Accounting Policies of Hinduja Global Solutions Ltd. Company
Mar 31, 2023
1 Background
Hinduja Global Solutions Limited (âHGSâ or the âCompanyâ) is a public limited Company, domiciled in India and it''s incorporated under the provisions of The Companies Act 1956 and is engaged in Business Process Management and Media and Communication business. Business Process Management segment offer voice and non-voice based services such as contact center solutions and back office transaction processing across America, Canada, Europe, Asia and Middle East. HGS'' Digital, Media & Communications business, is India''s premier integrated Digital Delivery Platforms Company delivering services via satellite, digital cable and broadband to over 5 million customers across 1,500 cities and towns. Its ordinary shares (equity) are listed on the two registered stock exchanges in India i.e National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) . The address of its registered office is 171, Hinduja House, Dr. Annie Besant Road, Worli, Mumbai 400018.
These financial statements were authorized to be approved by the Board of Directors on May 26, 2023.
a Basis of preparation of standalone financial statements
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under sec. 133 of Companies Act 2013, as applicable.The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
The financial statements correspond to the classification provisions contained in Ind AS 1, âPresentation of Financial Statementsâ. For clarity, various items are aggregated in the statements of profit and loss and balance sheet. These items are disaggregated separately in the notes to the financial statements, where applicable.
Accounting policies have been applied consistently to all periods presented in these standalone financial statements, except for the adoption of new accounting standards, amendments and interpretations effective from April 1, 2023.
All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures. Previous year figures have been regrouped/re-arranged, wherever necessary.
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements.
(i) Basis of Measurement
The financial statements have been prepared on a historical cost convention and accrual basis, except for the following:
a. certain financial assets and liabilities (including derivative instruments) that are measured at fair value;
b. The defined benefit liability / (Asset) is recognised as the present value of present value of defined benefit obligation less fair value of plan assets.; and
c. Share-based payments
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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and / or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of Ind AS 102, leasing transactions that are within the scope of Ind AS 116, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
All assets and liabilities have been classified as current or non-current as per Company normal operating cycle and presented as per criteria set out in the Division II format of Schedule III to the Act. The Company has identified its operating cycle as twelve months.
b Use of estimates and judgements
The preparation of these financial statements in conformity with Ind AS requires the management to make judgements, accounting estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Accounting estimates are monetary amounts in the standalone financial statements that are subject to measurement uncertainty. An accounting policy may require items in standalone financial statements to be measured at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, management develops an accounting estimate to achieve the objective set out by accounting policy. Developing accounting estimates involves the use of judgements or assumptions based on the latest available and reliable information. Actual results may differ from those accounting estimates.
Accounting estimates and underlying assumptions are reviewed on an ongoing basis. Changes to the accounting estimates are recognized in the period in which the estimates are changed and in any future period affected. In particular, information about material areas of estimation, uncertainty and critical judgement in applying accounting policies that have the material effect on the amounts recognized in the standalone financial statements are included in the following areas.
i) Estimation of provisions & contingent liabilities.
The Company estimates the provisions that have present obligations as a result of past events, and it is probable that outflow of resources will be required to settle the obligations. These provisions are reviewed at the end of each reporting date and are adjusted to reflect the current best estimates.
The Company uses significant judgement to disclose contingent liabilities. Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation, or a reliable estimate of the amount cannot be made. Contingent assets are neither recognized nor disclosed in the financial statements. (Refer note 21, 24 and 35)
ii) Estimation of defined benefit plans
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employment plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations. The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations. In determining the appropriate discount rate, the Company considers the interest rates of government bonds of maturity approximating the terms of the related plan liability. Refer note 41 for the details of the assumptions used in estimating the defined benefit obligation.
iii) Useful lives of property, plant and equipment
The Company depreciates property, plant and equipment on a straight-line basis over estimated useful lives of the assets. The charge in respect of periodic depreciation is derived based on an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The 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. The estimated useful life is reviewed at least annually.
iv) Income taxes
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
v) Deferred taxes
Deferred tax is recorded on temporary differences between the tax bases of assets and liabilities and their carrying amounts, at the rates that have been enacted or substantively enacted at the reporting date. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
profits during the periods in which those temporary differences and tax loss carry-forwards become deductible. The Company considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are reduced.
vi) Impairment testing
Investments in subsidiaries are tested for impairment at least annually and when events occur or changes in circumstances indicate that the recoverable amount of the asset or cash generating units to which these pertain is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to dispose. The calculation of value in use of a cash generating unit involves use of significant estimates and assumptions which includes turnover, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.
Goodwill is required to be assessed for impairment for every Cash Generating Unit (CGU) on a yearly basis. For the purposes of the same, the Company calculates the recoverable amount of the CGU. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to dispose. The calculation of value in use of the CGU is based on discounted cash flow model. The cash flows are derived from the budget for the future years. The recoverable amount is sensitive to the discount rates used in discounted cash flow model as well as growth rate used for estimate and involves use of significant estimates and assumptions including turnover, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions. Refer note 38 for the details of assumptions used in estimation of impairment of goodwill.
vii) Revenue
The Company applies judgement to determine whether each product or services promised to a customer are capable of being distinct, and are distinct in the context of the contract, if not, the promised product or services are combined and accounted as a single performance obligation. The Company allocates the arrangement consideration to separately identifiable performance obligation deliverables based on their relative stand-alone selling price. In cases where the Company is unable to determine the stand-alone selling price the Company uses expected cost-plus margin approach in estimating the stand-alone selling price. The Company estimates the unbilled receivables (representing revenues recognized for services rendered between the last billing date and the balance sheet date), discounts, incentives, performance bonuses, etc. based on estimates of performance obligations satisfied and historical experience.
viii) Leases
Critical judgements required in the application of Ind AS 116 may include, among others, the following:
i) Identifying whether a contract (or part of a contract) includes a lease;
ii) Determining whether it is reasonably certain that an extension or termination option will be exercised;
iii) Classification of lease agreements (when the entity is a lessor);
iv) Determination of whether variable payments are in-substance fixed;
v) Establishing whether there are multiple leases in an arrangement;
vi) Determining the stand-alone selling prices of lease and non-lease components.
Key sources of estimation uncertainty in the application of Ind AS 116 may include, among others, the following:
i) Estimation of the lease term;
ii) Determination of the appropriate rate to discount the lease payments;
iii) Assessment of whether a right-of-use asset is impaired.
ix) Business combinations:
In accounting for business combinations, judgment is required to assess whether an identifiable intangible asset is to be recorded separately from goodwill. Additionally, estimating the acquisition date fair value of the identifiable assets acquired (including useful life estimates), liabilities assumed, and contingent consideration assumed involves management judgment. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management. Changes in these judgments, estimates, and assumptions can materially affect the results of operations.
x) Useful lives of intangible assets:
The Company amortizes intangible assets on a straight-line basis over estimated useful lives of the assets. The useful life is estimated based on a number of factors including the effects of obsolescence, demand, competition and other economic factors such as the stability of the industry and known technological advances and the level of maintenance expenditures required to obtain the expected future cash flows from the assets. The estimated useful life is reviewed at least annually.
xi) Other estimates
The share based compensation expense is determined based on the Company''s estimate of equity instruments that will eventually vest. Accounting of derivative hedging instruments designated as cash flow hedges involves significant estimates relating to the occurrence of forecast transaction.
c Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the âfunctional currencyâ). The financial statements are presented in Indian Rupees (INR), which is Company''s functional and presentation currency.
(ii) Transactions and balances
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. They are deferred in equity if they relate to qualifying cash flow hedges.
(iii) Foreign operations
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
a. assets and liabilities are translated at the closing rate at the date of balance sheet.
b. income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
c. All resulting exchange differences are recognized in other comprehensive income. d Revenue from contracts with customers
The Company has adopted Ind AS 115 âRevenue from Contracts with Customersâ which sets forth a single comprehensive model for recognising and reporting revenues.
Revenue is recognised upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services in the normal course of business.
Revenue is measured at the transaction price of the consideration received or receivable excluding taxes collected on behalf of the government and is reduced for estimated credit notes and other similar allowances.
To recognise revenues, we apply the following five step approach:
(1) identify the contract with a customer,
(2) identify the performance obligations in the contract,
(3) determine the transaction price,
(4) allocate the transaction price to the performance obligations in the contract and
(5) recognise revenues when a performance obligation is satisfied.
i) Business process management services.
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.
The Company derives its revenue from business process management (BPM) which includes services like back office processing, contact center and HRO solutions. The Company provides BPM services, which typically involve claim processing and call center services for healthcare industry, call center services for telecom industry, which it administers and manages those services for its client on an ongoing basis. The Company combines technology powered services in automation, analytics and digital with domain expertise focusing on back office processing, contract centers and HRO solutions to deliver transformational impact to clients.
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.
A. Time and Material contracts
Revenue from time and material transactions and outcome based contracts are recognised as the services are performed.
B. Fixed price contracts
In respect of fixed-price contracts, where performance obligations are satisfied over a period of time, revenue is recognised by means of percentage of completion method. Under this method, revenue is recognised by applying the percentage of completion on the transaction price.
Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. If the Company is not able to reasonably measure the progress of completion, revenue is recognized only to the extent of costs incurred for which recoverability is probable. When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the statement of profit and loss in the period in which such losses become probable based on the current contract estimates as an onerous contract provision.
C. Contract Asset and Liabilities
The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset.
A receivable is a right to consideration that is unconditional. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due. For example, the Company recognizes a receivable for revenues related to time and materials contracts or volume-based contracts. The Company presents such receivables as part of trade receivables at their net estimated realizable value. The same is tested for impairment as per the guidance in Ind AS 109 using expected credit loss method.
D. Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognised which includes unearned revenue and amounts that will be invoiced and recognised as revenue in future periods. Applying the practical expedient, the Company has not disclosed its right to consideration from customer in an amount that corresponds directly with the value to the customer of the Company''s performance completed to date which are, contracts invoiced on time and material basis and volume based.
Any change in scope or price is considered as a contract modification. The Company accounts for modifications to existing contracts by assessing whether the services added are distinct and whether the pricing is at the stand-alone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract if the additional services are priced at the stand-alone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the stand-alone selling price.
The Company accounts for variable considerations like, volume discounts, rebates and pricing incentives to customers as reduction of revenue on a systematic and rational basis over the period of the contract. The Company estimates an amount of such variable consideration using expected value method or the single most likely amount in a range of possible consideration depending on which method better predicts the amount of consideration to which the Company may be entitled.
Revenues are shown net of allowances/ returns, sales tax, value added tax, goods and services tax and applicable discounts and allowances.
The Company accrues the estimated cost of warranties at the time when the revenue is recognised. The accruals are based on the Company''s historical experience of material usage and service delivery costs.
Incremental costs that relate directly to a contract and incurred in securing a contract with a customer are recognised as an asset when the Company expects to recover these costs and amortised over the contract term.
The Company recognizes contract fulfilment cost as an asset if those costs specifically relate to a contract or to an anticipated contract, the costs generate or enhance resources that will be used in satisfying performance obligations in future; and the costs are expected to be recovered. The asset so recognised is amortised on a systematic basis consistent with the transfer of goods or services to customer to which the asset relates.
The Company assesses the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, the Company does not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist.
The Company may enter into arrangements with third party suppliers to resell products or services. In such cases, the Company evaluates whether the Company is the principal (i.e. report revenues on a gross basis) or agent (i.e. report revenues on a net basis). In doing so, the Company first evaluates whether the Company controls the services before it is transferred to the customer. If Company controls the services before it is transferred to the customer, Company is the principal; if not, the Company is the agent.
The Company has concluded that it falls under the definition of principal for all its contracts relating to business service division. Since it is the primary obligor and has pricing latitude which establishes control before transferring products and services to the customer, hence, the Company recognises the revenue earned from such contracts on gross basis in its books of accounts.
Estimates of transaction price and total costs or efforts are continuously monitored over the term of the contract and are recognized in net profit in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses.
F. Reconciliation of revenue recognised
The Company recognises Volume discounts, Penalties and Incentives against each transaction price as per the terms of the contract with the customer, the disclosures related to the reconciliation of revenue recognised with the transaction price have not been provided as the same is not material to the Company.
ii) Media and Communication business
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of accounting in Ind AS 115.
The performance obligations of the Company are satisfied over time as services are rendered. Determination of transaction price
Revenue is measured based on transaction price which includes variable consideration only to the extent it is probable that a significant reversal of revenues recognised will not occur when the uncertainty associated with the variable consideration is resolved. Revenues also exclude taxes collected from customers.
Allocation of transaction price
A contract''s transaction price is allocated to each distinct performance obligation and recognised as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, we allocate the contract''s transaction price to each performance obligation based on the relative standalone selling price. The primary method used to estimate standalone selling price is the adjusted market assessment approach, under which the Company evaluates the price in that market that a customer is willing to pay for those services. While determining relative standalone selling price and identifying separate performance obligations require judgment, generally relative standalone selling prices and the separate performance obligations are readily identifiable as we sell those performance obligations unaccompanied by other performance obligations.
Lease Income - Optic Fibre Cable
The policy for recognition of revenue from operating leases is described in 1.g below Installation revenue
Installation revenue on Set Top Boxes (STBs) is recognised over the estimated period of customer relationships.
Revenue is recognised on satisfaction of performance obligation upon transfer of promised products or services in an amount that reflects the consideration which the Company expects to receive in exchange of those products and services. Installation revenue on Set Top Boxes (STBs) is deferred and is recognised over the estimated period of customer relationship. Amount billed for services as per contractual terms but not recognised as revenue, is shown as income received in advance under other deferred income. Revenue is measured at the amount of consideration which the Company expects to be entitled to in exchange for providing services to a customer as specified in the contract, excluding amounts collected on behalf of third parties (for example taxes and duties collected on behalf of the government). Consideration is generally due upon satisfaction of performance obligations and a receivable is recognized when it becomes unconditional. Revenue in excess of invoicing are disclosed as contracts assets ("unbilled receivablesâ) and invoicing in excess of revenues are disclosed as contract liabilities.
Rendering of other services
Revenue from services is recognised when the services are rendered in accordance with the specific terms of contract and when collectability of the resulting receivable is reasonably assured.
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and adjustment for unused tax losses.
The current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its branch operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences, unused tax losses and MAT credit entitlements only if it is probable that future taxable amounts will be available to utilize those temporary differences, losses and credits.
Deferred tax liabilities are not recognized for temporary differences between the carrying amount and tax bases of investments in branches where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets are not recognized for temporary differences between the carrying amount and tax bases of investments in branches where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary difference can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in statement of profit and loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is recognized in other comprehensive income or directly in equity, respectively.
The Company has thus disclosed the Income Tax Assets/ Liabilities on a net basis to the extent that the same is settled within the same tax jurisdictions, which is in line with Accounting statements prescribed under Ind AS 12- Income Taxes.
The Company enters into an arrangement for lease of land, buildings, plant and machinery including computer equipment and furnitures. Such arrangements are generally for a fixed period but may have extension or termination options. The Company assesses, whether the contract is, or contains, a lease, at its inception. A contract is, or contains, a lease if the contract conveys the right to -
(a) control the use of an identified asset,
(b) obtain substantially all the economic benefits from use of the identified asset, and
(c) direct the use of the identified asset.
The Company determines the lease term as the non-cancellable period of a lease, together with periods covered by an option to extend the lease, where the Company is reasonably certain to exercise that option.
