis. GAAP comprises
mandatory accounting standards prescribed by the Companies (Accounting
Standards) Rules, 2006, the provisions of the Companies Act, 1956 and
guidelines issued by the Securities and Exchange Board of India.
1.2 Use of estimates
The preparation of financial statements in conformity with GAAP
requires the management to make estimates and assumptions that affect
the reported amount of assets, liabilities, revenues and expenses and
disclosure of contingent liabilities as on the date of the financial
statements. The recognition, measurement, classification or disclosure
of an item or information in the financial statements is made relying
on these estimates. Any revision to these accounting estimates is
recognized prospectively.
1.3 Revenue Recognition
a) Revenue from IT solutions:
Revenue from IT solutions comprises of revenue from the sale of
software products, providing IT services and sale of hardware and third
party software.
Revenue from Software Products is recognized on delivery/installation,
as per the predetermined/laid down policy across all geographies or a
lower amount as considered appropriate in terms of the contract.
Maintenance revenue in respect of products is deferred and recognized
ratably over the period of the underlying maintenance agreement.
Revenue from IT Services is recognized either on time and material
basis or fixed price basis or based on certain measurable criteria as
per relevant contracts. Revenue on Time and Material Contracts is
recognized as and when services are performed. Revenue on Fixed-Price
Contracts is recognized on the percentage of completion method.
Provision for estimated losses, if any, on such uncompleted contracts
are recorded in the period in which such losses become probable based
on the current estimates.
Revenue from Supply of Hardware/Other Material and Sale of Third Party
Software License/Term License/ Other Materials incidental to the
aforesaid services is recognized based on delivery/installation, as the
case may be. Recovery of incidental expenses is added to respective
revenue.
b) Revenue from Transaction Services:
Revenue from transaction services and other service contracts is
recognized based on transactions processed or manpower deployed.
1.4 Unbilled and unearned revenue
Revenue recognized over and above the billings on a customer is
classified as "unbilled revenue" and advance billing to customer is
classified as "advance from customer/unearned revenue" and included
in other liabilities.
1.5 Fixed assets and depreciation/ amortization Intangible assets:
"Software products (meant for sale)" are products licensed to
customers. Costs that are directly associated with such products
whether acquired or developed or upgraded in partnership with others,
and have a probable economic benefit exceeding one year are recognized
as software products (meant for sale).
Costs related to further development of existing "software products
meant for sale" are capitalized only if the costs results in a
software product whose life and value in use is in excess of its
originally assessed standard of performance, can be measured reliably,
technological feasibility has been established, future economic
benefits of each of such product is probable and the Company intends to
complete development and to use the software.
Software Products-Others: Purchased software meant for in house
consumption and significant upgrades thereof which have a probable
economic benefit exceeding one year are capitalized at the acquisition
price.
Business and Commercial Rights are capitalized at the acquisition
price.
Tangible assets:
Fixed assets are stated at cost, which comprises the purchase
consideration and other directly attributable costs of bringing an
asset to its working condition for the intended use.
Advances given towards acquisition of fixed assets are disclosed as
capital advances under "Long Term Loans and Advances" and the costs
incurred on assets not ready for use as at the balance sheet date are
disclosed as "Capital work in progress".
Depreciation/Amortization:
Leasehold land, Leasehold building and improvements thereon and other
leased assets are amortized over the period of lease or its life,
whichever is lower.
Business and Commercial Rights are amortized over their estimated
useful life or ten years, whichever is lower while Software Products -
Others are amortized over a period of five years.
Software Products (meant for sale) are amortized over a period of 10
years after taking into consideration the residual value.
Depreciation on other fixed assets is provided applying straight-line
method at the rates and in the manner as prescribed in Schedule XIV of
the Companies Act, 1956.
1.6 Investments
Trade investments are the investments made to enhance the Company''s
business interest. Investments are either classified as current or
long-term based on the management''s intention at the time of purchase.
Long-term investments are carried at cost and a provision is made to
recognize any decline, other than temporary, in the value of such
investments.
Current investments are carried at lower of the cost or fair value and
a provision is made to recognize any decline in the carrying value.
Cost of overseas investments represents the Indian Rupee equivalent of
the consideration paid for the investment.
1.7 Accounting for Taxes on Income
Provision for current income tax is made on the basis of the estimated
taxable income for the year in accordance with the Income Tax Act,
1961.
MAT credit asset is recognized and carried forward only if there is a
reasonable certainty of it being set off against regular tax payable
within the stipulated statutory period.
Deferred tax resulting from timing differences between book and tax
profits is accounted for under the liability method, at the current
rate of tax, to the extent that the timing differences are expected to
crystallize. Deferred tax assets are recognized and carried forward
only if there is a virtual/reasonable certainty that they will be
realized and are reviewed for the appropriateness of their respective
carrying values at each balance sheet date.
1.8 Translation of Foreign Currency Items other than hedged
transactions
Transactions in foreign currency are recorded at the rate of exchange
in force on the date of the transaction. Exchange differences in
respect of all current monetary assets and liabilities denominated in
foreign currency are restated at the rates ruling at the year end and
all exchange gains / losses arising there from are recognized in the
Statement of Profit and Loss.
Exchange differences arising on reporting of long term foreign currency
monetary items at rates different from those at which they were
initially recorded during the period or reported in previous financial
statements, are accounted as below:
- In so far as they relate to the acquisition of depreciable capital
assets, are added to or deducted from the cost of the asset and are
depreciated over the balance life of the asset; and
- In other cases, the said exchange differences are accumulated in a
''Foreign Currency Monetary Items Translation Difference Account'' and
amortized over the balance period of such long term asset/Mability.
Foreign operations carried out with a significant degree of autonomy
are classified as ''''non integral" operations" as per the provisions
of AS 11 "Effects of changes in foreign exchange rates". All assets
and liabilities, both monetary and non-monetary, are translated at the
closing rate while the income and expenses are translated at the
average rate for the year. The resulting exchange differences are
accumulated in the "Foreign Currency Translation Reserve".
Foreign operations other than non-integral operations are classified as
integral. All monetary assets and liabilities are translated at closing
rates while non monetary assets are translated at historical rates and
income and expenses are translated at the average rates for the year
and the resulting exchange differences are accounted in the Statement
of Profit and Loss.
1.9 Hedge Accounting
The Company enters into foreign currency and interest rate swap
contracts to hedge its risks associated with foreign currency
fluctuations relating to loan liabilities and highly probable forecast
transactions. The Company designates these derivative instruments as
hedges and records the gain or loss on effective cash flow hedges in
the ''Hedging Reserve Account'' until the forecasted transaction
materializes. Gain or loss on the ineffective portion of cash flow
hedges is recognized in the Statement of Profit and Loss.
1.10 Accounting of Employee Benefits Employee Benefits in India
Gratuity
The Company provides for gratuity, a defined benefit retirement plan,
which covers eligible employees and the liability under the plan is
determined based on actuarial valuation done by an independent valuer
using the projected unit credit method.
Superannuation
Certain employees of the Company are also participants in a defined
superannuation contribution plan. The Company contributes to the scheme
with Life Insurance Corporation of India on a monthly basis. The
Company has no further obligations to the scheme beyond its monthly
contributions.
Provident fund
Eligible employees receive benefits from a provident fund, which is a
defined contribution plan under which the contribution is made to a
Trust/Government administered Trust. In the case of Trust, the
aggregate contribution along with interest thereon is paid at
retirement, death, incapacitation or termination of employment. Both
the employee and the Company make monthly contribution to the ''3i
Infotech Provident Fund Trust'' equal to a specified percentage of the
covered employee''s salary. The Company also contributes to a Government
administered pension fund on behalf of its employees.
The interest rate payable by the trust to the beneficiaries every year
is being notified by the government. The Company has an obligation to
make good the shortfall, if any, between the return from the
investments of the trust and the notified interest rate. Such shortfall
is charged to the Statement of Profit and Loss in the year it is
determined.
Leave entitlement
Liability for leave entitlement for employees is provided on the basis
of actuarial valuation semi-annually and based on estimates for interim
financial reporting.
Employee Benefits in Foreign Branch
In respect of employees in foreign branch, necessary provisions are
made based on the applicable local laws. Gratuity and leave
encashment/entitlement as applicable for employees in foreign branch is
provided on the basis of actuarial valuation and based on estimates for
interim financial reporting.
1.11 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be outflow of resources.
Disclosures for a contingent liability is made, without a provision in
books, when there is an obligation that may, but probably will not,
require outflow of resources.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.12 Borrowing costs
Borrowing costs directly attributable to acquisition, construction and
production of qualifying assets are capitalized as a part of the cost
of such asset upto the date of completion. Other borrowing costs are
charged to the Statement of Profit and Loss.
1.13 Impairment of assets
In accordance with AS 28 on ''Impairment of Assets'', where there is an
indication of impairment of the Company''s assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the Statement of Profit and Loss whenever the carrying
amount of such assets exceeds its recoverable amount. If at the balance
sheet date there is an indication that a previously assessed impairment
loss no longer exists, then such loss is reversed and the asset is
restated to the extent of the carrying value of the asset that would
have been determined (net of amortization/ depreciation) had no
impairment loss been recognized.
1.14 Securities issue expenses
Securities issue expenses including expenses incurred on increase in
authorized share capital are adjusted against Securities Premium
Account.
1.15 Premium payable on redemption of FCCB
Premium payable on redemption of FCCB is amortized proportionately till
the date of redemption and is adjusted against the balance in
Securities Premium account.
1.16 Lease
Finance leases, which effectively transfer to the Parent 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.
Leased assets are depreciated on a straight-line basis over the useful
life of the asset or the useful life as per Schedule XIV of the
Companies Act, 1956, whichever is lower.
Leases, where the lessor effectively retain substantially all the risks
and benefits incidental to 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.
1.17 Earnings per share
In determining earnings per share, the Company considers the net
profit/loss after tax and the post tax effect of any extra-ordinary,
exceptional items and discontinuing operations on earnings per share is
shown separately. The number of shares considered in computing basic
earnings per share is the weighted average number of shares outstanding
during the year. The number of shares considered for computing diluted
earnings per share is the aggregate of the weighted average number of
shares used for deriving the basic earnings per share and the weighted
average number of equity shares that could have been issued on the
conversion of all dilutive potential equity shares which includes
potential FCCB conversions and ESOS. The number of shares and
potentially dilutive equity shares are adjusted for any stock splits
and bonus shares issues.
2.1 Share Capital
The Company has only one class of equity shares having a par value of
''10 each. Each shareholder has right to vote in respect of such share,
on every resolution placed before the Company and his voting right on a
poll shall be in proportion to his share of the paid up equity capital
of the Company. In the event of liquidation, the equity shareholders
are entitled to receive the remaining assets of the Company after
payments of preferential amounts in proportion to their shareholding.
The Company has not issued any class of shares as fully paid up shares
pursuant to contract(s) without payment being received in cash and
bonus shares during the period of 5 years immediately preceding the
Balance Sheet date.
The company has not bought back any class of shares during the period
of 5 years immediately preceding the Balance Sheet date.
The preference shares are redeemable at amount that would provide the
holder of the said shares an internal rate of return 6% per annum
excluding the dividend rate on the outstanding amount of the said
shares payable on the expiry of ten years from the date of allotment
i.e. March 31, 2012.
Also refer note no. 2.26 A in respect of Corporate Debt Restructuring
(CDR).
d) Employee Stock Option Scheme (ESOS)
The Company''s Employee Stock Option Schemes are applicable to
"Eligible Employees" as defined in the scheme which includes
directors and employees of the Company and its subsidiaries.
They provide for issue of equity options up to 25% of the paid-up
equity capital to eligible employees. Currently, the Company has 2
schemes, ESOS 2000 and ESOS 2007(as amended).
The options granted under the ESOS scheme 2000 and 2007 vest in a
phased manner over three years with 20%, 30% and 50% of the grants
vesting at the end of each year from the date of the grant and the same
can be exercised within ten years from the date of the grant or five
years from the date of vesting of options whichever is later by paying
cash at a price determined on the date of the grant. One Stock option
if converted will be equivalent to one equity share.
During the previous year, the Board of Directors of the Company
approved ESOS Plan-2013 under the existing scheme ESOS 2007. The plan
consists of variations in certain terms with regard to vesting and
certain other related matters in ESOS 2007. The options granted are
convertible and one option is equivalent to one equity share each. This
plan is applicable to all the new options granted to eligible employees
in or after 2013. The existing options would continue to be governed by
the existing terms. The options granted as per ESOS Plan -2013 would
vest in a phased manner over three years with 33%, 33% and 34% of the
grants vesting at the end of each year from the date of the grant and
the same can be exercised within ten years from the date of grant of
options or five years from the date of vesting of options, whichever is
later.
During the year ended March 31, 2014, the Company granted 16,948,000
options to the employees of the Company and its Whole-Time Directors at
an exercise price of Rs.10 under Employee Stock Option Plan, 2013.
Method used for accounting for share based payment scheme.
The Company has elected to use the intrinsic value method to account
for the compensation cost of stock options to eligible employees.
Intrinsic value is the amount by which the quoted market price of the
underlying share as on the date of grant exceeds the exercise price of
the option.
* During the year ended March 31, 2014, 1,500,000 options (for the year
ended March 31, 2013 Nil Options) granted to Managing Director and
Global CEO and 1,000,000 options granted to Executive Director & Global
CFO.
** Includes 2,590,000 options granted to non executive directors (for
the year ended March 31, 2013, 290,000 options granted to non-executive
directors).
Note for securities offered under Corporate Debt Restructuring:
In terms of the Corporate Debt Restructuring (CDR) package agreed with
the lenders participating in CDR package (hereinafter referred to as
"CDR Lenders") and the Master Restructuring Agreement (MRA) signed
for this purpose, the Company and its certain subsidiaries had agreed
to offer guarantees and security to the CDR Lenders. The necessary
security documentation was executed with the Security Trustee appointed
by the CDR Lenders and security was created. In pursuance of the CDR
package, it was agreed that those lenders who were holding security
prior to CDR package would continue to hold such security with first
priority over it and remaining CDR Lenders will hold it with second
priority.
A. Security created:
During the year ended March 31, 2014, the underlying '' facilities of
some of the CDR Lenders aggregating Rs.738.81 crores have been converted
into equivalent USD 120.26 million pursuant to execution on January 9,
2014 of Amendment Agreement to the Master Restructuring Agreement (MRA)
dated March 30, 2012 (as amended by Amendment Agreement dated July 25,
2012) and the Foreign Currency Facility Agreements with the respective
banks on various dates. The security which was offered in terms of the
MRA will continue to be applicable as is upon conversion to the
aforementioned foreign currency loans.
Further, during the year, the Company, upon receipt of necessary
approvals from the CDR Lenders, has executed Facility Agreements with
ICICI Bank Limited, to avail additional facilities up to Rs.215
crores(Outstanding as at March 31, 2014 Rs.172.94 crores). In terms of
these Facility Agreements, the additional facility availed shall also
be secured by the assets secured with the CDR Lenders in terms of the
MRA. The charge so created in favour of ICICI Bank Limited shall be on
a first pari passu basis with CDR Lenders. The Company will execute
necessary security documents with ICICI Bank Limited for this purpose.
In terms of the Corporate Debt Restructuring package, during the year
ended March 31,2014, the Company has also sold its property situated at
Goregaon. The charge on immoveable assets of the Company was released
to this extent for the purpose of the aforesaid sale of the Goregaon
property.
B. Corporate guarantees from material subsidiaries:
Corporate guarantees of each of the material subsidiaries guaranteeing
the secured obligations ("Corporate Guarantees"), in favour of all
the CDR lenders. Each Corporate Guarantee shall be secured/credit
enhanced by security interest over assets of the relevant material
subsidiary providing the Corporate Guarantee, as permitted under
applicable laws in the relevant jurisdictions, as detailed in the table
below and shall have the ranking as mentioned against each security.
D. Security and terms and conditions for others:
1. Rs.0.60 crores (as at March 31, 2013 of Rs.1.32 crores) loan is
secured by way of hypothecation of certain Company owned vehicles.
2. Working capital loans aggregating to Rs.35.76 crores (as at March
31, 2013 of Rs.35.76 crores) are secured by way of floating charge on
Trade receivables.
2.9.1 Buildings - Leasehold include:
(i) Gross Block of Rs.20.85 crores (as at March 31, 2013 Rs.0.85 crores),
Accumulated Depreciation Rs.4.62 crores (as at March 31, 2013Rs.4.27
crores) and Net Block of Rs.16.23 crores (as at March 31, 2013 Rs. 16.58
crores) being lease premium paid in respect of building taken on lease
for sixty years.