The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term wherein the probability for renewal is remote based on past experience (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. This expense is presented within ''other expenses'' in statement of profit and loss.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
i) fixed lease payments (including in-substance fixed payments), less any lease incentives;
ii) variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
iii) the amount expected to be payable by the lessee under residual value guarantees;
iv) the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
v) payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
Lease liability payments are classified as cash used in financing activities in the Statement of cash flows.
The Company has adopted the amendments to Ind AS 116 for the first time from April 1,2021. The amendments provide practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19 by introducing a practical expedient to Ind AS 116. The practical expedient permits a lessee to elect not to assess whether a COVID-19-related rent concession is a leases modification. A lessee that makes this election shall account for any change in lease payments resulting from the COVID-19- related rent concession the same way it would account for the change applying Ind AS 116 if the change were not a lease modification.
The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following conditions are met:
(a) The change in lease payments results in revised consideration for the lease that is substantially the same as or less than the consideration for the lease immediately preceding the change;
(b) Any reduction in lease payments affects only payments originally due on or before 30 June 2021(a rent concession meets this condition if it results in reduced lease payments on or before 30 June 2021and increased lease payments that extend beyond 30 June 2021); and
(c) There is no substantive change to other terms and conditions of the lease.
The Company has applied the practical expedient retrospectively to all eligible rent concessions and has not restated prior period figures.
The Company has benefited from a 12 month waiver of lease payments on buildings in India. The waiver of lease payments of FY 2022-23 A Nil(FY 2021-22 R 137.84 lakhs) has been accounted for as a negative variable lease payment in profit or loss.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever
i) the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
ii) the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
iii) a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
Right-of-Use Assets:
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. Prepaid lease payments (including the difference between nominal amount of the deposit and the fair value) are also included in the initial carrying amount of the right of use asset.
They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated on a straight line basis over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the statement of financial position.
The Company applies Ind AS 36 to determine whether a ROU asset is impaired and accounts for any identified impairment loss as described in the impairment of non-financial assets below
The Company incurs obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease. the Company has assessed that such restoration costs are negligible and hence no provision under Ind-AS 37 has been recognised.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line âother expensesâ in the statement of profit and loss.
As a practical expedient, Ind AS 116 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Company has not used this practical expedient.
The Company''s lease asset classes Digital, Media and Communication segment consist of leases for Plant and Machinery, Set top boxes and Transponder. 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. 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.
Assets leased out under operating leases are capitalised. Rental income from operating lease is recognised on a straight-line basis over the lease term. Rental income, based on agreement, is recognised based on product of number of pairs of dark fibre assets leased out and length of dark fibre assets leased out (in kilometres) and the rate at which lease rent is charged per pair per kilometre of dark fibre assets including minimum guarantee lease rental.
Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Company''s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue.
The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise 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 Company as a lessor
Leases under which the Company is a lessor are classified as a finance or operating lease. Lease contracts where all the risks and rewards are substantially transferred to the lessee are classified as a finance lease. All other leases are classified as operating lease. For leases under which the Company is an intermediate lessor, the Company accounts for the head-lease and the sub-lease as two separate contracts. The sub-lease is further classified either as a finance lease or an operating lease by reference to the RoU asset arising from the head-lease.
h Impairment
i) Impairment of non financial assets
The Company assesses long-lived assets such as property, plant and equipment, ROU assets and acquired intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. If any such indication exists, the Company estimates the recoverable amount of the asset or group of assets. Goodwill is tested for impairment at least annually at the same time and when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than it''s carrying value. The goodwill impairment test is performed at the level of cash-generating unit or groups of cash-generating units which represents the lowest level at which goodwill is monitored for internal management purposes. The recoverable amount of an asset or cash generating unit is the higher of its fair value less cost of disposal (âFVLCDâ) and its value-in-use (âVIUâ). The VIU of long-lived assets is calculated using projected future cash flows. FVLCD of a cash generating unit is computed using turnover and earnings multiples. If the recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the reporting date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the impairment losses previously recognized are reversed such that the asset is recognized at its recoverable amount but not exceeding written down value which would have been reported if the impairment losses had not been recognized initially.
ii) Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on trade receivables including unbilled receivables measured at amortized cost, Expected credit loss is the difference between the contractual cash flows and the cash flows that the entity expects to receive discounted using effective interest rate.
Loss allowances for trade receivables are measured at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. Lifetime expected credit loss is computed based on historical credit loss experience adjusted for forward looking information.
For other financial assets, expected credit loss is measured at the amount equal to twelve months expected credit loss unless there has been a significant increase in credit risk from initial recognition, in which case those are measured at lifetime expected credit loss.
iii) Impairment of Investment in subsidiaries:
The Company assesses investments in subsidiaries for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If any such indication exists, the Company estimates the recoverable amount of the investment in subsidiary. The recoverable amount of such investment is the higher of its fair value less cost of disposal (âFVLCDâ) and its value-in-use (âVIUâ). The VIU of the investment is calculated using projected future cash flows. If the recoverable amount of the investment is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, balances with bank in current accounts, Exchange Earners Foreign Currency (EEFC) Accounts, other short-term, highly liquid deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
j Trade receivables
Trade receivables are recognized initially at transaction price and subsequently measured at amortized cost using the effective interest method, less provision for impairment.
k Contract balancesContract Asset
A contract asset is right to consideration in exchange of services that the company has rendered to a customer when that right is conditioned on something other than passage of time. Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Contract Liability
A contract liability is the obligation to render services to a customer for which the company has received consideration from the customer. If a customer pays consideration before the company renders services to the customer, a contract liability is recognised when the payment is made. Contract liabilities are recognised as revenue when the Company renders services as per the contract.
l Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit or loss in the period in which they are incurred. m Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
a. those to be measured subsequently at fair value (either through other comprehensive income, or through statement of profit and loss), and
b. those measured at amortized cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through statement of profit and loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in statement of profit and loss.
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in statement of profit and loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Currently there are no debt instruments measured at Fair value.
(iii) Derecognition of financial assets
A financial asset is derecognized only when
a. The Company has transferred the rights to receive cash flows from the financial asset or
b. retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset, and the transfer qualifies for derecognition under Ind AS 109. If the Company retains substantially all the risks and rewards of a transferred financial asset, the Company continues to recognize the financial asset and recognizes a borrowing for the proceeds received. A financial liability (or a part of a financial liability) is derecognized from the Company''s balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
(iv) Investments in equity instruments:
The Company carries certain equity instruments which are not held for trading. At initial recognition, the Company may make an irrevocable election to present subsequent changes in the fair value of an investment in an equity instrument in other comprehensive income (FVTOCI) or through statement of profit and loss (FVTPL). For investments designated to be classified as FVTOCI, movements in fair value of investments are recognised in other comprehensive income and the gain or loss is not transferred to statement of profit and loss on disposal of investments. For investments designated to be classified as FVTPL, both movements in fair value of investments and gain or loss on disposal of investments are recognised in the statement of profit and loss.
Dividends from these investments are recognised in the statement of profit and loss when the Company''s right to receive dividends is established.
(v) Investments in subsidiaries:
Investment in equity instruments of subsidiaries are measured at cost less impairment. Investment in redeemable preference shares of subsidiaries are measured at FVTPL. These investments are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in statement of profit and loss. The gain or loss on disposal is recognised in statement of profit and loss.
(vi) Other financial assets:
Other financial assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current assets. These are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any impairment losses. These comprise finance lease receivables, employee and other advances and other eligible current and non-current assets.
(vii) Income recognition Interest income:
Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument.
Dividends are recognized in statement of profit and loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
n Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The Company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of highly probable forecast transactions.
The Company documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. The Company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
(i) Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in statement of profit and loss, within other income.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to statement of profit and loss within other gains/(losses).
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volum
Mar 31, 2022
1 Background
Hinduja Global Solutions Limited (âHGSâ or the âCompanyâ) is a public limited Company, domiciled in India and it''s incorporated under the provisions of The Companies Act 1956 and is engaged in Business Process Management. HGS with its subsidiaries offer voice and non-voice based services such as contact center solutions and back office transaction processing across America, Canada, Europe, Asia and Middle East. Its ordinary shares (equity) are listed on the two registered stock exchanges in India i.e National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) . The address of its registered office is 171, Hinduja House, Dr. Annie Besant Road, Worli, Mumbai 400018.
These financial statements were authorized to be approved by the Board of Directors on August 12, 2022.
a Basis of preparation of standalone financial statements
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under sec. 133 of Companies Act 2013, as applicable and guidelines issued by the Securities and Exchange Board of India (âSEBIâ). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. The financial statements correspond to the classification provisions contained in Ind AS 1, âPresentation of Financial Statementsâ. For clarity, various items are aggregated in the statements of profit and loss and balance sheet. These items are disaggregated separately in the notes to the financial statements, where applicable.
Accounting policies have been applied consistently to all periods presented in these standalone financial statements, except for the adoption of new accounting standards, amendments and interpretations effective from April 1, 2022.
All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures. Previous year figures have been regrouped/re-arranged, wherever necessary.
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements.
(i) Basis of Measurement
The financial statements have been prepared on a historical cost convention and accrual basis, except for the following:
a. certain financial assets and liabilities (including derivative instruments) that are measured at fair value;
b. The defined benefit liability / (Asset) is recognised as the present value of present value of defined benefit obligation less fair value of plan assets.; and
c. Share-based payments
b Use of estimates and judgements
The preparation of these financial statements in conformity with Ind AS requires the management to make judgements, accounting estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Accounting estimates are monetary amounts in the standalone financial statements that are subject to measurement uncertainty. An accounting policy may require items in standalone financial statements to be measured at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, management develops an accounting estimate to achieve the objective set out by accounting policy. Developing accounting estimates involves the use of judgements or assumptions based on the latest available and reliable information. Actual results may differ from those accounting estimates.
Accounting estimates and underlying assumptions are reviewed on an ongoing basis. Changes to the accounting estimates are recognized in the period in which the estimates are changed and in any future period affected. In particular, information about material areas of estimation, uncertainty and critical judgement in applying accounting policies that have the material effect on the amounts recognized in the standalone financial statements are included in the following areas.
i) Estimation of provisions & contingent liabilities.
The Company estimates the provisions that have present obligations as a result of past events, and it is probable that outflow of resources will be required to settle the obligations. These provisions are reviewed at the end of each reporting date and are adjusted to reflect the current best estimates.
The Company uses significant judgement to disclose contingent liabilities. Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation, or a reliable estimate of the amount cannot be made. Contingent assets are neither recognized nor disclosed in the financial statements. (Refer note 19 and 31)
ii) Estimation of defined benefit plans
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employment plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations. The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations. In determining the appropriate discount rate, the Company considers the interest rates of government bonds of maturity approximating the terms of the related plan liability. Refer note 37 for the details of the assumptions used in estimating the defined benefit obligation.
iii) Useful lives of property, plant and equipment
The Company depreciates property, plant and equipment on a straight-line basis over estimated useful lives of the assets. The charge in respect of periodic depreciation is derived based on an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The 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. The estimated useful life is reviewed at least annually.
iv) Income taxes
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
v) Deferred taxes
Deferred tax is recorded on temporary differences between the tax bases of assets and liabilities and their carrying amounts, at the rates that have been enacted or substantively enacted at the reporting date. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profits during the periods in which those temporary differences and tax loss carry-forwards become deductible. The Company considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are reduced.
vi) Impairment testing
Investments in subsidiaries are tested for impairment at least annually and when events occur or changes in circumstances indicate that the recoverable amount of the asset or cash generating units to which these pertain is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to dispose. The calculation of value in use of a cash generating unit involves use of significant estimates and assumptions which includes turnover, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.
Goodwill is required to be assessed for impairment for every Cash Generating Unit (CGU) on a yearly basis. For the purposes of the same, the group calculates the recoverable amount of the CGU. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to dispose.
The calculation of value in use of the CGU is based on discounted cash flow model. The cash flows are derived from the budget for the future years. The recoverable amount is sensitive to the discount rates used in discounted cash flow model as well as growth rate used for estimate and involves use of significant estimates and assumptions including turnover, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions. Refer note 34 for the details of assumptions used in estimation of impairment of goodwill.
vii) Revenue
The Company applies judgement to determine whether each product or services promised to a customer are capable of being distinct, and are distinct in the context of the contract, if not, the promised product or services are combined and accounted as a single performance obligation. The Company allocates the arrangement consideration to separately identifiable performance obligation deliverables based on their relative stand-alone selling price. In cases where the Company is unable to determine the stand-alone selling price the Company uses expected cost-plus margin approach in estimating the stand-alone selling price. The Group estimates the unbilled receivables (representing revenues recognized for services rendered between the last billing date and the balance sheet date), discounts, incentives, performance bonuses, etc. based on estimates of performance obligations satisfied and historical experience.
viii) Leases
Critical judgements required in the application of Ind AS 116 may include, among others, the following:
i) Identifying whether a contract (or part of a contract) includes a lease;
ii) Determining whether it is reasonably certain that an extension or termination option will be exercised;
iii) Classification of lease agreements (when the entity is a lessor);
iv) Determination of whether variable payments are in-substance fixed;
v) Establishing whether there are multiple leases in an arrangement;
vi) Determining the stand-alone selling prices of lease and non-lease components.
Key sources of estimation uncertainty in the application of Ind AS 116 may include, among others, the following:
i) Estimation of the lease term;
ii) Determination of the appropriate rate to discount the lease payments;
iii) Assessment of whether a right-of-use asset is impaired.
ix) Business combinations:
In accounting for business combinations, judgment is required to assess whether an identifiable intangible asset is to be recorded separately from goodwill. Additionally, estimating the acquisition date fair value of the identifiable assets acquired (including useful life estimates), liabilities assumed, and contingent consideration assumed involves management judgment. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management. Changes in these judgments, estimates, and assumptions can materially affect the results of operations.
x) Useful lives of intangible assets:
The Company amortizes intangible assets on a straight-line basis over estimated useful lives of the assets. The useful life is estimated based on a number of factors including the effects of obsolescence, demand, competition and other economic factors such as the stability of the industry and known technological advances and the level of maintenance expenditures required to obtain the expected future cash flows from the assets. The estimated useful life is reviewed at least annually.
xi) Other estimates
The share based compensation expense is determined based on the Company''s estimate of equity instruments that will eventually vest. Accounting of derivative hedging instruments designated as cash flow hedges involves significant estimates relating to the occurrence of forecast transaction.
Estimation uncertainty relating to COVID-19 outbreak:
The outbreak of corona virus (COVID-19) pandemic globally and in India is causing significant disturbance and slowdown of economic activity. There were no changes to our internal control over financial reporting
that have materially affected or are reasonably likely to materially affect our internal control over financial reporting during the period covered in this Financial statements.
In assessing the recoverability of receivables including unbilled receivables, contract assets and contract costs, goodwill, intangible assets, and certain investments, the Company has considered internal and external information up to the date of approval of these financial statements including credit reports and economic forecasts. The Company has performed sensitivity analysis on the assumptions used herein. Based on the current indicators of future economic conditions, the Company expects to recover the carrying amount of these assets.
The Company basis its assessment believes that the probability of the occurrence of forecasted transactions is not impacted by COVID-19. The Company has also considered the effect of changes, if any, in both counterparty credit risk and own credit risk while assessing hedge effectiveness and measuring hedge ineffectiveness and continues to believe that there is no impact on effectiveness of its hedges.