(ii) Gross Block of Rs.Nil (as at March 31, 2013 Rs.11.49 crores),
Accumulated Depreciation Rs.Nil (as at March 31, 2013 Rs 4.71 crores)
and Net Block of Rs.Nil (as at March 31, 2013 Rs.6.78 crores) being
lease premium paid in respect of building taken on lease for ninety
nine years, and the title deed is yet to be received.
2.9.3 Depreciation for the year includes loss on sale/discarding of
various assets amounting to Rs.4.36 crores (for the year ended March 31,
2013 Rs.10.80 crores) and certain intangible assets have been fully
amortized having Gross Block of Rs.15.40 crores (as at March 31,2013
Rs.Nil crores), Accumulated Depreciation Rs.2.66 crores (as at March
31,2013 Rs.Nil crores) and Net Block of Rs.12.74 crores (as at March 31,
2013 Rs.Nil crores) due to technological obsolescence.
2.10.1 Pledge of shares
Investments in these companies have been pledged as per the Master
Restructuring Agreement entered by the Company with CDR Lenders. (Also
refer note on securities offered under Corporate Debt Restructuring)
Mar 31, 2013
1.1 Basis of preparation of financial statements
The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles ("GAAP") under the historical
cost convention on the accrual basis. GAAP comprises mandatory
accounting standards prescribed by the Companies (Accounting Standards)
Rules, 2006, the provisions of the Companies Act, 1956 and guidelines
issued by the Securities and Exchange Board of India.
1.2 Use of estimates
The preparation of financial statements in conformity with GAAP
requires the management to make estimates and assumptions that affect
the reported amount of assets, liabilities, revenues and expenses and
disclosure of contingent liabilities as on the date of the financial
statements. The recognition, measurement, classification or disclosure
of an item or information in the financial statements is made relying
on these estimates. Any revision to these accounting estimates is
recognized prospectively.
1.3 Revenue Recognition
a) Revenue from IT solutions :
Revenue from IT solutions comprises of revenue from the sale of
software products, providing IT services and sale of hardware and third
party software.
Revenue from Software Products is recognized on delivery/installation,
as per the predetermined/laid down policy across all geographies or a
lower amount as considered appropriate in terms of the contract.
Maintenance revenue in respect of products is deferred and recognized
ratably over the period of the underlying maintenance agreement.
Revenue from IT Services is recognized either on time and material
basis or fixed price basis or based on certain measurable criteria as
per relevant contracts. Revenue on Time and Material Contracts is
recognized as and when services are performed. Revenue on Fixed-Price
Contracts is recognized on the percentage of completion method.
Provision for estimated losses, if any, on such uncompleted contracts
are recorded in the period in which such losses become probable based
on the current estimates.
Revenue from Supply of Hardware/Other Material and Sale of Third Party
Software License/Term License/Other Materials incidental to the
aforesaid services recognized based on delivery/installation, as the
case may be. Recovery of incidental expenses is added to respective
revenue.
b) Revenue from Transaction Services :
Revenue from transaction services and other service contracts is
recognized based on transactions processed or manpower deployed.
1.4 Unbilled and unearned revenue
Revenue recognized over and above the billings on a customer is
classified as "unbilled revenue" and advance billing to customer is
classified as "advance from customer/unearned revenue" and included in
other liabilities.
1.5 Fixed assets and depreciation/ amortization
Intangible assets :
"Software products (meant for sale)" are products licensed to
customers. Costs that are directly associated with such products
whether acquired or developed or upgraded in partnership with others,
and have a probable economic benefit exceeding one year are recognized
as software products (meant for sale).
Costs related to further development of existing "software products
(meant for sale)" are capitalized only if the costs result in a
software product whose life and value in use is in excess of its
originally assessed standard of performance, can be measured reliably,
technological feasibility has been established, future economic
benefits of each of such product is probable and the Company intends to
complete development and to use the software.
Software Products-Others : Purchased software meant for in-house
consumption and significant upgrades thereof which have a probable
economic benefit exceeding one year are capitalized at the acquisition
price.
Business and Commercial Rights are capitalized at the acquisition
price.
Tangible assets :
Fixed assets are stated at cost, which comprises the purchase
consideration and other directly attributable costs of bringing an
asset to its working condition for the intended use.
Advances given towards acquisition of fixed assets are disclosed as
capital advances under "Long Term Loans and Advances" and the costs
incurred on assets not ready for use as at the balance sheet date are
disclosed as "Capital work in progress".
Depreciation/Amortisation :
Leasehold land, Leasehold building and improvements thereon and other
leased assets are amortized over the period of lease or its life,
whichever is lower.
Business and Commercial Rights are amortized over their estimated
useful life or ten years, whichever is lower while Software Products -
Others are amortized over a period of five years.
Software Products (meant for sale) are amortized over a period of 10
years after taking into consideration the residual value.
Depreciation on other fixed assets is provided applying straight-line
method at the rates and in the manner as prescribed in Schedule XIV of
the Companies Act, 1956.
1.6 Investments
Trade investments are the investments made to enhance the Company''s
business interest. Investments are either classified as current or
long-term based on the management''s intention at the time of purchase.
Long-term investments are carried at cost and a provision is made to
recognize any decline, other than temporary, in the value of such
investments.
Current investments are carried at lower of the cost or fair value and
a provision is made to recognize any decline in the carrying value.
Cost of overseas investments represents the Indian Rupee equivalent of
the consideration paid for the investment.
1.7 Accounting for Taxes on Income
Provision for current income tax is made on the basis of the estimated
taxable income for the year in accordance with the Income Tax Act,
1961.
MAT credit asset is recognized and carried forward only if there is a
reasonable certainty of it being set off against regular tax payable
within the stipulated statutory period.
Deferred tax resulting from timing differences between book and tax
profits is accounted for under the liability method, at the current
rate of tax, to the extent that the timing differences are expected to
crystallize. Deferred tax assets are recognized and carried forward
only if there is a virtual/reasonable certainty that they will be
realized and are reviewed for the appropriateness of their respective
carrying values at each balance sheet date.
1.8 Translation of Foreign Currency Items other than hedged
transactions
Transactions in foreign currency are recorded at the rate of exchange
in force on the date of the transaction. Exchange differences in
respect of all current monetary assets and liabilities denominated in
foreign currency are restated at the rates ruling at the year end and
all exchange gains / losses arising there from are adjusted to the
Statement of Profit and Loss.
Exchange differences arising on reporting of long term foreign currency
monetary items at rates different from those at which they were
initially recorded during the period or reported in previous financial
statements, are accounted as below:
- In so far as they relate to the acquisition of depreciable capital
assets, are added to or deducted from the cost of the asset and are
depreciated over the balance life of the asset; and
- In other cases, the said exchange differences are accumulated in a
''Foreign Currency Monetary Items Translation Difference Account'' and
amortised over the balance period of such long term asset/liability
Foreign operations carried out with a significant degree of autonomy
are classified as "non integral" operations" as per the provisions of
AS 11 "Effects of changes in foreign exchange rates". All assets and
liabilities, both monetary and non-monetary, are translated at the
closing rate while the income and expenses are translated at the
average rate for the year. The resulting exchange differences are
accumulated in the "Foreign Currency Translation Reserve".
Foreign operations other than non-integral operations are classified as
integral. All monetary assets and liabilities are translated at closing
rates while non monetary assets are translated at historical rates and
income and expenses are translated at the average rate for the year and
the resulting exchange differences are accounted in the Statement of
Profit and Loss.
1.9 Hedge Accounting
The Company enters into foreign currency and interest rate swap
contracts to hedge its risks associated with foreign currency
fluctuations relating to loan liabilities and highly probable forecast
transactions. The Company designates these derivative instruments as
hedges and records the gain or loss on effective cash flow hedges in
the ''Hedging Reserve Account'' until the forecasted transaction
materializes. Gain or loss on the ineffective portion of cash flow
hedges is recognized in the Statement of Profit and Loss.
1.10 Accounting of Employee Benefits Employee Benefits in India
Gratuity
The Company provides for gratuity, a defined benefit retirement plan,
which covers eligible employees and the liability under the plan is
determined based on actuarial valuation done by an independent valuer
using the projected unit credit method.
Superannuation
Certain employees of the Company are also participants in a defined
superannuation contribution plan. The Company contributes to the scheme
with Life Insurance Corporation of India on a monthly basis. The
Company has no further obligations to the scheme beyond its monthly
contributions.
Provident fund
Eligible employees receive benefits from a provident fund, which is a
defined contribution plan under which the contribution is made to a
Trust/Government administered Trust. In the case of Trust, the
aggregate contribution along with interest thereon is paid at
retirement, death, incapacitation or termination of employment. Both
the employee and the Company make monthly contribution to the ''3i
Infotech Provident Fund Trust'' equal to a specified percentage of the
covered employee''s salary. The Company also contributes to a Government
administered pension fund on behalf of its employees.
The interest rate payable by the trust to the beneficiaries every year
is being notified by the government. The Company has an obligation to
make good the shortfall, if any, between the return from the
investments of the trust and the notified interest rate. Such shortfall
is charged to the Statement of Profit and Loss in the year it is
determined.
Leave entitlement
Liability for leave entitlement for employees is provided on the basis
of actuarial valuation semi-annually and based on estimates for interim
financial reporting.
Employee Benefits in Foreign Branch
In respect of employees in foreign branch, necessary provisions are
made based on the applicable local laws. Gratuity and leave
encashment/entitlement as applicable for employees in foreign branch,
is provided on the basis of actuarial valuation and based on estimates
for interim financial reporting.
1.11 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be outflow of resources.
Disclosures for a contingent liability is made, without a provision in
books, when there is an obligation that may, but probably will not,
require outflow of resources.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.12 Borrowing costs
Borrowing costs directly attributable to acquisition, construction and
production of qualifying assets are capitalized as a part of the cost
of such asset upto the date of completion. Other borrowing costs are
charged to the Statement of Profit and Loss.
1.13 Impairment of assets
In accordance with AS 28 on ''Impairment of Assets'', where there is an
indication of impairment of the Company''s assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the Statement of Profit and Loss whenever the carrying
amount of such assets exceeds its recoverable amount. If at the balance
sheet date there is an indication that a previously assessed impairment
loss no longer exists, then such loss is reversed and the asset is
restated to the extent of the carrying value of the asset that would
have been determined (net of amortization/ depreciation) had no
impairment loss been recognized.
1.14 Securities issue expenses
Securities issue expenses including expenses incurred on increase in
authorized share capital are adjusted against Securities Premium
Account.
1.15 Premium payable on redemption of FCCB
Premium payable on redemption of FCCB is amortized proportionately till
the date of redemption and is adjusted against the balance in
Securities Premium account.
1.16 Lease
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.
Leased assets are depreciated on a straight-line basis over the useful
life of the asset or the useful life as per Schedule XIV of the
Companies Act, 1956, whichever is lower.
Leases, where the lessor effectively retains substantially all the
risks and benefits incidental to 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.
1.17 Earnings per share
In determining earnings per share, the Company considers the net
profit/loss after tax and the post tax effect of any extra-ordinary,
exceptional items and discontinuing operations on earnings per share is
shown separately. The number of shares considered in computing basic
earnings per share is the weighted average number of shares outstanding
during the year. The number of shares considered for computing diluted
earnings per share is the aggregate of the weighted average number of
shares used for deriving the basic earnings per share and the weighted
average number of equity shares that could have been issued on the
conversion of all dilutive potential equity shares which includes
potential FCCB conversions and ESOS. The number of shares and
potentially dilutive equity shares are adjusted for any stock splits
and bonus shares issued.
Mar 31, 2012
1.1 Method of Accounting
The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles ("GAAP") under the
historical cost convention on the accrual basis. GAAP comprises
mandatory accounting standards prescribed by the Companies (Accounting
Standards) Rules, 2006, the provisions of the Companies Act, 1956 and
guidelines issued by the Securities and Exchange Board of India.
Accounting policies have been consistently applied except where a newly
issued accounting standard is initially adopted or a revision to an
existing accounting standard required a change in accounting policy
hitherto in use.
1.2 Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amount of assets, liabilities, revenues and expenses and
disclosure of contingent liabilities on the date of financial
statements. The recognition, measurement, classification or disclosure
of an item or information in the financial statements is made relying
on these estimates. Any revision to accounting estimates is recognized
prospectively.
1.3 Revenue Recognition
a) Revenue from IT solutions:
Revenue from IT solutions comprises of revenue from software products,
IT services and sale of hardware/
outsourced software.
i) Revenue from software products is recognized on
delivery/installation or as considered appropriate by the management on
the basis of facts in specific cases, whichever is lower. Maintenance
revenue in respect of products is deferred and recognized ratably over
the period of the underlying maintenance agreement.
ii) Revenue from IT services is recognized either on time and material
basis or fixed price basis or based on certain measurable criteria as
per relevant contracts. Revenue on time and material contracts is
recognized as and when services are performed. Revenue on fixed-price
contracts is recognized on the percentage of completion method.
Provision for estimated losses, if any, on such uncompleted contracts
are recorded in the period in which such losses become probable based
on the current estimates.
iii) Revenue from supply of Hardware/Other Materials and sale of Third
Party Software License/Term License incidental to the aforesaid
services is recognized based on delivery/installation, as the case may
be. Recovery of incidental expenses is added to respective revenue.
b) Revenue from Transaction Services:
Revenue from transaction services and other service contracts is
recognized based on transactions processed or manpower deployed.
1.4 Unbilled and Unearned Revenue
Revenue recognized over and above the billings on a customer is
classified as "unbilled revenue" while billing over and above the
revenue recognized in respect of a customer is classified as
"unearned revenue".
1.5 a. Fixed Assets Intangible:
a) "Software Products (Meant for sale)" are products licensed to
customers. Costs that are directly associated with such products
whether acquired or developed in partnership with others, and have
probable economic benefit exceeding one year are recognized as Software
Products (Meant for sale).
b) Software Products-Others: Purchased software meant for in house
consumption and significant upgrades thereof and have probable economic
benefit exceeding one year are capitalized at the acquisition price.
c) Business and Commercial Rights are capatalized at the acquisition
price.
Tangible:
Fixed Assets are stated at cost, which comprises of purchase
consideration and other directly attributable cost of bringing an asset
to its working condition for the intended use.
Advances given towards acquisition of fixed assets are disclosed as
capital advances under Long Term Loans & Advances and the cost of
assets not ready for use as at the balance sheet date are disclosed as
capital work in progress.
b. Depreciation/Amortization:
Leasehold land, Leasehold building and improvements thereon and other
leased assets are amortized over the period of lease or its life,
whichever is lower.
Business & Commercial Rights are amortized at lower of the period the
benefits arising out of these are expected to accrue and ten years
while Software Products - Others and Goodwill arising on
merger/acquired Goodwill is amortized over a period of five years.
Software Products (Meant for sale) are amortized over a period of ten
years.
Depreciation on other fixed assets is provided on straight-line method
at the rates and in the manner as prescribed in Schedule XIV to the
Companies Act, 1956.
1.6 Investments
Trade investments are the investments made to enhance the Company's
business interest. Investments are either classified as current or
long-term based on the management's intention at the time of purchase.
Long-term investments are carried at cost and provision is made to
recognize any decline, other than temporary, in the value of such
investments.
Current investments are carried at the lower of the cost and fair value
and provision is made to recognize any decline in the carrying value.
Cost of overseas investment comprises the Indian Rupee value of the
consideration paid for the investment.
1.7 Accounting for Taxes on Income
Provision for current income tax is made on the basis of the estimated
taxable income for the year in accordance with the Income Tax Act,
1961.
MAT credit asset is recognized and carried forward only if there is a
reasonable certainty of it being set off against regular tax payable
within the stipulated statutory period.
Deferred tax resulting from timing differences between book and tax
profits is accounted for under the liability method, at the current
rate of tax, to the extent that the timing differences are expected to
crystallize. Deferred tax assets are recognized and carried forward
only if there is a virtual/reasonable certainty that they will be
realized and are reviewed for the appropriateness of their respective
carrying values at each balance sheet date.
1.8 Translation of Foreign Currency Items other than hedged
transactions
Transactions in foreign currency are recorded at the rate of exchange
in force on the date of the transactions. Current assets, current
liabilities and borrowings denominated in foreign currency are
translated at the exchange rate prevalent at the date of the Balance
Sheet. The resultant gain/loss are recognized in the Statement of
Profit & Loss. Overseas equity investments are recorded at the rate of
exchange in force on the date of allotment/acquisition.