The impact of COVID-19 remains uncertain and may be different from what we have estimated as of the date of approval of these financial statements and the Company will continue to closely monitor any material changes to future economic conditions.
c Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the âfunctional currencyâ). The financial statements are presented in Indian Rupees (INR), which is Company''s functional and presentation currency.
(ii) Transactions and balances
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. They are deferred in equity if they relate to qualifying cash flow hedges.
(iii) Foreign operations
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
a. assets and liabilities are translated at the closing rate at the date of balance sheet.
b. income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
c. All resulting exchange differences are recognized in other comprehensive income. d Revenue from contracts with customers
The Company earns revenue primarily from business process management services.
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.
The Company derives its revenue from business process management (BPM) which includes services like back office processing, contact center and HRO solutions. The Company provides BPM services, which typically involve claim processing and call center services for healthcare industry, call center services for telecom industry, which it administers and manages those services for its client on an ongoing basis. The Company combines technology powered services in automation, analytics and digital with domain expertise focusing on back office processing, contract centers and HRO solutions to deliver transformational impact to clients.
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.
A. Time and Material contracts
Revenue from time and material transactions and outcome based contracts are recognised as the services are performed.
B. Fixed price contracts
In respect of fixed-price contracts, where performance obligations are satisfied over a period of time, revenue is recognised by means of percentage of completion method. Under this method, revenue is recognised by applying the percentage of completion on the transaction price.
Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. If the Company is not able to reasonably measure the progress of completion, revenue is recognized only to the extent of costs incurred for which recoverability is probable. When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the statement of profit and loss in the period in which such losses become probable based on the current contract estimates as an onerous contract provision.
C. Contract Asset and Liabilities
The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset.
A receivable is a right to consideration that is unconditional. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due. For example, the Company recognizes a receivable for revenues related to time and materials contracts or volume-based contracts. The Company presents such receivables as part of trade receivables at their net estimated realizable value. The same is tested for impairment as per the guidance in Ind AS 109 using expected credit loss method.
D. Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognised which includes unearned revenue and amounts that will be invoiced and recognised as revenue in future periods. Applying the practical expedient, the Company has not disclosed its right to consideration from customer in an amount that corresponds directly with the value to the customer of the Company''s performance completed to date which are, contracts invoiced on time and material basis and volume based.
Any change in scope or price is considered as a contract modification. The Company accounts for modifications to existing contracts by assessing whether the services added are distinct and whether the pricing is at the stand-alone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract if the additional services are priced at the stand-alone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the stand-alone selling price.
The Company accounts for variable considerations like, volume discounts, rebates and pricing incentives to customers as reduction of revenue on a systematic and rational basis over the period of the contract. The Company estimates an amount of such variable consideration using expected value method or the single most likely amount in a range of possible consideration depending on which method better predicts the amount of consideration to which the Company may be entitled.
Revenues are shown net of allowances/ returns, sales tax, value added tax, goods and services tax and applicable discounts and allowances.
The Company accrues the estimated cost of warranties at the time when the revenue is recognised. The accruals are based on the Company''s historical experience of material usage and service delivery costs.
Incremental costs that relate directly to a contract and incurred in securing a contract with a customer are recognised as an asset when the Company expects to recover these costs and amortised over the contract term.
The Company recognizes contract fulfilment cost as an asset if those costs specifically relate to a contract or to an anticipated contract, the costs generate or enhance resources that will be used in satisfying
performance obligations in future; and the costs are expected to be recovered. The asset so recognised is amortised on a systematic basis consistent with the transfer of goods or services to customer to which the asset relates.
The Company assesses the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, the Company does not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist.
The Company may enter into arrangements with third party suppliers to resell products or services. In such cases, the Company evaluates whether the Company is the principal (i.e. report revenues on a gross basis) or agent (i.e. report revenues on a net basis). In doing so, the Company first evaluates whether the Company controls the services before it is transferred to the customer. If Company controls the services before it is transferred to the customer, Company is the principal; if not, the Company is the agent.
Estimates of transaction price and total costs or efforts are continuously monitored over the term of the contract and are recognized in net profit in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses.
F. Reconciliation of revenue recognised
The Company recognises Volume discounts, Penalties and Incentives against each transaction price as per the terms of the contract with the customer, the disclosures related to the reconciliation of revenue recognised with the transaction price have not been provided as the same is not material to the Company.
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and adjustment for unused tax losses.
The current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its branch operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences, unused tax losses and MAT credit entitlements only if it is probable that future taxable amounts will be available to utilize those temporary differences, losses and credits.
Deferred tax liabilities are not recognized for temporary differences between the carrying amount and tax bases of investments in branches where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets are not recognized for temporary differences between the carrying amount and tax bases of investments in branches where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary difference can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in statement of profit and loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is recognized in other comprehensive income or directly in equity, respectively.
The Company has thus disclosed the Income Tax Assets/ Liabilities on a net basis to the extent that the same is settled within the same tax jurisdictions, which is in line with Accounting statements prescribed under Ind AS 12- Income Taxes.
g Leases
The Company enters into an arrangement for lease of land, buildings, plant and machinery including computer equipment and furnitures. Such arrangements are generally for a fixed period but may have extension or termination options. The Company assesses, whether the contract is, or contains, a lease, at its inception. A contract is, or contains, a lease if the contract conveys the right to -
(a) control the use of an identified asset,
(b) obtain substantially all the economic benefits from use of the identified asset, and
(c) direct the use of the identified asset.
The Company determines the lease term as the non-cancellable period of a lease, together with periods covered by an option to extend the lease, where the Company is reasonably certain to exercise that option.
The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. This expense is presented within ''other expenses'' in statement of profit and loss.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
i) fixed lease payments (including in-substance fixed payments), less any lease incentives;
ii) variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
iii) the amount expected to be payable by the lessee under residual value guarantees;
iv) the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
v) payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
Lease liability payments are classified as cash used in financing activities in the Statement of cash flows.
The Company has adopted the amendments to Ind AS 116 for the first time in the current year. The amendments provide practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19 by introducing a practical expedient to Ind AS 116. The practical expedient permits a lessee to elect not to assess whether a COVID-19-related rent concession is a leasease modification. A lessee that makes this election shall account for any change in lease payments resulting from the COVID-19- related rent concession the same way it would account for the changeapplying Ind AS 116 if the change were not a lease modification.
The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following conditions are met:
(a) The change in lease payments results in revised consideration for the lease that is substantially the same as or less than the consideration for the lease immediately preceding the change;
(b) Any reduction in lease payments affects only payments originally due on or before 30 June 2021(a rent concession meets this condition if it results in reduced lease payments on or before 30 June 2021and increased lease payments that extend beyond 30 June 2021); and
(c) There is no substantive change to other terms and conditions of the lease.
The Company has applied the practical expedient retrospectively to all eligible rent concessions and has not restated prior period figures.
The Company has benefited from a 12 month waiver of lease payments on buildings in India. The waiver of lease payments of \ 137.84 lakhs has been accounted for as a negative variable lease payment in profit or loss.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever
i) the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
ii) the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
iii) a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
Right-of-Use Assets:
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. Prepaid lease payments (including the difference between nominal amount of the deposit and the fair value) are also included in the initial carrying amount of the right of use asset.
They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated on a straight line basis over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the statement of financial position.
The Company applies Ind AS 36 to determine whether a ROU asset is impaired and accounts for any identified impairment loss as described in the impairment of non-financial assets below
The Company incurs obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease. the Company has assessed that such restoration costs are negligible and hence no provision under Ind-AS 37 has been recognised.
Variable rents that do not depend on an index or rate are not included in the measurement the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line âother expensesâ in the statement of profit and loss.
As a practical expedient, Ind AS 116 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Company has not used this practical expedient.
Leases under which the Company is a lessor are classified as a finance or operating lease. Lease contracts where all the risks and rewards are substantially transferred to the lessee are classified as a finance lease. All other leases are classified as operating lease. For leases under which the Company is an intermediate lessor, the Company accounts for the head-lease and the sub-lease as two separate contracts. The sub-lease is further classified either as a finance lease or an operating lease by reference to the RoU asset arising from the head-lease.
h Impairment
i) Impairment of non financial assets
The Company assesses long-lived assets such as property, plant and equipment, ROU assets and acquired intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. If any such indication exists, the Company estimates the recoverable amount of the asset or group of assets. Goodwill is tested for impairment at least annually at the same time and when events occur or changes In circumstances indicate that the recoverable amount of the cash generating unit is less than it''s carrying value. The goodwill impairment test is performed at the level of cash-generating unit or groups of cash-generating units which represents the lowest level at which goodwill is monitored for internal management purposes. The recoverable amount of an asset or cash generating unit is the higher of its fair value less cost of disposal (âFVLCDâ) and its value-in-use (âVIUâ). The VIU of long-lived assets is calculated using projected future cash flows. FVLCD of a cash generating unit is computed using turnover and earnings multiples. If the recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the reporting date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the impairment losses previously recognized are reversed such that the asset is recognized at its recoverable amount but not exceeding written down value which would have been reported if the impairment losses had not been recognized initially.
ii) Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on trade receivables including unbilled receivables measured at amortized cost, Expected credit loss is the difference between the contractual cash flows and the cash flows that the entity expects to receive discounted using effective interest rate.
Loss allowances for trade receivables are measured at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. Lifetime expected credit loss is computed based on historical credit loss experience adjusted for forward looking information.
For other financial assets, expected credit loss is measured at the amount equal to twelve months expected credit loss unless there has been a significant increase in credit risk from initial recognition, in which case those are measured at lifetime expected credit loss.
iii) Impairment of Investment in subsidiaries:
The Company assesses investments in subsidiaries for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If any such indication exists, the Company estimates the recoverable amount of the investment in subsidiary. The recoverable amount of such investment is the higher of its fair value less cost of disposal (âFVLCDâ) and its value-in-use (âVIUâ). The VIU of the investment is calculated using projected future cash flows. If the recoverable amount of the investment is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss.
i Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, balances with bank in current accounts, Exchange Earners Foreign Currency (EEFC) Accounts, other short-term, highly liquid deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.
k Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
a. those to be measured subsequently at fair value (either through other comprehensive income, or through statement of profit and loss), and
b. those measured at amortized cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through statement of profit and loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in statement of profit and loss.
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in statement of profit and loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Currently there are no debt instruments measured at Fair value.
(iii) Derecognition of financial assets
A financial asset is derecognized only when
a. The Company has transferred the rights to receive cash flows from the financial asset or
b. retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset, and the transfer qualifies for derecognition under Ind AS 109. If the Company retains substantially all the risks and rewards of a transferred financial asset, the Company continues to recognize the financial asset and recognizes a borrowing for the proceeds received. A financial liability (or a part of a financial liability) is derecognized from the Company''s balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
iv) Investments in equity instruments:
The Company carries certain equity instruments which are not held for trading. At initial recognition, the Company may make an irrevocable election to present subsequent changes in the fair value of an investment in an equity instrument in other comprehensive income (FVTOCI) or through statement of
profit and loss (FVTPL). For investments designated to be classified as FVTOCI, movements in fair value of investments are recognised in other comprehensive income and the gain or loss is not transferred to statement of profit and loss on disposal of investments. For investments designated to be classified as FVTPL, both movements in fair value of investments and gain or loss on disposal of investments are recognised in the statement of profit and loss.
Dividends from these investments are recognised in the statement of profit and loss when the Company''s right to receive dividends is established.
v) Investments in subsidiaries:
Investment in equity instruments of subsidiaries are measured at cost less impairment. Investment in redeemable preference shares of subsidiaries are measured at FVTPL. These investments are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in statement of profit and loss. The gain or loss on disposal is recognised in statement of profit and loss.
vi) Other financial assets:
Other financial assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current assets. These are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any impairment losses. These comprise trade receivables, unbilled receivables, finance lease receivables, employee and other advances and other eligible current and non-current assets.
(iv) Income recognition Interest income:
Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument.
Dividends are recognized in statement of profit and loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
l Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The Company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of highly probable forecast transactions.
The Company documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. The Company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
(i) Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in statement of profit and loss, within other income.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at
that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to statement of profit and loss within other gains/(losses).
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in statement of profit and loss at the time of the hedge relationship rebalancing.
(ii) Others
Changes in fair value of foreign currency derivative instruments not designated as cash flow hedges are recognised in the statement of profit and loss and reported within foreign exchange gains/(losses), net, within results from operating activities. Changes in fair value and gains/(losses), net, on settlement of foreign currency derivative instruments relating to borrowings, which have not been designated as hedges are recorded in finance costs.
m Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
n 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 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 as follows:
|
Particulars |
Useful life |
|
Leasehold building and Leasehold improvement |
Over the period of Lease |
|
Building |
Upto 60 years |
|
Office Equipment |
Upto 7 years |
|
Computers |
Upto 6 years |
|
Furniture and Fixtures |
Upto 10 years |
|
Vehicles |
8 years |
Assets costing less than \ 5000 each are depreciated fully in the year of acquisition.
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.
Assets given to employees on contractual obligations are depreciated to the extent of 50% of the value over a period of four years, at the end of which these assets are transferred to the respective employees at the residual book value.
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 Statement of profit and loss within other income/ expenses.
Borrowing costs include interest, other costs incurred in connection with borrowing and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost. General and specific borrowing costs that are directly attributable to the acquisition 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.
The cost of property, plant and equipment not available for use before such date are disclosed under capital work- in-progress.
o Business combinations and Goodwill
a) Business combinations:
Business combinations are accounted for using the purchase (acquisition) method. The cost of an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed, and equity instruments issued at the date of exchange by the Company. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the date of acquisition. Transaction costs incurred in connection with a business acquisition are expensed as incurred. The cost of an acquisition also includes the fair value of any contingent consideration measured as at the date of acquisition. Any subsequent changes to the fair value of contingent consideration classified as liabilities, other than measurement period adjustments, are recognised in the statement of profit and loss.
b) Goodwill:
The excess of the cost of an acquisition over the Company''s share in the fair value of the acquiree''s identifiable assets and liabilities is recognised as goodwill. If the excess is negative, a bargain purchase gain is recognised in equity as capital reserve. Goodwill is measured at cost less accumulated impairment (if any). Goodwill associated with disposal of an operation that is part of cash-generating unit is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained, unless some other method better reflects the goodwill associated with the operation disposed of.
p Intangible assets
Costs associated with maintaining software programs are recognized as an expense as incurred.
Costs associated with acquisition of intangible assets is capitalized when it is controlled by entity and probable future economic benefits are expected to flow.
Amortization methods and periods
The Company amortizes intangible assets with a finite useful life using the straight-line method over the following periods:
|
Particulars |
Useful life |
|
Computer software |
3 to 6 years |
Gains or Losses arising from the retirement or disposal of intangible assets are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognized as income or expense in the Statement of Profit and Loss.
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. The amounts are unsecured and are usually paid within 60 days of recognition. 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 Borrowings
Borrowings are in
Mar 31, 2018
1 Background
Hinduja Global Solutions Limited (âHGSâ) is a public limited company, domiciled in India and it''s incorporated under the provisions of The Companies Act 1956 and is engaged in Business Process Management. HGS with its subsidiaries offer voice and non-voice based services such as contact center solutions and back office transaction processing across America, Canada, Europe, Asia and Middle East. Its ordinary shares (equity) are listed on the two registered stock exchanges in India i.e National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The address of its registered office is 171, Hinduja House, Dr. Annie Besant Road, Worli, Mumbai 400018.