Foreign operations carried out with a significant degree of autonomy
are classified as non integral operations as per the provisions of AS
11 "Effects of changes in foreign exchange rates" and all assets
and liabilities, both monetary and non-monetary, are translated at the
closing rate while the income and expenses are translated at the
average rate for the year. The resulting exchange differences are
accounted in the Foreign Currency Translation Reserve. Other Foreign
operations are classified as integral and all monetary assets and
liabilities are translated at closing rates while non monetary assets
are translated at historical rates and income and expenses are
translated at average rate, the resulting exchange differences are
accounted in Statement of Profit & Loss.
1.9 Hedge Accounting
The Company enters into foreign currency cum interest rate swap
contracts to hedge its risks associated with foreign currency
fluctuations relating to loan liabilities and highly probable forecast
transactions. The Company designates these instruments as hedges and
records the gain or loss on effective cash flow hedges in the Hedging
Reserve Account until the forecasted transaction materializes. Gain or
loss on ineffective cash flow hedges is recognized in the Statement of
Profit and Loss.
1.10 Accounting of Employee Benefits Employee Benefits in India
a) Gratuity
The Company provides for gratuity, a defined benefit retirement plan,
covering eligible employees. Liability under gratuity plan is
determined on actuarial valuation done by the Life Insurance
Corporation of India (LIC) at the beginning of the year, based upon
which, the Company contributes to the Scheme with LIC. The Company also
provides for the additional liability over the amount contributed to
LIC based on the actuarial valuation done by an independent valuer
using the Projected Unit Credit Method.
b) Superannuation
Certain employees of the Company are also participants in a defined
superannuation contribution plan. The Company contributes to the scheme
with Life Insurance Corporation of India on monthly basis. The Company
has no further obligations to the scheme beyond its monthly
contributions.
c) Provident fund
Eligible employees receive benefits from a provident fund, which is a
defined contribution plan to the Trust/ Government administered Trust.
In the case of Trust, aggregate contribution along with interest
thereon is paid at retirement, death, incapacitation or termination of
employment. Both the employee and the Company make monthly contribution
to the 3i Infotech Provident Fund Trust equal to a specified percentage
of the covered employee's salary. Company also contributes to a
Government administered pension fund on behalf of its employees.
The interest rate payable by the trust to the beneficiaries every year
is being notified by the government. The Company has an obligation to
make good the shortfall, if any, between the return from the
investments of the trust and the notified interest rate. Such shortfall
is charged to Statement of Profit & Loss in the year it is determined.
d) Liability for leave encashment/entitlement for employees is provided
on the basis of the actuarial valuation at the year end and based on
estimates for interim financials.
Employee Benefits in Foreign Branch
In respect of employees in foreign branches, necessary provision is
made based on the applicable local laws. Gratuity and leave
encashment/entitlement as applicable for employees in foreign branches
is provided on the basis of the actuarial valuation at the year end and
based on estimates for interim financials.
1.11 Provisions, Contingent Liabilities and Contingent Assets
i) Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be outflow of resources.
ii) Disclosures for a contingent liability is made, without a provision
in books, when there is an obligation that may, but probably will not,
require outflow of resources.
iii) Contingent Assets are neither recognized nor disclosed in the
financial statements.
1.12 Borrowing Costs
Borrowing costs directly attributable to acquisition, construction and
production of qualifying assets are capitalized as a part of the cost
of such asset upto the date of completion. Other borrowing costs are
charged to the Statement of Profit & Loss.
1.13 Impairment of Assets
In accordance with AS 28 on 'Impairment of Assets', where there is an
indication of impairment of the Company's assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the Statement of Profit & Loss whenever the carrying
amount of such assets exceeds its recoverable amount. If at the balance
sheet date there is an indication that a previously assessed impairment
loss no longer exists, then such loss is reversed and the asset is
restated to the extent of the carrying value of the asset that would
have been determined (net of amortization/depreciation) had no
impairment loss been recognized.
1.14 a) Securities issue expenses
Securities issue expenses including expenses incurred on increase in
authorized share capital and premium payable on securities are adjusted
against Securities Premium Account.
b) Premium payable on redemption of FCCB
Premium payable on redemption of FCCB is amortized proportionately till
the date of redemption and is adjusted against the balance in
Securities Premium account.
1.15 Lease
Where the Company has substantially acquired all risks and rewards of
ownership of the assets, leases are classified as financial lease. Such
assets are capitalized at the inception of the lease, at the lower of
fair value or present value of minimum lease payment and liability is
created for an equivalent amount. Each lease rental paid is allocated
between liability and interest cost so as to obtain constant periodic
rate of interest on the outstanding liability for each year.
Where significant portion of risks and reward of ownership of assets
acquired under lease are retained by lessor, leases are classified as
Operating lease. Equalized lease rentals for such leases are charged to
Statement of Profit & Loss.
1.16 Earnings per share
In determining the earnings per share, the Company considers the net
profit/loss after tax and post tax effect of any
extra-ordinary/exceptional item is shown separately. The number of
shares considered in computing basic earnings per share is the weighted
average number of shares outstanding during the year. The number of
shares considered for computing diluted earnings per share comprises
the weighted average number of shares used for deriving the 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 which includes potential FCCB conversions. The
number of shares and potentially dilutive equity shares are adjusted
for any stock splits and bonus shares issues.
1.17 Asset Held for Sale/Discontinuing Operations
'Assets held for sale' or 'Discontinuing Operations' is a component of
the Company that either has been disposed of or that is classified as
held for sale and (a) represents a separate major line of business or
geographical area of operations; and (b) is a part of a single
coordinated plan to dispose of a separate major line of business or
geographical area of operations. Asset held for sale/discontinuing
operations are carried at the lower of carrying amount or their fair
value. Any gain or loss from disposal of such units, together with the
results of the operations until the date of disposal, is reported
separately as 'Discontinuing Operations'.
Mar 31, 2011
1.1 Overview of the Group
3i Infotech Limited (Parent) was promoted by erstwhile ICICI limited.
The Parent and its subsidiaries are collectively referred to as the
Group. The Group is a global information technology conglomerate
headquartered in Mumbai, India. The Group undertakes sale of software
products, software development and consulting services, IT enabled
managed services and Transaction services.
1.2 Basis of preparation of consolidated fnancial statements
The consolidated fnancial statements are prepared and presented under
historical cost convention, on the accrual basis of accounting, in
accordance with the accounting principles generally accepted in India
(GAAP) and in compliance with the Accounting Standards (AS) issued
by Companies (Accounting Standards) Rules, 2006, to the extent
applicable. Accounting policies have been consistently applied except
where a newly issued accounting standard is initially adopted or a
revision to an existing accounting standard required a change in
accounting policy hitherto in use.
1.3 Use of estimates
The preparation of the consolidated fnancial statements in conformity
with GAAP requires management to make estimates and assumptions that
affect the reported amount of assets, liabilities, revenues and
expenses and disclosure of contingent liabilities on the date of
fnancial statements. The recognition, measurement, classifcation or
disclosures of an item or information in the fnancial statements are
made relying on these estimates. Any revision to accounting estimates
is recognized prospectively.
1.4 Principles of consolidation
The consolidated fnancial statements include the fnancial statements of
"The Parent" and all its subsidiaries, which are more than 50% owned or
controlled and have been prepared in accordance with the consolidation
procedures laid down in AS 21- Consolidated Financial Statements.
The consolidated fnancial statements have been prepared on the
following basis:
- The fnancial statements of the Parent and the subsidiaries have been
combined on a line-by-line basis by adding together the book values of
like items of assets, liabilities, income and expenses after
eliminating intra-group balances / transactions and resulting profts in
full. Unrealized losses resulting from intra-group transactions have
also been eliminated except to the extent that recoverable value of
related assets is lower than their cost to the Group.
- The consolidated fnancial statements are presented, to the extent
possible, in the same format as that adopted by the Parent for its
standalone fnancial statements.
- The consolidated fnancial statements are prepared using uniform
accounting policies across the Group.
- Goodwill arising on consolidation - The excess of cost to the Parent
Company, of its investment in subsidiaries over its portion of equity
in the subsidiaries at the respective dates on which investment in
subsidiaries was made, is recognized in the fnancial statements as
goodwill and in the case where equity exceeds the cost; the same is
being adjusted in the said goodwill. The Parent Companys portion of
equity in the subsidiaries is determined on the basis of the value of
assets and liabilities as per the fnancial statements of the
subsidiaries as on the date of investment.
- Entities acquired during the year have been consolidated from the
respective dates of their acquisition.
(a) In April 2010, the Parent Company has sold its investment in aok
In-house Factoring Services Private Ltd. to 3i Infotech BPO Limited
(formerly known as Linear Financial and Management Systems Pvt. Ltd.)
and in May 2010, Delta Services (India) Private Limited to 3i Infotech
Consultancy Services Limited.
(b) Refer note no. 2.4.1
(c) Refer note no. 2.4.2
(d) In May 2010, Delta Services (India) Private Limited has sold its
investment in Manipal Informatics Private Limited to 3i Infotech
Consultancy Services Limited.
(e) In December 2010, the Parent Company has sold its investment in
eMudhra Consumer Services Limited (formerly known as 3i Infotech
Consumer Services Limited) and its subsidiary and step down
subsidiaries to Indus Innovest Holdings Private Ltd. Refer note 2.4.4.
(f) 3i Infotech Consulting Inc. have been merged with 3i Infotech Inc.
effective from December 31, 2010 and consequently the assets and
liabilities have been transferred to 3i Infotech Inc.
(g) Lantern Systems Inc., ePower Inc. & Objectsoft Group Inc. have been
merged with 3i Infotech Inc. effective from December 31, 2010 and
consequently the assets and liabilities pertaining to those entities
which were hitherto owned by J&B Software (Canada) Inc have been
transferred to 3i Infotech Inc.
(h) Share purchase agreement dated December 29, 2010 has been signed
between 3i Infotech Insurance & Re-insurance Brokers Limited and Aretha
Advisors pursuant to which the shares of 3i Infotech Insurance &
Re-insurance Brokers Limited have been sold off to Aretha Advisors on
December 31, 2010. Refer note 2.4.5
(i) Refer note 2.4.6
(j) 3i Infotech Consulting Services SDN BHD has been closed with effect
from December 20, 2010.
(k) Stex Software Pvt. Ltd., E-Enable Technologies Pvt. Ltd. and KNM
Services Pvt. Ltd. have been merged with 3i Infotech Ltd. effective
from April 01, 2010 and consequently the assets and liabilities have
been transferred to 3i Infotech Ltd.
(l) Delta Services (India) Private Limited and Manipal Informatics Pvt.
Limited. have been merged with 3i Infotech Consultancy Services Limited
effective from April 01, 2009 and consequently the assets and
liabilities have been transferred to 3i Infotech Consultancy Services
Limited.
1.6 Revenue recognition
a) Revenue from IT solutions:
Revenue from IT solutions comprises of revenue from Software Products,
IT Services and Sale of Hardware /Outsourced Software.
i) Revenue from Software Products is recognized on delivery /
installation, as per the predetermined / laid down policy across all
geographies or lower, as considered appropriate by the management on
the basis of facts in specifc cases. Maintenance revenue in respect of
products is deferred and recognized ratably over the period of the
underlying maintenance agreement.
ii) Revenue from IT Services is recognized either on time and material
basis or fxed price basis or based on certain measurable criteria as
per relevant agreements. Revenue on Time and Material Contracts is
recognized as and when services are performed. Revenue on Fixed-Price
Contracts is recognized on the percentage of completion method.
Provision for estimated losses, if any, on such uncompleted contracts
are recorded in the period in which such losses become probable based
on the current estimates.
iii) Revenue from supply of Hardware, Software License / Term License /
Other Materials incidental to the aforesaid services recognized based
on delivery / installation, as the case may be. Recovery of incidental
expenses is added to respective revenue.
b) Revenue from Transaction Services:
Revenue from Transaction Services and Other Service contracts is
recognized based on transactions processed or manpower deployed.
1.7 Unbilled and Unearned Revenue:
Revenue recognized over and above the billings on a customer is
classifed as "unbilled revenue" while billing over and above the
revenue recognized in respect of a customer is classifed as "unearned
revenue".
1.8 a) Fixed Assets
Intangible: Purchased software meant for in-house consumption and
signifcant upgrades thereof, Business & Commercial Rights are
capitalized at the acquisition price.
Acquired software / products meant for sale are capitalized at the
acquisition price.
Tangible: Fixed Assets are stated at cost, which comprises of purchase
consideration and other directly attributable cost of bringing an asset
to its working condition for the intended use.
Advances given towards acquisition of fxed assets and the cost of
assets not ready for use as at the Balance Sheet date are disclosed
under capital work-in-progress.
b) Depreciation / Amortization:
Leasehold land, leasehold building and improvements thereon are
amortized over the period of lease or the life given below whichever is
lower.
Business and Commercial Rights are amortized at lower of the period the
benefts arising out of these are expected to accrue and ten years,
while purchased software meant for in-house consumption and signifcant
upgrades thereof and Goodwill arising on merger / acquired Goodwill is
amortized over a period of fve years.
Acquired software are amortized at lower of the estimated life of the
product and fve years.
1.9 Investments
Trade investments are the investments made to enhance the Parent
Companys business interest. Investments are either classifed as
current or long-term based on the managements intention at the time of
purchase. Long-term investments are carried at cost and provision is
made to recognize any decline, other than temporary, in the value of
such investments.
Current investments are carried at the lower of the cost and fair value
and provision is made to recognize any decline in the carrying value.
Cost of overseas investment comprises the Indian Rupee value of the
consideration paid for the investment.
1.10 Accounting for Taxes on Income
Provision for current income tax is made on the basis of the estimated
taxable income for the year in accordance with the specifc applicable
laws.
MAT Credit asset pertaining to the Parent and its Indian subsidiary
company is recognized and carried forward only if there is a reasonable
certainty of it being set off against regular tax payable within the
stipulated statutory period.
Deferred tax resulting from timing differences between book and tax
profts is accounted for under the liability method, at the current rate
of tax, to the extent that the timing differences are expected to
crystallize. Deferred tax assets are recognized and carried forward
only if there is a reasonable / virtual certainty that they will be
realized and are reviewed for the appropriateness of their respective
carrying values at each Balance Sheet date.
The deferred tax assets / liabilities and tax expenses are determined
separately for the Parent and each subsidiary company, as per their
applicable laws and then aggregated.
1.11 Translation of Foreign Currency Items
Transactions in foreign currency are recorded at the rate of exchange
in force on the date of the transactions. Current assets, current
liabilities and borrowings denominated in foreign currency are
translated at the exchange rate prevalent at the date of the Balance
Sheet. The resultant gain / loss is recognized in the Proft & Loss
Account. Overseas investments are recorded at the rate of exchange in
force on the date of allotment / acquisition.
All the activities of the foreign operations are carried out with a
signifcant degree of autonomy. Accordingly, as per the provisions of AS
11 "Effects of changes in foreign exchange rates", these operations
have been classifed as Non integral operations and therefore all
assets and liabilities, both monetary and non-monetary, are translated
at the closing rate while the income and expenses are translated at the
average rate for the year. The resulting exchange differences are
accumulated in the Foreign Currency Translation Reserve.
1.12 Accounting of Employee Benefts Employee Benefts in India
a) Gratuity
(i) Parent
The Parent Company provides for gratuity, a defned beneft retirement
plan, covering eligible employees. Liability under gratuity plan is
determined on actuarial valuation done by the Life Insurance
Corporation of India (LIC) at the beginning of the year, based upon
which, the Parent Company contributes to the Scheme with LIC. The
Parent Company also provides for the additional liability over the
amount contributed to LIC based on the actuarial valuation done by an
independent valuer using the Projected Unit Credit Method.
(ii) Subsidiaries
Liability for Gratuity for employees is provided on the basis of the
actuarial valuation at the year end.
b) Superannuation
Certain employees in India are also participants in a defned
superannuation contribution plan. The Parent contributes to the scheme
with Life Insurance Corporation of India on a monthly basis. The Parent
has no further obligations to the plan beyond its monthly
contributions.
c) Provident fund
(i) Parent
Eligible employees receive benefts from a provident fund, which is a
defned contribution plan to the Trust / Government administered Trust.
In the case of Trust aggregate contribution along with interest thereon
is paid at retirement, death, incapacitation or termination of
employment. Both the employee and the
Parent Company make monthly contribution to the 3i Infotech Provident
Fund Trust equal to a specifed percentage of the covered employees
salary. The Parent Company also contributes to a Government
administered pension fund on behalf of its employees.