These financial statements were authorized to be approved by the Board of Directors on 30.05.2018. Amounts as at and for the year ended March 31, 2017 financial statements were audited by Price Waterhouse.
a Basis of preparation of financial statements
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
(i) Statement of compliance and basis of preparation
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under sec. 133 of Companies Act 2013, as applicable and guidelines issued by the Securities and Exchange Board of India (âSEBIâ). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
The financial statements correspond to the classification provisions contained in Ind AS 1, âPresentation of Financial Statementsâ. For clarity, various items are aggregated in the statements of profit and loss and balance sheet. These items are disaggregated separately in the notes to the financial statements, where applicable.
All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures. Previous year figures have been regrouped/re-arranged, wherever necessary.
(ii) Basis of Measurement
The financial statements have been prepared on a historical cost convention and accrual basis, except for the following:
a. certain financial assets and liabilities (including derivative instruments) that are measured at fair value;
b. defined benefit plans - plan assets/ liability measured at fair value; and
c. Share-based payments
b Use of estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Company''s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is provided below.
i) Estimation of provisions & contingent liabilities.
The Company exercises judgement in measuring and recognizing provisions and the exposures to contingent liabilities which is related to pending litigation or other outstanding claims. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual liability may be different from the originally estimated as provision. (Refer note 14 and 27).
ii) Estimation of defined benefit plans
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post-employment plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations. The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations. In determining the appropriate discount rate, the Company considers the interest rates of government bonds of maturity approximating the terms of the related plan liability. Refer note 32 for the details of the assumptions used in estimating the defined benefit obligation.
iii) Useful lives of property, plant and equipment
The Company depreciates property, plant and equipment on a straight-line basis over estimated useful lives of the assets. The charge in respect of periodic depreciation is derived based on an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The 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. The estimated useful life is reviewed at least annually.
iv) Income taxes
Significant judgments are involved in determining the provision for income taxes including
judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
v) Deferred taxes
Deferred tax is recorded on temporary differences between the tax bases of assets and liabilities and their carrying amounts, at the rates that have been enacted or substantively enacted at the reporting date. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profits during the periods in which those temporary differences and tax loss carry-forwards become deductible. The Company considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are reduced.
vi) Impairment testing
Investments in subsidiaries are tested for impairment at least annually and when events occur or changes in circumstances indicate that the recoverable amount of the asset or cash generating units to which these pertain is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to dispose. The calculation of value in use of a cash generating unit involves use of significant estimates and assumptions which includes turnover, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.
vii) Other estimates
The share based compensation expense is determined based on the Company''s estimate of equity instruments that will eventually vest. Accounting of derivative hedging instruments designated as cash flow hedges involves significant estimates relating to the occurrence of forecast transaction.
c Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the âfunctional currencyâ). The financial statements are presented in Indian Rupees (INR), which is Company''s functional and presentation currency.
(ii) Transactions and balances
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 profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges.
(iii) Foreign operations
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
a. assets and liabilities are translated at the closing rate at the date of that balance sheet.
b. income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
c. All resulting exchange differences are recognized in other comprehensive income.
d Revenue recognition and measurement
Revenue is measured at the fair value of the consideration received or receivable. The revenue is presented net of rebates, trade allowances and taxes as applicable.
The Company recognizes revenue when the significant terms of the arrangement are enforceable, services have been delivered and the collectability is reasonably assured.
Revenues and costs relating to time and materials contracts are recognized as the related services are rendered. ''Unbilled revenues'' represent cost and earnings in excess of billings as at the end of the reporting period. e Income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and adjustment for unused tax losses.
The current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its branch operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
f Deferred taxes
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences, unused tax losses and MAT credit entitlements only if it is probable that future taxable amounts will be available to utilize those temporary differences, losses and credits.
Deferred tax liabilities are not recognized for temporary differences between the carrying amount and tax bases of investments in branches where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets are not recognized for temporary differences between the carrying amount and tax bases of investments in branches where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary difference can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The Company has thus disclosed the Income Tax Assets/ Liabilities on a net basis to the extent that the same is settled within the same tax jurisdictions, which is in line with Accounting statements prescribed under Ind AS 12.
g Leases
As a lessee
Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease''s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit
or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
h Impairment
i) Impairment of non-financial assets
Long- lived assets such as Property , plant and equipment are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or
group of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
ii) Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on trade receivables measured at amortized cost, Expected credit loss is the difference between the contractual cash flows and the cash flows that the entity expects to receive discounted using effective interest rate. Loss allowances for trade receivables are measured at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. Lifetime expected credit loss is computed based on a provision matrix which takes in to the account historical credit loss experience adjusted for forward looking information.
i Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, balances with bank in current accounts, Exchange Earners Foreign Currency (EEFC) Accounts, other short-term, highly liquid deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
j Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.
k Investments and other financial assets (i) Classification
The Company classifies its financial assets in the following measurement categories:
a. those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
b. those measured at amortized cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the company''s business model for managing the asset and the cash flow characteristics of the asset. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part
of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Currently there are no debt instruments measured at fair value.
(iii) Derecognition of financial assets
A financial asset is derecognized only when
a. The Company has transferred the rights to receive cash flows from the financial asset or
b. retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the company has not retained control of the financial asset. Where the company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
(iv) Income recognition
a. Interest income
Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument.
b. Dividends
Dividends are recognized in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the company, and the amount of the dividend can be measured reliably.
Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of highly probable forecast transactions.
The company documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. The company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
(i) Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, within other income.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss within other gains/(losses).
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.
m Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
n 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 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 profit or loss during the reporting period in which they are incurred.
Assets costing less than R 5000 each are depreciated fully in the year of acquisition.
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.
Assets given to employees on contractual obligations are depreciated to the extent of 50% of the value over a period of four years, at the end of which these assets are transferred to the respective employees at the residual book value.
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 income/ expenses.
Borrowing costs include interest, other costs incurred in connection with borrowing and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost. General and specific borrowing costs that are directly attributable to the acquisition 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.
The cost of property, plant and equipment not available for use before such date are disclosed under capital work-in-progress.
o Intangible assets
Costs associated with maintaining software programs are recognized as an expense as incurred.
Costs associated with acquisition of intangible assets is capitalized when it is controlled by entity and probable future economic benefits are expected to flow.
Amortization methods and periods
The company amortizes intangible assets with a finite useful life using the straight-line method over the following periods:
Gains or Losses arising from the retirement or disposal of intangible assets are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognized as income or expense in the Statement of Profit and Loss.
p 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. The amounts are unsecured and are usually paid within 60 days of recognition. 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.
q Borrowings
Borrowings are initially recognised at fair value, net of transaction cost incurred. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
r Provisions
Provisions are recognized when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.
s 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 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. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
(iii) Post-employment obligations
The company operates the following post-employment schemes:
(a) defined benefit plans such as gratuity; and Pension
(b) defined contribution plans such as provident fund Defined benefit obligation
The liability or asset recognized in the balance sheet in respect of defined benefit 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 government bond 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 profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. 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 profit or loss as past service cost.
Defined contribution plans
The company pays contributions to publicly administered 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.
The Superannuation Fund applicable to certain employees, constitutes an insured benefit, which is classified as a defined contribution plan as the Company makes contributions to an insurance company and has no further obligation beyond making the payment to the insurance company.
(iv) Share-based payments
Share-based compensation benefits are provided to employees via the Hinduja Global Solutions Limited Employee Stock Option Plan.
Employee options
The fair value of options granted under the Hinduja Global Solutions Limited Employee Stock 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.
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.
(v) Termination benefits
Termination benefits are payable when employment is terminated by the company before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The company recognizes termination benefits at the earlier of the following dates: (a) when the company can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
t 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.
u 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.
v Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
a. the profit attributable to owners of the company
b. 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:
a. the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
b. the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
w Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The Board of Directors of the Company has been identified as CODM which also consists of key managerial personnel of the Company. Refer note 39 for segment information.
x Rounding off amounts
All amounts disclosed in the financial statements and notes have been rounded off to nearest lakhs as per the requirement of schedule III unless otherwise stated.
y New standards/ amendments to existing standards issued but not yet adopted
Following are the amendments to existing standards which have been issued by The Ministry of Corporate Affairs (''MCA'') that are not effective for the reporting period and have not been early adopted by the Company:
Amendment to Ind AS 115 - Revenue from Contracts with Customers
Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 Revenue, Ind AS 11 Construction Contracts when it becomes effective.
The core principle of Ind AS 115 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligation in contract Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Under Ind AS 115, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when ''control'' of the goods or services underlying the particular performance obligation is transferred to the customer. The Company has completed its evaluation of the possible impact of Ind AS 115 and will adopt the standard with all related amendments to all contracts with customers retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. Under this transition method, cumulative effect of initially applying IND AS 115 is recognized as an adjustment to the opening balance of retained earnings of the annual reporting period. The standard is applied retrospectively only to contracts that are not completed contracts at the date of initial application. The Company does not expect the impact of the adoption of the new standard to be material on its retained earnings and to its net income on an ongoing basis.
Amendment to Ind AS 21 - The effect of changes in Foreign Exchange rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.
Terms and rights attached to equity shares
Equity Shares: The company has one class of equity shares having a par value of R 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of Interim Dividend Which are approved by Board of Directors in Board Meeting . In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. The share options granted under the Company ''s employee stock option plan carry dividend as well as voting rights upon exercise.
(i) Fair value of options granted
The fair value of options granted during the year ended March 31, 2018 is as below. The fair value as at grant date is determined using the BIack SchoIes Merton ModeI which takes into account the exercise price, term of option, share price at grant date, expected price volatility of underlying share, expected dividend yield and risk free interest rate for the term of option.
The expected price voIatiIity is based on the historic voIatiIity (based on the remaining Iife of the options), adjusted for any expected changes to future voIatiIity due to pubIicIy avaiIabIe information.
Notes:
Hinduja Ventures Limited has received income tax demand pertaining to IT/ ITES business aggregating R 7,144.66 Lakhs (As at March 31, 2017: R 7,144.06 Lakhs) in respect of period prior to October 1, 2006 which is reimbursable by the Company pursuant to the Scheme of Arrangement and Reconstruction for demerger of IT/ITES business into the Company sanctioned by High Court of Judicature of Bombay and made effective on March 7, 2007. In this regard, the Company had paid R 5,550 Lakhs to Hinduja Ventures Limited to discharge part payment of disputed income tax dues pertaining to IT/ITES business. Out of this amount, the Company has received refund of R 2,231.01 Lakhs (including interest of R 606.72 Lakhs) during
the Previous year and the net outstanding amount as at March 31, 2018 of R 3,318.99 Lakhs ( As at March 31, 2017: R 3,318.99 Lakhs) is included in âReceivable from related party - Note 7â. Hinduja Ventures Limited has filed an appeal against the said demand. In view of Management and based on the legal advice obtained, the Company has strong case to succeed.
The honourable Supreme Court of India has admitted a special leave petition (SLP) against section 10A matter under Income Tax Act, 1961 and the contingent liability as disclosed for financial year ended March 31, 2018 is recomputed considering all the open assessment years.
Future cash outflow in respect of above, if any, is determinable only on receipt of judgements/ decisions pending with relevant authorities.
b) Capital and other commitments:
(i) Estimated Amount of Contracts (net of capital advances) remaining to be executed on capital account R 617.69 Lakhs (As at March 31, 2017: R 1,542.66 Lakhs).
(ii) The Company has issued an Undertaking to provide need based financial support and is committed, if needed, to continue such support to meet the ongoing obligations of its following step-down subsidiaries.
i. HGS Mena FZ LLC
ii. C-Cubed B.V
iii. Hinduja Global Solutions Europe Limited
iv. HGS St. Lucia
v. HGS Colibrium Inc.
vi. Hinduja Global Solutions Inc
iv. C-Cubed N.V
viii. HGS Canada Inc
There has been no payments during the year against these undertakings.
c) Non-cancellable operating leases:
The Company leases various offices premises under non-cancellable operating leases expiring within twenty years from the date inception. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
Mar 31, 2017
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
a Basis of preparation
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
The financial statements up to year ended March 31, 2016 were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act. (hereinafter referred as âPrevious GAAPâ)
These financial statements are the first financial statements of the Company under Ind AS. Refer note 31 for an explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position, financial performance and cash flows.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
a. certain financial assets and liabilities (including derivative instruments) that is measured at fair value;
b. defined benefit plans - plan assets measured at fair value; and
c. Share-based payments
b Critical estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Companyâs accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is provided below.
i) Estimation of Provisions & Contingent Liabilities.
The Company exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities which is related to pending litigation or other outstanding claims. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual liability may be different from the originally estimated as provision. (Refer Note 14 and 27).
ii) Estimation of Defined Benefit Obligation
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employment plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations. The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations. In determining the appropriate discount rate, the Company considers the interest rates of government bonds of maturity approximating the terms of the related plan liability. Refer note 35 for the details of the assumptions used in estimating the defined benefit obligation.
c Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM). The Board of Directors of the Company has been identified as CODM which also consists of key managerial personnel of the Company. Refer note 43 for segment information.
d Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the âfunctional currencyâ). The financial statements are presented in Indian Rupees (INR), which is Companyâs functional and presentation currency.
(ii) Transactions and balances
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 profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges. 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.
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 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. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
(iii) Foreign operations
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
a. assets and liabilities are translated at the closing rate at the date of that balance sheet.
b. income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
c. All resulting exchange differences are recognised in other comprehensive income. e Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. The revenue is net of rebates, trade allowances and taxes as applicable.
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:
a. the amount of revenue can be measured reliably
b. it is probable that the economic benefits associated with the transaction will flow to the entity;
c. the stage of completion of the transaction at the end of the reporting period can be measured reliably; and
d. the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
f Income tax
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its branch operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and MAT credit entitlements only if it is probable that future taxable amounts will be available to utilise those temporary differences, losses and credit.
Deferred tax liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in branches where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments in branches where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary difference can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The Company has thus disclosed the Income Tax Assets/ Liabilities on a net basis to the extent that the same is settled within the same tax jurisdictions, which is in line with Ind AS 12.
g Leases
As a lesse
Leases of property, plant and equipment where the company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the leaseâs inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
h Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
i Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
j Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
k Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
a. those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
b. those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The company reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest
Debt instruments
Subsequent measurement of debt instruments depends on the companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the company classifies its debt instruments:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments
The company subsequently measures all equity investments at fair value. Where the companyâs management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognised in profit or loss as other income when the companyâs right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in other gain/ (losses) in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
Investment in equity instruments of subsidiaries is recognised at cost on the date of acquisition as per Ind-AS 27.
On transition to Ind AS, the company has elected to continue with the carrying value of all of its investment in subsidiaries recognised as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the investments.
(iii) Impairment of financial assets
The company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 39 details how the company determines whether there has been a significant increase in credit risk.
For trade receivables only, the company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
(iv) Derecognition of financial assets
A financial asset is derecognised only when
a. The Company has transferred the rights to receive cash flows from the financial asset or
b. retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the company has not retained control of the financial asset. Where the company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
(v) Income recognition Interest income:
Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument.
Dividends:
Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the company, and the amount of the dividend can be measured reliably.
l Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of highly probable forecast transactions and variable interest rate risk associated with borrowings (cash flow hedges).