The interest rate payable by the trust to the benefciaries every year
is being notifed by the government. The Parent has an obligation to
make good the shortfall, if any, between the return from investments of
the trust and the notifed interest rate. Such shortfall is charged to
Proft & Loss Account in the year it is determined.
(ii) Subsidiaries
Contribution is made to the state administered fund as a percentage of
the covered employees salary.
d) Liability for leave encashment / entitlement for employees is
provided on the basis of the actuarial valuation at the year end.
e) All actuarial gains / losses are charged to revenue in the year
these arise.
Employee Benefts in the Foreign Branch
In respect of employees in foreign branches, necessary provision has
been made based on the applicable laws. Gratuity / leave encashment
for employees in the foreign branches is provided on the basis of the
actuarial valuation at the year end.
All actuarial gains / losses are charged to revenue in the year these
arise.
Employee Benefts in Foreign Subsidiary Companies
In respect of employees in Foreign Subsidiary Companies, contributions
to defned contribution pension plans are recognized as an expense in
the Proft & Loss Account as incurred.
Liability for leave entitlement is provided on the basis of actual
eligibility at the year end.
1.13 Provisions, Contingent Liabilities and Contingent Assets
i) Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outfow of resources.
ii) Disclosures for a contingent liability is made, without a provision
in books, when there is an obligation that may but probably will not,
require outfow of resources.
iii) Contingent Assets are neither recognized nor disclosed in the
fnancial statements.
1.14 Borrowing Costs
Borrowing costs directly attributable to acquisition, construction and
production of qualifying assets are capitalized as a part of the cost
of such asset up to the date of completion. Other borrowing costs are
charged to the Proft & Loss Account.
1.15 Impairment of assets
In accordance with AS 28 on Impairment of Assets, where there is an
indication of impairment of the Groups assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each Balance Sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the Proft & Loss Account whenever the carrying amount of
such assets exceeds its recoverable amount. If at the Balance Sheet
date there is an indication that a previously assessed impairment loss
no longer exists, then such loss is reversed and the asset is restated
to the extent of the carrying value of the asset that would have been
determined (net of amortization / depreciation) had no impairment loss
been recognized.
1.16 a) Securities issue expenses
Securities issue expenses, Issue expenses including expenses incurred
on increase in authorized share capital and premium payable on
securities are adjusted against Securities Premium Account.
b) Premium payable on redemption of FCCB
Premium payable on redemption of FCCB is amortized proportionately till
the date of redemption and is adjusted against the balance in
Securities Premium Account.
1.17 Lease
Where the Group has substantially acquired all risks and rewards of
ownership of the assets, leases are classifed as fnancial lease. Such
assets are capitalized at the inception of the lease, at the lower of
fair value or present value of minimum lease payment and liability is
created for an equivalent amount. Each lease rental paid is allocated
between liability and interest cost so as to obtain constant periodic
rate of interest on the outstanding liability for each year.
Where signifcant portion of risks and reward of ownership of assets
acquired under lease are retained by lessor, leases are classifed as
Operating lease. Equalized lease rentals for such leases are charged to
Proft & Loss Account.
1.18 Earnings per share
In determining the earnings per share, the Group considers the net
proft after tax and post tax effect of any extra- ordinary /
exceptional item is shown separately. The number of shares considered
in computing basic earnings per share is the weighted average number of
shares outstanding during the year. The number of shares considered for
computing diluted earnings per share comprises the weighted average
number of shares used for deriving the 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 which
includes potential FCCB conversions. The number of shares and
potentially dilutive equity shares are adjusted for any stock splits
and bonus shares issues.
1.19 Inventories
Inventories consist of postage, paper, envelopes, hardware and
supplies, and are stated at cost (computed on frst in frst out or
weighted average basis as the case may be) or net realizable value,
whichever is lower.
Mar 31, 2010
1.1 Overview of the Group
3i Infotech Limited (ÃParentÃ) was promoted by erstwhile ICICI limited.
The Parent and its subsidiaries are collectively referred to as Ãthe
GroupÃ. The Group is a global information technology conglomerate
headquartered in Mumbai, India. The Group undertakes sale of software
products, software development and consulting services, IT enabled
managed services and Transaction services.
1.2 Basis of preparation of consolidated fnancial statements
The consolidated fnancial statements are prepared and presented under
historical cost convention, on the accrual basis of accounting, in
accordance with the accounting principles generally accepted in India
(ÃGAAPÃ) and in compliance with the Accounting Standards (ÃASÃ) issued
by The Companies (Accounting Standards) Rules, 2006, to the extent
applicable. Accounting policies have been consistently applied except
where a newly issued accounting standard is initially adopted or a
revision to an existing accounting standard required a change in
accounting policy hitherto in use.
1.3 Use of estimates
The preparation of the consolidated fnancial statements in conformity
with GAAP requires management to make estimates and assumptions that
affect the reported amount of assets, liabilities, revenues and
expenses and disclosure of contingent liabilities on the date of
fnancial statements. The recognition, measurement, classifcation or
disclosures of an item or information in the fnancial statements are
made relying on these estimates. Any revision to accounting estimates
is recognized prospectively.
1.4 Principles of consolidation
The consolidated fnancial statements include the fnancial statements of
à The Parentà and all its subsidiaries, which are more than 50% owned
or controlled and have been prepared in accordance with the
consolidation procedures laid down in AS 21-ÃConsolidated Financial
StatementsÃ.
The consolidated fnancial statements have been prepared on the
following basis:
l The fnancial statements of the Parent and the subsidiaries have been
combined on a line-by-line basis by adding together the book values of
like items of assets, liabilities, income and expenses after
eliminating intra-group balances/transactions and resulting profts in
full. Unrealized losses resulting from intra-group transactions have
also been eliminated except to the extent that recoverable value of
related assets is lower than their cost to the Group.
l The consolidated fnancial statements are presented, to the extent
possible, in the same format as that adopted by the Parent for its
standalone fnancial statements.
l The consolidated fnancial statements are prepared using uniform
accounting policies across the Group.
l Goodwill arising on consolidation - The excess of cost to the Parent,
of its investment in subsidiaries over its portion of equity in the
subsidiaries at the respective dates on which investment in
subsidiaries was made, is recognized in the fnancial statements as
goodwill and in the case where equity exceeds the cost; the same is
being adjusted in the said goodwill. The ParentÃs portion of equity in
the subsidiaries is determined on the basis of the value of assets and
liabilities as per the fnancial statements of the subsidiaries as on
the date of investment.
l Entities acquired during the year have been consolidated from the
respective dates of their acquisition.
(a) In March 2010, the Parent Company has sold its investment in aok
In-house BPO Services Ltd. and HCCA Business Services Pvt. Ltd. to 3i
Infotech BPO Ltd.
(b) During the year, 3i Infotech (Middle East) FZ LLC. transferred its
entire membership interest in Objectsoft Group Inc., ePower Inc. and
Lantern Systems Inc. to J&B Software (Canada) Inc.
(c) Objectsoft Global Services Inc has been merged with Objectsoft
Group Inc.
(d) Nile Information Technology (Nile) was considered as an Associate
till June 2009. The Group ceases to have signifcant infuence during the
year; hence the investment in Nile is now considered as a non-trade
Investment.
1.6 Revenue recognition
Revenue from software products is recognized on delivery/installation,
as per the pre determined/laid down policy across all geographies or
lower, as considered appropriate by the management on the basis of
facts in specifc cases. Maintenance revenue in respect of products is
deferred and recognized ratably over the period of the underlying
maintenance agreement.
Revenue from IT services is recognized either on time and material
basis or fxed price basis or based on certain measurable criteria as
per relevant agreements. Revenue on time and material contracts is
recognized as and when services are performed. Revenue on fxed-price
contracts is recognized on the percentage of completion method.
Provision for estimated losses, if any, on such uncompleted contracts
are recorded in the period in which such losses become probable based
on the current estimates.
Revenue from transaction services and other service contracts is
recognized based on transactions processed or manpower deployed.
Revenue from supply of Hardware/Outsourced Software License/Term
License/other materials is incidental to the aforesaid services
recognized based on delivery/installation, as the case may be. Recovery
of incidental expenses is added to respective revenue.
1.7 Unbilled and Unearned Revenue:
Revenue recognized over and above the billings on a customer is
classifed as Ãunbilled revenueà while billing over and above the
revenue recognized in respect of a customer is classifed as Ãunearned
revenueÃ.