The company documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. The company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
(i) Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, within other income.
When forward contracts are used to hedge forecast transactions, the company generally designates only the change in fair value of the forward contract related to the spot component as the hedging instrument. Gains or losses relating to the effective portion of the change in the spot component of the forward contracts are recognised in other comprehensive income in cash flow hedging reserve within equity. The change in the forward element of the contract that relates to the hedged item (âaligned forward elementâ) is recognised within other comprehensive income in the costs of hedging reserve within equity. In some cases, the entity may designate the full change in fair value of the forward contract (including forward points) as the hedging instrument. In such cases, the gains and losses relating to the effective portion of the change in fair value of the entire forward contract are recognised in the cash flow hedging reserve within equity.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss within other gains/(losses).
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.
m Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
n 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 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 profit or 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 as follows:
The property, plant and equipment acquired under finance leases is depreciated over the assetâs useful 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 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 assetsâ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Assets given to employees on contractual obligations are depreciated to the extent of 50% of the value over a period of four years, at the end of which these assets are transferred to the respective employees at the residual book value.
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 profit or loss within other income/ expenses.
Transition to Ind AS
On transition to Ind AS, the company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at April 1, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
o Intangible assets
(i) Computer software
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 amortised from the point at which the asset is available for use.
(ii) Other Intangible assets
Costs associated with acquisition of intangible assets is capitalised when it is controlled by entity and probable future economic benefits are expected to flow.
(iii) Amortisation methods and periods
The company amortises intangible assets with a finite useful life using the straight-line method over the following periods:
Gains or Losses arising from the retirement or disposal of intangible assets are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognised as income or expense in the Statement of Profit and Loss.
Transition to Ind AS
On transition to Ind AS, the company has elected to continue with the carrying value of all of intangible assets recognised as at April 1, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
p 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. The amounts are unsecured and are usually paid within 60 days of recognition. 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.
q Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.
r Borrowing costs
Borrowing costs include interest, other costs incurred in connection with borrowing and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost. 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.
s Provisions
Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
t 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. 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 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. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year are treated as long term employee benefits. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year.
(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 recognised in the balance sheet in respect of defined benefit 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 government bond 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 recognised in the period in which they occur, directly in other comprehensive income. 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 profit or loss as past service cost.
Defined contribution plans
The company pays provident fund contributions to publicly administered provident funds as per indian 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.
The Superannuation Fund applicable to certain employees, constitutes an insured benefit, which is classified as a defined contribution plan as the Company makes contributions to an insurance company and has no further obligation beyond making the payment to the insurance company.
(iv) Share-based payments
Share-based compensation benefits are provided to employees via the Hinduja Global Solutions Limited Employee Stock Option Plan.
Employee options
The fair value of options granted under the Hinduja Global Solutions Limited Employee Stock 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:
a. including any market performance conditions
b. excluding the impact of any service and non-market performance vesting conditions, and
c. 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 profit or loss, with a corresponding adjustment to equity.
(v) Termination benefits
Termination benefits are payable when employment is terminated by the company before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The company recognises termination benefits at the earlier of the following dates: (a) when the company can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
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 earning per share
Basic earnings per share is calculated by dividing:
a. the profit attributable to owners of the company
b. 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 earning per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
a. the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
b. the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
x Rounding off amounts
All amounts disclosed in the financial statements and notes have been rounded off to nearest lakhs as per the requirement of schedule III unless otherwise stated.
y New standards/ amendments to existing standards issued but not yet adopted
Following are the amendments to existing standards which have been issued by The Ministry of Corporate Affairs (âMCAâ) that are not effective for the reporting period and have not been early adopted by the Company:
Amendments to Ind AS 7, âStatement of cash flowsâ on disclosure initiative:
The amendment to Ind AS 7 introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. This includes changes arising from cash flows (e. g. draw downs and repayments of borrowings) and non-cash changes (i. e. changes in fair values), Changes resulting from acquisitions and disposals and effect of foreign exchange differences. Changes in financial assets must be included in this disclosure if the cash flows were, or will be, included in cash flows from financing activities. This could be the case, for example, for assets that hedge liabilities arising from financing liabilities. The Company is currently assessing the potential impact of this amendment. These amendments are mandatory for the reporting period beginning on or after April 1, 2017.
Amendments to Ind AS 102, âShare-based Paymentâ:
The amendment to Ind AS 102 clarifies the measurement basis for cash settled share-based payments and the accounting for modifications that change an award from cash-settled to equity settled. It also introduces an exception to the principles in Ind AS 102 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employeeâs tax obligation associated with a share-based payment and pay that amount to the tax authority. The Company is currently assessing the potential impact of this amendment. These amendments are mandatory for the reporting period beginning on or after April 1, 2017. The Company intends to adopt the amendments when it becomes effective. There are no other standards or amendments that are not yet effective and that would be expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.
Mar 31, 2016
1 General Information
Hinduja Global Solutions Limited ("HGS"), is engaged in Business
Process Management. HGS with its subsidiaries offer voice and non-voice
based services such as contact centre solutions and back office
transaction processing across North America, Europe, Asia and Middle
East. HGS is a public limited company, listed on the National Stock
Exchange (NSE) and Bombay Stock Exchange (BSE) in India.
2 Significant Accounting Policies
2.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to section 133 of the
Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules,
2014, till standards of accounting or any addendum thereto are
prescribed by Central Government in consultation and recommendation of
the National Financial Reporting authority, the existing accounting
standards notified under the Companies Act, 1956 shall continue to
apply. Consequently, these financial statements have been prepared to
comply in all material aspects with the accounting standards notified
under section 211 (3C) (Companies (Accounting Standards) Rules, 2006,
as amended) and other relevant provisions of the Companies Act, 2013.
2.2 Use of Estimates
The preparation of the financial statements in conformity with the
Generally Accepted Accounting Principles in India requires Management
to make estimates and assumptions considered in the reported amount of
assets and liabilities (including contingent liabilities) and the
reported Income and Expenses during the year. The Management believes
that the estimates used in preparation of financial statements are
prudent and reasonable. Future results could defer than these estimates
and the differences between the actual results and the estimates are
recognized in the periods in which the results are known/ materialize.
2.3 Fixed Assets
a) Tangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation/ impairment losses, if any. Cost comprises of cost of
acquisition, cost of improvements and any attributable cost of bringing
the asset to its working condition for intended use.
Subsequent expenditures related to an item of tangible assets are added
to its book value only if they increase the future benefits from the
existing assets beyond its previously assessed standard of performance.
Losses arising from the retirement of, and gains or losses arising from
disposal of tangible assets which are carried at cost are recognized in
the Statement of Profit and Loss.
Depreciation is provided on a straight line method on pro-rata basis at
the rates prescribed under Schedule II to the Companies Act, 2013,
except for computers, which is depreciated over six years based on
technical valuation of its useful life. The leasehold land, leasehold
building and leasehold improvements are amortized over the lease term
or its useful life, whichever is shorter.
Assets given to employees on contractual obligations are depreciated to
the extent of 50% of the value over a period of four years, at the end
of which these assets are transferred to the respective employees at
the residual book value.
b) Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortization/ impairment losses, if any on a straight line basis.
Computer Software having benefit of more than one year is capitalized
and amortized on a straight line basis over a period of 3 to 6 years.
Non-compete fees is amortized over a period of non-compete agreement
(i.e. five years).
Gains or Losses arising from the retirement or disposal of intangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of asset and recognized as income or
expense in the Statement of Profit and Loss.
2.4 Borrowing Costs
Borrowing costs include interest, other costs incurred in connection
with borrowing and exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment to the
interest cost. General and specific borrowing costs directly
attributable to the acquisition, construction, or production of
qualifying assets, which are assets that necessarily take a substantial
period of time to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. All other borrowing
costs are recognized in Statement of Profit and Loss in the period in
which they are incurred.
2.5 Impairment of Assets
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash infows from continuing use that are
largely independent of the cash infows from other assets or groups of
assets, is considered as a cash generating unit. If any such indication
exists, an estimate of the recoverable amount of the asset/cash
generating unit is made. Assets whose carrying value exceeds their
recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash fows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognized for
an asset in prior accounting periods may no longer exist or may have
decreased. An impairment loss is reversed to the extent that the
asset''s carrying amount does not exceed the carrying amount that would
have been determined if no impairment loss had previously been
recognized.
2.6 Investments
Investments that are readily realizable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments. Current investments are carried
at cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognize
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
2.7 Foreign Currency Translations
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items, which are carried in
terms of historical cost, denominated in a foreign currency are
reported using the exchange rate at the date of the transaction. All
non-monetary items, which are carried at fair value or other similar
valuation, denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
All foreign currency monetary assets and liabilities as at Balance
Sheet date are translated at the exchange rate prevailing on the
Balance Sheet date. With respect to foreign exchange difference on
long-term foreign currency monetary items, the Company has adopted the
following policy from April 1, 2011 onwards:
a. Foreign exchange difference relating to the acquisition of a
depreciable asset is adjusted in the cost of the depreciable asset,
which would be depreciated over the balance life of the asset.
b. In other cases, the foreign exchange difference is accumulated in a
Foreign Currency Monetary Item Translation Difference Account, and
amortized over the balance period of such long term asset/ liability.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences on restatement of all other monetary items are
recognized in the Statement of Profit and Loss.
Translation of integral and non-integral foreign operations
The company classifies all its foreign operations as either "integral
foreign operations or" non-integral foreign operations.
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the company itself.
The assets and liabilities of a non-integral foreign operation are
translated into the reporting currency at the exchange rate prevailing
at the reporting date. Their statement of Profit and loss are
translated at exchange rates prevailing at the dates of transactions or
weighted average weekly rates, where such rates approximate the
exchange rate at the date of transaction. The exchange differences
arising on translation are accumulated in the foreign currency
translation reserve. On disposal of a non-integral foreign operation,
the accumulated foreign currency translation reserve relating to that
foreign operation is recognized in the statement of Profit and loss.
When there is a change in the classification of a foreign operation,
the translation procedures applicable to the revised classification are
applied from the date of the change in the classification.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortized as expense or income over the life of the contract. Exchange
differences on such a contract are recognized in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any Profit or losses arising on cancellation or renewal of such
a forward exchange contract are recognized as income or as expense for
the period.
In accordance with its risk management policies and procedures, the
Company uses derivative instruments such as foreign currency forward
contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecasted transactions. The
derivatives that qualify for hedge accounting and designated as cash
fow hedges are initially measured at fair value and are re-measured at
a subsequent reporting date and the changes in the fair value of the
derivatives i.e. gain or loss is recognized directly in Shareholders''
Funds under hedging reserve account to the extent considered highly
effective. Gain or loss on derivative instruments that either does not
qualify for hedge accounting or not designated as cash fow hedges or
designated cash fow hedges to the extent considered ineffective are
recognized in Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognized in Shareholders'' Funds under hedging reserve account is
retained there until the forecasted transaction occurs subsequent to
which the same is adjusted against the related transaction in the
Statement of Profit and Loss. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognized in
Shareholders'' Funds is transferred to the Statement of Profit and Loss
in the same period.
2.8 Revenue Recognition
a. In Contact Centre Activity, revenue is recognized as the related
services are performed, based on actual utilization or minimum
utilization level, as appropriate, specified in the agreements.
In Claim Processing Activity, revenue is recognized based on number of
claims processed, at contractual rates and terms as specified in the
agreements.
In respect of other services, revenue for services rendered is
recognized as per the terms of specific contracts.
In cases where services are rendered to customers during the year but
invoices are yet to be raised at the year end, revenue is accrued and
classified under ''Other Current Assets  Note 18''.
b. Interest income is accounted on accrual basis and dividend income
is accounted on right to receipt basis.
c. In respect of other heads of income, the Company follows the
practice of accounting of such income on accrual basis.
2.9 employee Benefits
(i) Defined Contribution Plan
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund, Superannuation Fund and other funds.
Under the Provident Fund Plan, the Company contributes to a Government
administered provident fund on behalf of its employees and has no
further obligation beyond making its contribution.
The Superannuation Fund applicable to certain employees, constitutes an
insured benefit, which is classified as a defined contribution plan as
the Company makes contributions to an insurance company and has no
further obligation beyond making the payment to the insurance company.
The Company makes contributions to State plans namely Employee''s State
Insurance Fund and Employee''s Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
There are contributory plans at certain overseas branches of the
Company and contributions are made as per their policies/ local
regulations.
The Company''s contributions to the above funds are charged to revenue
every year.
(ii) Defined Benefit Plan
The Company provides for retirement benefits in the form of gratuity
for all its employees in India and pension benefit plan at a foreign
branch. The gratuity scheme is funded through Group Gratuity Policy
with Life Insurance Corporation of India (''LIC''). The pension benefit
plan at the foreign branch is funded for employees through payment in
trustee administered funds as determined by periodic actuarial
calculation.
The liability for the Defined benefit plan of Gratuity and Pension is
determined on the basis of an actuarial valuation carried out by an
independent actuary at the year-end using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognized
immediately in the Statement of Profit and Loss as income or expense.
(iii) Other Employee Benefits
Compensated Absences: Accumulated compensated absences, which are
expected to be availed or encashed within 12 months from the end of the
year are treated as short term employee benefits. The obligation
towards the same is measured at the expected cost of accumulating
compensated absences as the additional amount expected to be paid as a
result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year are treated as long
term employee benefits. The Company''s liability is actuarially
determined (using the Projected Unit Credit method) at the end of each
year. Actuarial losses/ gains are recognized in the Statement of Profit
and Loss in the year in which they arise.
(iv) Termination benefits
Termination benefits in the nature of voluntary retirement benefits are
recognized in the Statement of Profit and Loss as and when incurred.
2.10 Taxation
a. Provision for Income Tax is made after considering exemptions and
deductions available under the Income Tax Act, 1961, of India and legal
advice from time to time. Provisions for Income Tax in respect of
overseas branches are made as per the tax laws applicable to the
relevant country.
b. Minimum Alternative Tax (''MAT'') credit is recognized as an asset
only when and to the extent there is convincing evidence that the
Company will pay normal income tax during the specified period. Such
asset is reviewed at each Balance Sheet date and the carrying amount of
the MAT credit asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal
income tax during the specified period.
c. Deferred tax is recognized for all the timing differences, subject
to the consideration of prudence in respect of deferred tax assets.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets are recognized and carried
forward only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
Profits.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognized amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and deferred
tax liabilities relate to taxes on income levied by the same governing
taxation laws.
2.11 Provisions and Contingent Liabilities
Provisions: Provisions are recognized when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
2.12 Leases
As Lessee :
Leases in which a significant portion of the risks and rewards of
ownership are retained by the less or are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit and Loss on a straight-line basis over the period
of the lease.
The Company leases certain tangible and intangible assets and such
leases where the Company has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are
capitalized at the inception of the lease at the lower of the fair
value of the leased asset and the present value of the minimum lease
payments.
Each lease payment is apportioned between the finance charge and the
reduction of the outstanding liability. The outstanding liability is
included in other short/ long-term borrowings. The finance charge is
charged to the Statement of Profit and Loss over the lease period so as
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
2.13 Accounting for Employee Stock Options
Stock options granted to employees under the Employee Stock Option
Scheme are accounted as pert he accounting treatment prescribed by the
Guidance Note on Employee Share-based Payments issued by the Institute
of Chartered Accountants of India as required by the Securities and
Exchange Board of India (Share based employee benefits) regulations,
2014.
2.14 Cash and Cash Equivalents
In the cash fow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with maturities of three months or less.
2.15 Earnings per share
Basic earnings per share is calculated by dividing the net Profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company''s earnings per share is the net
Profit for the period after deducting preference dividends and any
attributable tax thereto for the period. The weighted average number of
equity shares outstanding during the period and for all periods
presented is adjusted for events, such as bonus shares, other than the
conversion of potential equity shares, that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
Profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares
Mar 31, 2015
1.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to section 133 of the
Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules,
2014, till standards of accounting or any addendum thereto are
prescribed by Central Government in consultation and recommendation of
the National Financial Reporting authority, the existing accounting
standards notified under the Companies Act, 1956 shall continue to
apply. Consequently, these fnancial statements have been prepared to
comply in all material aspects with the accounting standards notified
under section 211 (3C) (Companies (Accounting Standards) Rules, 2006,
as amended) and other relevant provisions of the Companies Act, 2013.
1.2 Use of Estimates
The preparation of the financial statements in conformity with the
Generally Accepted Accounting Principles in India requires Management
to make estimates and assumptions considered in the reported amount of
assets and liabilities (including contingent liabilities) and the
reported Income and Expenses during the year. The Management believes
that the estimates used in preparation of financial statements are
prudent and reasonable. Future results could defer than these estimates
and the differences between the actual results and the estimates are
recognised in the periods in which the results are known/ materialise.
1.3 Fixed Assets
a) Tangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation/ impairment losses, if any. Cost comprises of cost of
acquisition, cost of improvements and any attributable cost of bringing
the asset to its working condition for intended use.
Subsequent expenditures related to an item of tangible assets are added
to its book value only if they increase the future benefits from the
existing assets beyond its previously assessed standard of performance.
Losses arising from the retirement of, and gains or losses arising from
disposal of tangible assets which are carried at cost are recognised in
the Statement of Profit and Loss.
Depreciation is provided on a straight line method on pro-rata basis at
the rates prescribed under Schedule II to the Companies Act, 2013,
except for computers, which is depreciated over six years based on
technical valuation of its useful life. The leasehold land, leasehold
building and leasehold improvements are amortised over the lease term
or its useful life, whichever is shorter.
Assets given to employees on contractual obligations are depreciated to
the extent of 50% of the value over a period of four years, at the end
of which these assets are transferred to the respective employees at
the residual book value.
b) Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortisation/ impairment losses, if any on a straight line basis.
Computer Software having benefit of more than one year is capitalised
and amortised on a straight line basis over a period of 3 to 6 years.
Non-compete fees is amortised over a period of non-compete agreement
(i.e. fve years).
Gains or Losses arising from the retirement or disposal of intangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of asset and recognised as income or
expense in the Statement of Profit and Loss.
1.4 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction, or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit and Loss in the period in which they are
incurred.
1.5 Impairment of Assets
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the
asset/cash generating unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset's or cash generating unit's
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.6 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments. Current investments are carried
at cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
1.7 Foreign Currency Translations
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items, which are carried in
terms of historical cost, denominated in a foreign currency are
reported using the exchange rate at the date of the transaction. All
non-monetary items, which are carried at fair value or other similar
valuation, denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
All foreign currency monetary assets and liabilities as at Balance
Sheet date are translated at the exchange rate prevailing on the
Balance Sheet date. With respect to foreign exchange difference on
long-term foreign currency monetary items, the Company has adopted the
following policy from April 1, 2011 onwards:
a. Foreign exchange difference relating to the acquisition of a
depreciable asset is adjusted in the cost of the depreciable asset,
which would be depreciated over the balance life of the asset.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit and Loss.
Translation of foreign operations
Foreign operations are classified as either 'integral' or
'non-integral' operation. Exchange differences arising on a monetary
item that, in substance, forms part of an enterprise's net investment
in a non-integral foreign operation are accumulated in the Cumulative
Foreign Currency Translation Reserve until the disposal of the net
investment, at which time they are recognised as income or as expenses.
In case of integral foreign operations, all revenue and expense
transaction reflected in the Statement of Profit and Loss have been
translated into Indian Rupees at an average exchange rate. Monetary
assets and liabilities are translated at the exchange rate prevailing
on the Balance Sheet date. The non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction. The
net foreign exchange gain/ loss are recognised in Statement of Profit
and Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any profit or losses arising on cancellation or renewal of such
a forward exchange contract are recognised as income or as expense for
the period.
In accordance with its risk management policies and procedures, the
Company uses derivative instruments such as foreign currency forward
contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecasted transactions. The
derivatives that qualify for hedge accounting and designated as cash
flow hedges are initially measured at fair value and are re-measured at
a subsequent reporting date and the changes in the fair value of the
derivatives i.e. gain or loss is recognised directly in Shareholders'
Funds under hedging reserve account to the extent considered highly
effective. Gain or loss on derivative instruments that either does not
qualify for hedge accounting or not designated as cash flow hedges or
designated cash flow hedges to the extent considered ineffective are
recognised in Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognised in Shareholders' Funds under hedging reserve account is
retained there until the forecasted transaction occurs subsequent to
which the same is adjusted against the related transaction in the
Statement of Profit and Loss. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised in
Shareholders' Funds is transferred to the Statement of Profit and Loss
in the same period.
1.8 Revenue Recognition
a. In Contact Centre Activity, revenue is recognised as the related
services are performed, based on actual utilisation or minimum
utilisation level, as appropriate, specified in the agreements.
In Claim Processing Activity, revenue is recognised based on number of
claims processed, at contractual rates and terms as specified in the
agreements.
In respect of other services, revenue for services rendered is
recognised as per the terms of specific contracts.
In cases where services are rendered to customers during the year but
invoices are yet to be raised at the year end, revenue is accrued and
classified under 'Other Current Assets  Note 18'.
b. Interest income is accounted on accrual basis and dividend income
is accounted on right to receipt basis.
c. In respect of other heads of income, the Company follows the
practice of accounting of such income on accrual basis.
1.9 Employee Benefits
(i) Defined Contribution Plan
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund, Superannuation Fund and other funds.
Under the Provident Fund Plan, the Company contributes to a Government
administered provident fund on behalf of its employees and has no
further obligation beyond making its contribution.
The Superannuation Fund applicable to certain employees, constitutes an
insured benefit, which is classified as a defined contribution plan as
the Company makes contributions to an insurance company and has no
further obligation beyond making the payment to the insurance company.
The Company makes contributions to State plans namely Employee's State
Insurance Fund and Employee's Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
There are contributory plans at certain overseas branches of the
Company and contributions are made as per their policies/ local
regulations.
The Company's contributions to the above funds are charged to revenue
every year.
(ii) Defined Benefit Plan
The Company provides for retirement benefits in the form of gratuity
for all its employees in India and pension benefit plan at a foreign
branch. The gratuity scheme is funded through Group Gratuity Policy
with Life Insurance Corporation of India ('LIC'). The pension benefit
plan at the foreign branch is funded for employees through payment in
trustee administered funds as determined by periodic actuarial
calculation.
The liability for the defined benefit plan of Gratuity and Pension is
determined on the basis of an actuarial valuation carried out by an
independent actuary at the year-end using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss as income or expense.
(iii) Other Employee Benefits
Compensated Absences: Accumulated compensated absences, which are
expected to be availed or encashed within 12 months from the end of the
year are treated as short term employee benefits. The obligation
towards the same is measured at the expected cost of accumulating
compensated absences as the additional amount expected to be paid as a
result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year are treated as long
term employee benefits. The Company's liability is actuarially
determined (using the Projected Unit Credit method) at the end of each
year. Actuarial losses/ gains are recognised in the Statement of Profit
and Loss in the year in which they arise.
(iv) Termination benefits
Termination benefits in the nature of voluntary retirement benefits are
recognised in the Statement of Profit and Loss as and when incurred.
1.10 Taxation
a. Provision for Income Tax is made after considering exemptions and
deductions available under the Income Tax Act, 1961, of India and legal
advice from time to time. Provisions for Income Tax in respect of
overseas branches are made as per the tax laws applicable to the
relevant country.
b. Minimum Alternative Tax ('MAT') credit is recognised as an asset
only when and to the extent there is convincing evidence that the
Company will pay normal income tax during the specified period. Such
asset is reviewed at each Balance Sheet date and the carrying amount of
the MAT credit asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal
income tax during the specified period.
c. Deferred tax is recognised for all the timing differences, subject
to the consideration of prudence in respect of deferred tax assets.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets are recognised and carried
forward only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
profits.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set of the recognised amounts and there is
an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is legally enforcable right to set off assets against liabilities
representing current tax and where the deferred tax assets and deferred
tax liabilities relate to taxes on income levied by the same governing
taxation laws.
1.11 Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
1.12 Leases
As Lessee: Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases are charged to
the Statement of Profit and Loss on a straight-line basis over the
period of the lease.
The Company leases certain tangible and intangible assets and such
leases where the Company has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are
capitalised at the inception of the lease at the lower of the fair
value of the leased asset and the present value of the minimum lease
payments.
Each lease payment is apportioned between the finance charge and the
reduction of the outstanding liability. The outstanding liability is
included in other short/ long-term borrowings. The finance charge is
charged to the Statement of Profit and Loss over the lease period so as
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
1.13 Accounting for Employee Stock Options
Stock options granted to employees under the Employee Stock Option
Scheme are accounted as per the accounting treatment prescribed by
Employee stock option scheme and Employee stock purchase Guidelines,
1999, issued by Securities and Exchange Board of India ('SEBI') and
Guidance Note on Accounting for Employee Share-based Payments issued by
the Institute of Chartered Accountants of India.
1.14 Cash and Cash Equivalents
In the cash fow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with maturities of three months or less.
Mar 31, 2014
1 General Information
Hinduja Global Solutions Limited ("HGS"), is engaged in Business
Process Management. HGS with its subsidiaries offer voice and non-voice
based services such as contact centre solutions and back office
transaction processing across North America, Europe and Asia. HGS is a
public limited company, listed on the National Stock Exchange (NSE) and
Bombay Stock Exchange (BSE) in India.
2 Significant Accounting Policies
2.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under historical cost
convention on accrual basis. Pursuant to circular 15/2013 dated
13.09.2013 read with circular 08/2014 dated 04.04.2014, till the
Standards of Accounting or any addendum thereto are prescribed by
Central Government in consultation and recommendation of the National
Financial Reporting Authority, the existing Accounting Standards
notified under the Companies Act, 1956 shall continue to apply. These
financial statements have been prepared to comply in all material
aspects with the Accounting Standards notified under Section 211 (3C)
of the Companies (Accounting Standards) Rules, 2006, as amended and
other relevant provisions of the Companies Act, 1956 (''the Act'').
2.2 Use of Estimates
The preparation of the financial statements in conformity with the
Generally Accepted Accounting Principles in India requires Management
to make estimates and assumptions considered in the reported amount of
assets and liabilities (including contingent liabilities) and the
reported Income and Expenses during the year. The Management believes
that the estimates used in preparation of financial statements are
prudent and reasonable. Future results could defer than these estimates
and the differences between the actual results and the estimates are
recognised in the periods in which the results are known/ materialise.
2.3 Fixed Assets
a) Tangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation/ impairment losses, if any. Cost comprises of cost of
acquisition, cost of improvements and any attributable cost of bringing
the asset to its working condition for intended use.
Subsequent expenditures related to an item of tangible assets are added
to its book value only if they increase the future benefits from the
existing assets beyond its previously assessed standard of performance.
Losses arising from the retirement of, and gains or losses arising from
disposal of tangible assets which are carried at cost are recognised in
the Statement of Profit and Loss.
Depreciation on assets for own use is provided on Straight Line Method
on pro-rata basis at the rates prescribed under Schedule XIV to the
Act, except for leasehold land and building and leasehold improvements,
which are amortised over the period of the lease. Assets costing less
than Rs.5,000 each are depreciated fully in the year of acquisition.
Assets given to employees on contractual obligations are depreciated to
the extent of 50% of the value over a period of four years, at the end
of which these assets are transferred to the respective employees at
the residual book value.
b) Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortisation/ impairment losses, if any.
Computer Software having benefit of more than one year is capitalised
and amortised over a period of 3 to 6 year. Non-compete fees is
amortised over a period of non-compete agreement (i.e. fve years).
Gains or Losses arising from the retirement or disposal of intangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of asset and recognised as income or
expense in the Statement of Profit and Loss.
2.4 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction, or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit and Loss in the period in which they are incurred.
2.5 Impairment of Assets
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the
asset/cash generating unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or '''' cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
2.6 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments. Current investments are carried
at cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
2.7 Foreign Currency Translations
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items, which are carried in
terms of historical cost, denominated in a foreign currency are
reported using the exchange rate at the date of the transaction. All
non-monetary items, which are carried at fair value or other similar
valuation, denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
All foreign currency monetary assets and liabilities as at Balance
Sheet date are translated at the exchange rate prevailing on the
Balance Sheet date. With respect to foreign exchange difference on
long-term foreign currency monetary items, the Company has adopted the
following policy from April 1, 2011 onwards:
a. Foreign exchange difference relating to the acquisition of a
depreciable asset is adjusted in the cost of the depreciable asset,
which would be depreciated over the balance life of the asset.
b. In other cases, the foreign exchange difference is accumulated in a
Foreign Currency Monetary Item Translation Difference Account, and
amortised over the balance period of such long term asset/ liability.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit and Loss.
Translation of foreign operations
Foreign operations are classified as either ''integral'' or ''non-integral''
operation. Exchange differences arising on a monetary item that, in
substance, forms part of an enterprise''s net investment in a
non-integral foreign operation are accumulated in the "Cumulative
Foreign Currency Translation Reserve" until the disposal of the net
investment, at which time they are recognised as income or as expenses.
In case of integral foreign operations, all revenue and expense
transaction refected in the Statement of Profit and Loss have been
translated into Indian Rupees at an average exchange rate. Monetary
assets and liabilities are translated at the exchange rate prevailing
on the Balance Sheet date. The non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction. The
net foreign exchange gain/ loss are recognised in Statement of Profit
and Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of Profit
and Loss in the reporting period in which the exchange rates change.
Any profit or losses arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
In accordance with its risk management policies and procedures, the
Company uses derivative instruments such as foreign currency forward
contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecasted transactions. The
derivatives that qualify for hedge accounting and designated as cash
flow hedges are initially measured at fair value and are re-measured at
a subsequent reporting date and the changes in the fair value of the
derivatives i.e. gain or loss is recognised directly in Shareholders''
Funds under hedging reserve account to the extent considered highly
effective. Gain or loss on derivative instruments that either does not
qualify for hedge accounting or not designated as cash flow hedges or
designated cash flow hedges to the extent considered ineffective are
recognised in Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognised in Shareholders'' Funds under hedging reserve account is
retained there until the forecasted transaction occurs subsequent to
which the same is adjusted against the related transaction in the
Statement of Profit and Loss. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised in
Shareholders'' Funds is transferred to the Statement of Profit and Loss
in the same period.
2.8 Revenue Recognition
a. In Contact Centre Activity, revenue is recognised as the related
services are performed, based on actual utilisation or minimum
utilisation level, as appropriate, specified in the agreements.