1.8 a. Fixed Assets
Intangible: Purchased software meant for in house consumption and
signifcant upgrades thereof, Business & Commercial Rights are
capitalized at the acquisition price.
Acquired software/products meant for sale are capitalized at the
acquisition price.
Tangible: Fixed Assets are stated at cost, which comprises of purchase
consideration and other directly attributable cost of bringing an asset
to its working condition for the intended use.
Advances given towards acquisition of fxed assets and the cost of
assets not ready for use as at the balance sheet date are disclosed
under capital work-in-progress.
b. Depreciation/Amortization:
Leasehold land, leasehold building and improvements thereon are
amortized over the period of lease or the life given below whichever is
lower.
Business & Commercial Rights are amortized at lower of the period the
benefts arising out of these are expected to accrue and ten years,
while purchased software meant for in house consumption and signifcant
upgrades thereof and Goodwill arising on merger/acquired Goodwill is
amortized over a period of fve years.
Project Assets/acquired software are amortized at lower of the
estimated life of the product /project and fve years.
Depreciation on other fxed assets is provided on straight line method
at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956. In the case of some subsidiary companies, it is
provided on straight line basis over the estimated useful life of the
assets given herein below:
1.9 Investments
Trade investments are the investments made to enhance the Parent
CompanyÃs business interest. Investments are either classifed as
current or long-term based on the managementÃs intention at the time of
purchase. Long-term investments are carried at cost and provision is
made to recognize any decline, other than temporary, in the value of
such investments.
Current investments are carried at the lower of the cost and fair value
and provision is made to recognize any decline in the carrying value.
Cost of overseas investment comprises the Indian Rupee value of the
consideration paid for the investment.
1.10 Accounting for Taxes on Income
Provision for current income tax is made on the basis of the estimated
taxable income for the year in accordance with the specifc applicable
laws.
MAT credit asset pertaining to the Parent and its Indian subsidiary
company is recognized and carried forward only if there is a reasonable
certainty of it being set off against regular tax payable within the
stipulated statutory period.
Deferred tax resulting from timing differences between book and tax
profts is accounted for under the liability method, at the current rate
of tax, to the extent that the timing differences are expected to
crystallize. Deferred tax assets are recognized and carried forward
only if there is a reasonable/virtual certainty that they will be
realized and are reviewed for the appropriateness of their respective
carrying values at each balance sheet date.
The deferred tax assets/liabilities and tax expenses are determined
separately for the Parent and each subsidiary company, as per their
applicable laws and then aggregated.
1.11 Translation of Foreign Currency Items
Transactions in foreign currency are recorded at the rate of exchange
in force on the date of the transactions. Current assets, current
liabilities and borrowings denominated in foreign currency are
translated at the exchange rate prevalent at the date of the Balance
Sheet. The resultant gain/loss are recognized in the Proft & Loss
account. Overseas investments are recorded at the rate of exchange in
force on the date of allotment/acquisition.
All the activities of the foreign operations are carried out with a
signifcant degree of autonomy. Accordingly, as per the provisions of AS
11 ÃEffects of changes in foreign exchange ratesÃ, these operations
have been classifed as ÃNon integral operationsà and therefore all
assets and liabilities, both monetary and non-monetary, are translated
at the closing rate while the income and expenses are translated at the
average rate for the year. The resulting exchange differences are
accumulated in the Foreign Currency Translation Reserve.
1.12 Accounting of Employee Benefts Employee Benefts in India
a) Gratuity
(i) Parent
The Parent Company provides for gratuity, a defned beneft retirement
plan, covering eligible employees. Liability under gratuity plan is
determined on actuarial valuation done by the Life Insurance
Corporation of India (LIC) at the beginning of the year, based upon
which, the Parent Company contributes to the Scheme with LIC. The
Parent Company also provides for the additional liability over the
amount contributed to LIC based on the actuarial valuation done by an
independent valuer using the Projected Unit Credit Method.
(ii) Subsidiaries
Liability for Gratuity for employees is provided on the basis of the
actuarial valuation at the year end.
b) Superannuation
Certain employees in India are also participants in a defned
superannuation contribution plan. The Parent contributes to the scheme
with Life Insurance Corporation of India on a monthly basis. The Parent
has no further obligations to the plan beyond its monthly
contributions.
c) Provident fund
(i) Parent
Eligible employees receive benefts from a provident fund, which is a
defned contribution plan to the Trust/Government administered Trust. In
the case of Trust aggregate contribution along with interest thereon is
paid at retirement, death, incapacitation or termination of employment.
Both the employee and the Parent Company make monthly contribution to
the 3i Infotech Provident Fund Trust equal to a specifed percentage of
the covered employeeÃs salary. The Parent Company also contributes to a
Government administered pension fund on behalf of its employees.
The interest rate payable by the trust to the benefciaries every year
is being notifed by the government. The Parent has an obligation to
make good the shortfall, if any, between the return from investments of
the trust and the notifed interest rate. Such shortfall is charged to
proft & loss account in the year it is determined.
(ii) Subsidiaries
Contribution is made to the state administered fund as a percentage of
the covered employeesà salary.
d) Liability for leave encashment/entitlement for employees is provided
on the basis of the actuarial valuation at the year end.
e) All actuarial gains/losses are charged to revenue in the year these
arise.
Employee Benefts in the Foreign Branch
In respect of employees in foreign branches, necessary provision has
been made based on the applicable laws. Gratuity/leave encashment for
employees in the foreign branches is provided on the basis of the
actuarial valuation at the year end.
All actuarial gains/losses are charged to revenue in the year these
arise.
Employee Benefts in Foreign Subsidiary Companies
In respect of employees in Foreign Subsidiary Companies, contributions
to defned contribution pension plans are recognized as an expense in
the proft & loss account as incurred.
Liability for leave entitlement is provided on the basis of actual
eligibility at the year end.
1.13 Provisions, Contingent Liabilities and Contingent Assets
i) Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outfow of resources.
ii) Disclosures for a contingent liability is made, without a provision
in books, when there is an obligation that may, but probably will not,
require outfow of resources.
iii) Contingent Assets are neither recognized nor disclosed in the
fnancial statements.
1.14 Borrowing Costs
Borrowing costs directly attributable to acquisition, construction and
production of qualifying assets are capitalized as a part of the cost
of such asset up to the date of completion. Other borrowing costs are
charged to the Proft & Loss account.
1.15 Impairment of assets
In accordance with AS 28 on ÃImpairment of AssetsÃ, where there is an
indication of impairment of the GroupÃs assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each balance sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognized in the Proft & Loss account whenever the carrying amount of
such assets exceeds its recoverable amount. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, then such loss is reversed and the asset is restated
to the extent of the carrying value of the asset that would have been
determined (net of amortization/depreciation) had no impairment loss
been recognized.
1.16 a) Securities issue expenses
Securities issue expenses, Issue expenses including expenses incurred
on increase in authorized share capital and premium payable on
securities are adjusted against Securities Premium Account.
b) Premium payable on redemption of FCCB is amortized proportionately
till the date of redemption and is adjusted against the balance in
Securities Premium account.
1.17 Lease
Where the Group has substantially acquired all risks and rewards of
ownership of the assets, leases are classifed as fnancial lease. Such
assets are capitalized at the inception of the lease, at the lower of
fair value or present value of minimum lease payment and liability is
created for an equivalent amount. Each lease rental paid is allocated
between liability and interest cost so as to obtain constant periodic
rate of interest on the outstanding liability for each year.
Where signifcant portion of risks and reward of ownership of assets
acquired under lease are retained by lessor, leases are classifed as
Operating lease. Equalized lease rentals for such leases are charged to
Proft & Loss account.
1.18 Earnings Per Share
In determining the Earnings Per Share, the Group considers the net
proft after tax and post tax effect of any extra- ordinary/exceptional
item is shown separately. The number of shares considered in computing
basic Earnings Per Share is the weighted average number of shares
outstanding during the year. The number of shares considered for
computing diluted Earnings Per Share comprises the weighted average
number of shares used for deriving the 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 which
includes potential FCCB conversions. The number of shares and
potentially dilutive equity shares are adjusted for any stock splits
and bonus shares issues.
1.19 Inventories
Inventories consist of postage, paper, envelopes, hardware and
supplies, and are stated at cost (computed on frst in frst out or
weighted average basis as the case may be) or net realizable value,
whichever is lower.