In Claim Processing Activity, revenue is recognised based on number of
claims processed, at contractual rates.
In respect of other services, revenue is accrued as per terms of
specific contracts once the related services are rendered.
In cases where services are rendered to customers during the year but
invoices are yet to be raised at the year end, revenue is accrued and
classified under ''Other Current Assets  Note 18''.
b. Interest income is accounted on accrual basis and dividend income
is accounted on right to receipt basis.
c. In respect of other heads of income, the Company follows the
practice of accounting of such income on accrual basis.
2.9 Employee Benefits
(i) Defined Contribution Plan
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund, Superannuation Fund and other funds.
Under the Provident Fund Plan, the Company contributes to a Government
administered provident fund on behalf of its employees and has no
further obligation beyond making its contribution.
The Superannuation Fund applicable to certain employees, constitutes an
insured benefit, which is classified as a defined contribution plan as
the Company makes contributions to an insurance company and has no
further obligation beyond making the payment to the insurance company.
The Company makes contributions to State plans namely Employee''s State
Insurance Fund and Employee''s Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
There are contributory plans at certain overseas branches of the
Company and contributions are made as per their policies/ local
regulations.
The Company''s contributions to the above funds are charged to revenue
every year.
(ii) Defined Benefit Plan
The Company provides for retirement benefits in the form of gratuity for
all its employees in India and pension benefit plan at certain foreign
branches. The gratuity scheme is funded through Group Gratuity Policy
with Life Insurance Corporation of India (''LIC''). The pension benefit
plan at certain foreign branches is funded for employees through
payment in trustee administered funds as determined by periodic
actuarial calculation.
The liability for the defend benefit plan of Gratuity and Pension is
determined on the basis of an actuarial valuation carried out by an
independent actuary at the year-end using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss as income or expense.
(iii) Other Employee Benefits
Compensated Absences: Accumulated compensated absences, which are
expected to be availed or encashed within 12 months from the end of the
year are treated as short term employee benefits. The obligation towards
the same is measured at the expected cost of accumulating compensated
absences as the additional amount expected to be paid as a result of
the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year are treated as long
term employee benefits. The Company''s liability is actuarially
determined (using the Projected Unit Credit method) at the end of each
year. Actuarial losses/ gains are recognised in the Statement of Profit
and Loss in the year in which they arise.
(iv) Termination benefits
Termination benefits in the nature of voluntary retirement benefits are
recognised in the Statement of Profit and Loss as and when incurred.
2.10 Taxation
a. Provision for Income Tax is made after considering exemptions and
deductions available under the Income Tax Act, 1961, of India and legal
advice from time to time. Provisions for Income Tax in respect of
overseas branches are made as per the tax laws applicable to the
relevant country.
b. Minimum Alternative Tax (''MAT'') credit is recognised as an asset
only when and to the extent there is convincing evidence that the
Company will pay normal income tax during the specified period. Such
asset is reviewed at each Balance Sheet date and the carrying amount of
the MAT credit asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal
income tax during the specified period.
c. Deferred tax is recognised for all the timing differences, subject
to the consideration of prudence in respect of deferred tax assets.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets are recognised and carried
forward only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
profits.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and deferred
tax liabilities relate to taxes on income levied by the same governing
taxation laws.
2.11 Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
2.12 Leases
As Lessee: Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases are charged to
the Statement of Profit and Loss on a straight-line basis over the
period of the lease.
The Company leases certain tangible and intangible assets and such
leases where the Company has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are
capitalised at the inception of the lease at the lower of the fair
value of the leased asset and the present value of the minimum lease
payments.
Each lease payment is apportioned between the finance charge and the
reduction of the outstanding liability. The outstanding liability is
included in other short/ long-term borrowings. The finance charge is
charged to the Statement of Profit and Loss over the lease period so as
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
2.13 Accounting for Employee Stock Options
Stock options granted to employees under the Employee Stock Option
Scheme are accounted as per the accounting treatment prescribed by
Employee stock option scheme and Employee stock purchase Guidelines,
1999, issued by Securities and Exchange Board of India (''SEBI'') and
Guidance Note on Accounting for Employee Share-based Payments issued by
the Institute of Chartered Accountants of India.
2.14 Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with maturities of three months or less.
b. Rights, preferences and restrictions attached to equity shares:
The Company has one class of Equity Shares having a par value of Rs.10
each. Each Shareholder is eligible for one vote per share held.
The dividend proposed by the Board of Directors is subject to the
approval of the Shareholders in the ensuing Annual General Meeting,
except in case of Interim Dividend.
In the event of liquidation, the Equity Shareholders are eligible to
receive the remaining assets of the Company, after distribution of all
preferential amounts, in proportion to their shareholding.
Mar 31, 2013
1.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under historial cost
convention on accrual basis. These financial statements have been
prepared to comply with the Accounting Standards notified under Section
211 (3C) of the Companies Act, 1956 (''the Act'') and the relevant
provisions of the Act.
1.2 Use of Estimates
The preparation of the financial statements in conformity with the
Generally Accepted Accounting Principles in India requires Management
to make estimates and assumptions considered in the reported amount of
assets and liabilities (including contingent liabilities) and the
reported Income and Expenses during the year. The Management believes
that the estimates used in preparation of financial statements are
prudent and reasonable. Future results could defer than these estimates
and the differences between the actual results and the estimates are
recognised in the periods in which the results are known/ materialise.
1.3 Fixed Assets
a) Tangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation/ impairment losses, if any. Cost comprises of cost of
acquisition, cost of improvements and any attributable cost of bringing
the asset to its working condition for intended use.
Subsequent expenditures related to an item of tangible assets are added
to its book value only if they increase the future benefits from the
existing assets beyond its previously assessed standard of performance.
Losses arising from the retirement of, and gains or losses arising from
disposal of tangible assets which are carried at cost are recognised in
the Statement of Profit and Loss.
Depreciation on assets for own use is provided on Straight Line Method
on pro-rata basis at the rates prescribed under Schedule XIV to the
Act, except for leasehold land and building and leasehold improvements,
which are amortised over the period of the lease. Assets costing less
than R 5,000 each are depreciated fully in the year of acquisition.
Assets given to employees on contractual obligations are depreciated to
the extent of 50% of the value over a period of four years, at the end
of which these assets are transferred to the respective employees at
the residual book value.
b) Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortisation/ impairment losses, if any.
Computer Software having benefit of more than one year is capitalised
and amortised over a period of 3 to 6 years. Non-compete fees is
amortised over a period of non-compete agreement (i.e. five years).
Gains or Losses arising from the retirement or disposal of intangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of asset and recognised as income or
expense in the Statement of Profit and Loss.
1.4 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction, or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit and Loss in the period in which they are incurred.
1.5 Impairment of Assets
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the
asset/cash generating unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating
unit''s net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.6 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments. Current investments are carried
at cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
1.7 Foreign Currency Translations Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items, which are carried in
terms of historical cost, denominated in a foreign currency are
reported using the exchange rate at the date of the transaction. All
non-monetary items, which are carried at fair value or other similar
valuation, denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
All foreign currency monetary assets and liabilities as at Balance
Sheet date are translated at the exchange rate prevailing on the
Balance Sheet date. With respect to foreign exchange difference on
long-term foreign currency monetary items, the Company has adopted the
following policy from April 1, 2011 onwards:
a. Foreign exchange difference relating to the acquisition of a
depreciable asset is adjusted in the cost of the depreciable asset,
which would be depreciated over the balance life of the asset.
b. In other cases, the foreign exchange difference is accumulated in a
Foreign Currency Monetary Item Translation Difference Account, and
amortised over the balance period of such long term asset/ liability.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit and Loss.
Translation of foreign operations
Foreign operations are classified as either ''integral'' or
''non-integral'' operation. Exchange differences arising on a
monetary item that, in substance, forms part of an enterprise''s net
investment in a non-integral foreign operation are accumulated in the
"Cumulative Foreign Currency Translation Reserve" until the
disposal of the net investment, at which time they are recognised as
income or as expenses.
In case of integral foreign operations, all revenue and expense
transaction reflected in the Statement of Profit and Loss have been
translated into Indian Rupees at an average exchange rate. Monetary
assets and liabilities are translated at the exchange rate prevailing
on the Balance Sheet date. The non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction. The
net foreign exchange gain/ loss are recognised in Statement of Profit
and Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any profit or losses arising on cancellation or renewal of such
a forward exchange contract are recognised as income or as expense for
the period.
In accordance with its risk management policies and procedures, the
Company uses derivative instruments such as foreign currency forward
contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecasted transactions. The
derivatives that qualify for hedge accounting and designated as cash
flow hedges are initially measured at fair value and are re-measured at
a subsequent reporting date and the changes in the fair value of the
derivatives i.e. gain or loss is recognised directly in Shareholders''
Funds under hedging reserve account to the extent considered highly
effective. Gain or loss on derivative instruments that either does not
qualify for hedge accounting or not designated as cash flow hedges or
designated cash flow hedges to the extent considered ineffective are
recognised in Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognised in Shareholders'' Funds under hedging reserve account is
retained there until the forecasted transaction occurs subsequent to
which the same is adjusted against the related transaction in the
Statement of Profit and Loss. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised in
Shareholders'' Funds is transferred to the Statement of Profit and
Loss in the same period.
1.8 Revenue Recognition
a. In Contact Centre Activity, revenue is recognised as the related
services are performed, based on actual utilisation or minimum
utilisation level, as appropriate, specified in the agreements.
In Claim Processing Activity, revenue is recognised based on number of
claims processed, at contractual rates.
In respect of other services, revenue is accrued as per terms of
specific contracts once the related services are rendered.
In cases where services are rendered to customers during the year but
invoices are yet to be raised at the year end, revenue is accrued and
classified under ''Other Current Assets - Note 18''.
b. Interest income is accounted on accrual basis and dividend income
is accounted on right to receipt basis.
c. In respect of other heads of income, the Company follows the
practice of accounting of such income on accrual basis.
1.9 Employee Benefits
(i) Defined Contribution Plan
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund, Superannuation Fund and other funds.
Under the Provident Fund Plan, the Company contributes to a Government
administered provident fund on behalf of its employees and has no
further obligation beyond making its contribution.
The Superannuation Fund applicable to certain employees, constitutes an
insured benefit, which is classified as a defined contribution plan as
the Company makes contributions to an insurance company and has no
further obligation beyond making the payment to the insurance company.
The Company makes contributions to State plans namely Employee''s
State Insurance Fund and Employee''s Pension Scheme 1995 and has no
further obligation beyond making the payment to them.
There are contributory plans at certain overseas branches of the
Company and contributions are made as per their policies/ local
regulations.
The Company''s contributions to the above funds are charged to revenue
every year.
(ii) Defined Benefit Plan
The Company provides for retirement benefits in the form of gratuity
for all its employees in India and pension benefit plan at certain
foreign branches. The gratuity scheme is funded through Group Gratuity
Policy with Life Insurance Corporation of India (''LIC''). The
pension benefit plan at certain foreign branches is funded for certain
employees through payment in trustee administered funds as determined
by periodic actuarial calculation.
The liability for the defined benefit plan of Gratuity and Pension is
determined on the basis of an actuarial valuation carried out by an
independent actuary at the year-end using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss as income or expense.
(iii) Other Employee Benefits
Compensated Absences: Accumulated compensated absences, which are
expected to be availed or encashed within 12 months from the end of the
year are treated as short term employee benefits. The obligation
towards the same is measured at the expected cost of accumulating
compensated absences as the additional amount expected to be paid as a
result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year are treated as long
term employee benefits. The Company''s liability is actuarially
determined (using the Projected Unit Credit method) at the end of each
year. Actuarial losses/ gains are recognised in the Statement of Profit
and Loss in the year in which they arise.
(iv) Termination benefits
Termination benefits in the nature of voluntary retirement benefits are
recognised in the Statement of Profit and Loss as and when incurred.
1.10 Taxation
a. Provision for Income Tax is made after considering exemptions and
deductions available under the Income Tax Act, 1961, of India and legal
advice from time to time. Provisions for Income Tax in respect of
overseas branches are made as per the tax laws applicable to the
relevant country.
b. Minimum Alternative Tax (''MAT'') credit is recognised as an asset
only when and to the extent there is convincing evidence that the
Company will pay normal income tax during the specified period. Such
asset is reviewed at each Balance Sheet date and the carrying amount of
the MAT credit asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal
income tax during the specified period.
c. Deferred tax is recognised for all the timing differences, subject
to the consideration of prudence in respect of deferred tax assets.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets are recognised and carried
forward only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
profits.
1.11 Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
1.12 Leases
As Lessee
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit and Loss on a straight-line basis over the period
of the lease.
1.13 Accounting for Employee Stock Options
Stock options granted to employees under the Employee Stock Option
Scheme are accounted as per the accounting treatment prescribed by
Employee stock option scheme and Employee stock purchase Guidelines,
1999, issued by Securities and Exchange Board of India (''SEBI'') and
Guidance Note on Accounting for Employee Share-based Payments issued by
the Institute of Chartered Accountants of India.
1.14 Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with maturities of three months or less.
Mar 31, 2012
1.1 Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under historical cost
convention on accrual basis. These financial statements have been
prepared to comply with the Accounting Standards notified under Section
211 (3C) of the Companies Act, 1956 ('the Act') and the relevant
provisions of the Act.
1.2 Changes in Accounting Policy
i. Up to September 30, 2011, the forward exchange contracts other than
those covered under Accounting Standard 11 - "The Effects of Changes
in Foreign Exchange Rates", were valued on mark to market basis at
the period- end and any loss on valuation was recognised in the
Statement of Profit and Loss, on a portfolio basis and any gain arising
on this valuation were not recognised in line with the principle of
prudence as enunciated in Accounting Standard 1 - "Disclosure of
Accounting Policies".
Effective October 1, 2011, the Company has adopted the principles of
accounting for derivatives and hedge accounting as prescribed in
Accounting Standard 30 - "Financial Instruments - Recognition and
Measurement" to the extent they do not conflict with the requirements
of the existing accounting standards notified under section 211(3C) of
the Companies Act, 1956 and/or other regulatory requirements. Under
such principles, for qualifying hedge relationships, mark to market
gain/ loss at the period-end on derivatives are accounted for in the
Hedging Reserves. In respect of derivatives which do not qualify for
hedge relationships, the mark to market gain/loss at the period-end are
recognised in the Statement of Profit and Loss.
Had the Company followed its previous accounting policy, the profit
before tax for the year ended March 31, 2012 would have been lower by R
262.51 Lacs.
ii. The Company has opted to avail the option provided under paragraph
46A of AS-11 - "The Effects of changes in Foreign Exchange Rates"
inserted vide Notification dated December 29, 2011. Refer Note 2.7 for
policy regarding accounting treatment of foreign exchange differences
on long-term foreign currency items.
In the absence of long-term foreign currency monetary items as at March
31, 2012 and for the year ended thereon, there is no impact on profit
before tax for the year ended March 31, 2012.
1.3 Use of Estimates
The preparation of the financial statements in conformity with the
Generally Accepted Accounting Principles in India requires, the
Management to make estimates and assumptions considered in the reported
amount of assets and liabilities (including contingent liabilities) and
the reported Income and Expenses during the year. The Management
believes that the estimates used in preparation of financial statements
are prudent and reasonable. Future results could defer than these
estimates and the differences between the actual results and the
estimates are recognised in the periods in which the results are known/
materialise.
1.4 Fixed Assets
a) Tangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation/ impairment losses, if any. Cost comprises of cost of
acquisition, cost of improvements and any attributable cost of bringing
the asset to its working condition for intended use.
Subsequent expenditures related to an item of tangible assets are added
to its book value only if they increase the future benefits from the
existing assets beyond its previously assessed standard of performance.
Losses arising from the retirement of, and gains or losses arising from
disposal of tangible assets which are carried at cost are recognised in
the Statement of Profit and Loss.
Depreciation on assets for own use is provided on Straight Line Method
on pro-rata basis at the rates prescribed under Schedule XIV to the
Act, except for leasehold land and building and leasehold improvements,
which are amortised over the period of the lease. Assets costing less
than R 5,000 each are depreciated fully in the year of acquisition.
Assets given to employees on contractual obligations are depreciated to
the extent of 50% of the value over a period of four years, at the end
of which these assets are transferred to the respective employees at
the residual book value.
b) Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortisation/ impairment losses, if any.
Computer Software having benefit of more than one year is capitalised
and amortised over a period of 3 to 6 years. Non-compete fees is
amortised over a period of non-compete agreement (i.e. five years).
Gains or Losses arising from the retirement or disposal of intangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of asset and recognised as income or
expense in the Statement of Profit and Loss.
1.5 Borrowing Costs
General and specific borrowing costs directly attributable to the
acquisition, construction, or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
Statement of Profit and Loss in the period in which they are incurred.
1.6 Impairment of Assets
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the
asset/cash generating unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset's or cash generating
unit's net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.7 Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments. Current investments are carried
at cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
1.8 Foreign Currency Translations Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items, which are carried in
terms of historical cost, denominated in a foreign currency are
reported using the exchange rate at the date of the transaction. All
non-monetary items, which are carried at fair value or other similar
valuation, denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
All foreign currency monetary assets and liabilities as at Balance
Sheet date are translated at the exchange rate prevailing on the
Balance Sheet date. With respect to foreign exchange difference on
long-term foreign currency monetary items, the Company has adopted the
following policy from April 1, 2011 onwards:
- Foreign exchange difference relating to the acquisition of a
depreciable asset is adjusted in the cost of the depreciable asset,
which would be depreciated over the balance life of the asset.
- In other cases, the foreign exchange difference is accumulated in a
Foreign Currency Monetary Item Translation Difference Account, and
amortised over the balance period of such long term asset/ liability.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit and Loss.
Translation of foreign operations
Foreign operations are classified as either 'integral' or
'non-integral' operation. Exchange differences arising on a
monetary item that, in substance, forms part of an enterprise's net
investment in a non-integral foreign operation are accumulated in the
"Cumulative Foreign Currency Translation Reserve" until the
disposal of the net investment, at which time they are recognised as
income or as expenses.
In case of integral foreign operations, all revenue and expense
transaction reflected in the Statement of Profit and Loss have been
translated into Indian Rupees at an average exchange rate. Monetary
assets and liabilities are translated at the exchange rate prevailing
on the Balance Sheet date. The non-monetary assets and liabilities are
translated at the rate prevailing on the date of the transaction. The
net foreign exchange gain/ loss are recognised in Statement of Profit
and Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any profit or losses arising on cancellation or renewal of such
a forward exchange contract are recognised as income or as expense for
the period.
In accordance with its risk management policies and procedures, the
Company uses derivative instruments such as foreign currency forward
contracts to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecasted transactions. The
derivatives that qualify for hedge accounting and designated as cash
flow hedges are initially measured at fair value and are re-measured at
a subsequent reporting date and the changes in the fair value of the
derivatives i.e. gain or loss is recognised directly in Shareholders'
Funds under hedging reserve account to the extent considered highly
effective. Gain or loss on derivative instruments that either does not
qualify for hedge accounting or not designated as cash flow hedges or
designated cash flow hedges to the extent considered ineffective are
recognised in Statement of the Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognised in Shareholders' Funds under hedging reserve account is
retained there until the forecasted transaction occurs subsequent to
which the same is adjusted against the related transaction in the
Statement of Profit and Loss. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised in
Shareholders' Funds is transferred to the Statement of Profit and
Loss in the same period.
1.9 Revenue Recognition
a. In Contact Centre Activity, revenue is recognised as the related
services are performed, based on actual utilisation or minimum
utilisation level, as appropriate, specified in the agreements.
In Claim Processing Activity, revenue is recognised based on number of
claims processed, at contractual rates.
In respect of other ITES services, revenue is accrued as per terms of
specific contracts once the related services are rendered.
In cases where services are rendered to customers during the year but
invoices are yet to be raised at the year end, revenue is accrued and
classified under 'Other Current Assets - Note 18'.
b. Interest income is accounted on accrual basis and dividend income
is accounted on right to receipt basis.
c. In respect of other heads of income, the Company follows the
practice of accounting of such income on accrual basis.
1.10 Employee Benefits
(i) Defined Contribution Plan
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund, Superannuation Fund and other funds.
Under the Provident Fund Plan, the Company contributes to a Government
administered provident fund on behalf of its employees and has no
further obligation beyond making its contribution.
The Superannuation Fund applicable to certain employees, constitutes an
insured benefit, which is classified as a defined contribution plan as
the Company makes contributions to an insurance company and has no
further obligation beyond making the payment to the insurance company.
The Company makes contributions to State plans namely Employee's
State Insurance Fund and Employee's Pension Scheme 1995 and has no
further obligation beyond making the payment to them.
There are contributory plans at certain overseas branches of the
Company and contributions are made as per their policies/ local
regulations.
The Company's contributions to the above funds are charged to revenue
every year.
(ii) Defined Benefit Plan
The Company provides for retirement benefits in the form of gratuity
for all its employees in India and pension benefit plan at certain
foreign branches. The gratuity scheme is funded through Group Gratuity
Policy with Life Insurance Corporation of India ('LIC'). The
pension benefit plan at certain foreign branches is funded for certain
employees through payment in trustee administered funds as determined
by periodic actuarial calculation.
The liability for the defined benefit plan of Gratuity and Pension is
determined on the basis of an actuarial valuation carried out by an
independent actuary at the year-end using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss as income or expense.
(iii) Other Employee Benefits
Compensated Absences: Accumulated compensated absences, which are
expected to be availed or encashed within 12 months from the end of the
year end are treated as short term employee benefits. The obligation
towards the same is measured at the expected cost of accumulating
compensated absences as the additional amount expected to be paid as a
result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year end are treated as
other long term employee benefits. The Company's liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses/ gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
(iv) Termination benefits
Termination benefits in the nature of voluntary retirement benefits are
recognised in the Statement of Profit and Loss as and when incurred.
1.11 Taxation
a. Provision for Income Tax is made after considering exemptions and
deductions available under the Income Tax Act, 1961, of India and legal
advice from time to time. Provisions for Income Tax in respect of
overseas branches are made as per the tax laws applicable to the
relevant country.
b. Minimum Alternative Tax ('MAT') credit is recognised as an
asset only when and to the extent there is convincing evidence that the
Company will pay normal income tax during the specified period. Such
asset is reviewed at each Balance Sheet date and the carrying amount of
the MAT credit asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal
income tax during the specified period.
c. Deferred tax is recognised for all the timing differences, subject
to the consideration of prudence in respect of deferred tax assets.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets are recognised and carried
forward only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
profits.
1.12 Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
1.13 Leases
As Lessee
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit and Loss on a straight-line basis over the period
of the lease.
1.14 Accounting for Employee Stock Options
Stock options granted to employees under the Employee Stock Option
Scheme are accounted as per the accounting treatment prescribed by
Employee stock option scheme and Employee stock purchase Guidelines,
1999, issued by Securities and Exchange Board of India ('SEBI') and
Guidance Note on Accounting for Employee Share-based Payments issued by
the Institute of Chartered Accountants of India.
1.15 Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with maturities of three months or less.
Mar 31, 2011
1. Accounting Convention
These fi nancial statements have been prepared under historical cost
convention from the books of accounts maintained on an accrual basis in
conformity with accounting principles generally accepted in India and
comply with the Accounting Standards notifi ed under Section 211 (3C)
of the Companies Act, 1956 (the Act) and the relevant provisions of
the Act.
2. Fixed Assets
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition for its
intended use, less accumulated depreciation.
Tangible Assets
a. Depreciation on assets for own use is provided on Straight Line
Method on pro-rata basis at the rates prescribed under Schedule XIV to
the Act, except for leasehold land and building and leasehold
improvements, which are amortised over the period of the lease. Assets
costing less than Rs. 5,000 each are depreciated fully in the year of
acquisition.
b. Assets given to employees on contractual obligations are
depreciated to the extent of 50% of the value over a period of four
years, at the end of which these assets are transferred to the
respective employees at the residual book value.
Intangible Assets
Computer Software having benefit of more than one year is capitalised
and amortised over a period of 3 to 6 years.
Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The
reduction, if any, is treated as an impairment loss and is recognised
in the Profit and Loss Account. If at the Balance Sheet date there is
an indication that a previously assessed impairment loss no longer
exists, the recoverable amount is reassessed and the asset is refl
ected at the recoverable amount.
3. Valuation of Investments
Long term investments are stated at cost and provision is made for
diminution, other than temporary, in value of investments. Current
investments are valued at lower of cost and market value/ net asset
value.
4. Revenue Recognition
a. In Call Centre Activity, revenue is recognised as the related
services are performed, based on actual utilisation or minimum
utilisation level, as appropriate, specifi ed in the agreements.
In Claim Processing Activity, revenue is recognised based on number of
claims processed, at contractual rates.
In cases where services are rendered to customers during the year but
invoices are yet to be raised at the year end, revenue is accrued and
classifi ed under Sundry Debtors - Schedule G.
In respect of I.T. Division, revenue is billed to clients as per terms
of specifi c contracts once the related services are rendered. On fi
xed-price contracts, revenue is recognised based on milestones achieved
as specifi ed in the contracts on the basis of work completed. Revenue
from rendering technical project and other services is recognised
during the period in which services are rendered.
b. Interest income is accounted on accrual basis and dividend income
is accounted on right to receipt basis.
c. In respect of other heads of income, the Company follows the
practice of accounting of such income on accrual basis.
5. Foreign Currency Transactions
a. Foreign currency transactions are recorded at the exchange rates
prevailing on the date of such transactions. Foreign currency monetary
assets and liabilities as at the Balance Sheet date are translated at
the rates of exchange prevailing on the Balance Sheet date. Gain and
losses arising on account of differences in foreign exchange rates on
settlement/ translation of foreign currency monetary assets and
liabilities are recognised in the Profit and Loss Account. Non
monetary foreign currency items are carried at cost.
b. Forward exchange contracts are accounted for, by amortising the
difference between the forward rate and the exchange rate on the date
of the transaction over the life of the contract.
c. In respect of transactions related to foreign branches, all revenue
and expense transactions during the year are reported at an average
rate. Monetary assets and liabilities are translated at the rate
prevailing on the Balance Sheet date whereas non-monetary assets and
liabilities are translated at the rate prevailing on the date of the
transaction. Net gain/ loss on foreign currency translation in respect
of transactions of all foreign branches, which are integral to the
Company, are recognised in the Profit and Loss Account.
d. Any profit or loss arising on settlement or cancellation of other
derivative contracts (forward contracts in respect of fi rm commitments
or highly probable forecast transactions, swaps and currency options)
is recognised as income or expense for the year. Pursuant to The
Institute of Chartered Accountants of Indias announcement Accounting
for Derivatives, the Company marks-to-market all such outstanding
derivative contracts at the year-end and the resulting mark-to-market
losses, if any, are recognised in the Profit and Loss Account.
6. Employee Benefits
(i) Defi ned Contribution Plan
The Company has Defi ned Contribution plans for post employment benefi
ts namely Provident Fund, Superannuation Fund and other funds.
Under the Provident Fund Plan, the Company contributes to a Government
administered provident fund on behalf of its employees and has no
further obligation beyond making its contribution.
The Superannuation Fund applicable to certain employees, constitutes an
insured benefit, which is classifi ed as a defi ned contribution plan
as the Company makes contributions to an insurance company and has no
further obligation beyond making the payment to the insurance company.
The Company makes contributions to State plans namely Employees State
Insurance Fund and Employees Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
There are contributory plans at certain overseas branches of the
Company and contributions are made as per their policies/ local
regulations.
The Companys contributions to the above funds are charged to revenue
every year.
(ii) Defi ned Benefit Plan
The Company has a Defi ned Benefit plan namely Gratuity for all of its
employees in India. The gratuity scheme is funded through Group
Gratuity Policy with Life Insurance Corporation of India (LIC). The
Company also has pension benefit plan at certain foreign branches. The
said plan is funded for ceratin employees through payment in trustee
administered funds as determined by periodic actuarial calculation.
The liability for the defi ned benefit plan of Gratuity and Pension is
determined on the basis of an actuarial valuation carried out by an
independent actuary at the year-end using Projected Unit Credit Method.
Termination benefits are recognised as an expense as and when
incurred.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account as income or expense.
(iii) Other Employee Benefits
The employees of the Company are entitled to leave encashment as per
the leave policy of the Company. The liability in respect of leave
encashment is provided, based on an actuarial valuation carried out by
an independent actuary as at the year end using Projected Unit Credit
Method. Short term compensated absences, if any, are provided on cost
to company basis.
7. Taxation
a. Provision for Income Tax is made after considering exemptions and
deductions available under the Income Tax Act, 1961, of India and legal
advice from time to time. Provision for Income Tax in respect of
overseas branches are made as per the tax laws applicable to the
relevant country.
b. Deferred Tax is recognised, subject to the consideration of
prudence, on timing differences being the difference between taxable
income and accounting income that orginate in one period and are
capable of reversal in one or more subsequent periods. Deferred Tax
Asset is not recognised unless there are timing differences, the
reversal of which will result in suffi cient income or there is virtual
certainty that suffi cient future taxable income will be available,
against which, deferred tax asset can be realised.
8. Provisions and Contingent Liabilities
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outfl ow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure of a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not, require an outfl ow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outfl ow of
resources is remote, no provision or disclosure as specifi ed in
Accounting Standard 29 - Provisions, Contingent Liabilities and
Contingent Assets is made.
9. Leases
a. Leases of assets under which all the risks and benefits of
ownership are substantially transferred to the lessee are classifi ed
as fi nance leases. Finance leases are capitalised at the estimated
present value of the minimum lease payments. Each lease payment is
allocated between the liability and fi nance charges so as to achieve a
constant rate on the fi nance balance outstanding. The corresponding
rental obligations, net of fi nance charges, are included in secured
loans. The interest element of the fi nance charge is charged to the
Profit and Loss Account over the lease period. Leased assets are being
depreciated over the lease period.
b. Assets acquired as leases where a signifi cant portion of the risks
and rewards of the ownership are retained by the lessor are classifi ed
as Operating Leases. Lease rentals are charged to the Profit and Loss
Account on accrual basis.
10. Accounting for Employee Stock Options
Stock options granted to employees under the Employee Stock Option
Scheme are accounted as per the accounting treatment prescribed in the
Guidance Note on Accounting for Employee Share-based Payments issued by
the Institute of Chartered Accountants of India.
Mar 31, 2010
1. Accounting Convention
The Accounts are prepared on accrual basis and in accordance with
generally accepted accounting principles in India, provisions of
Companies Act, 1956 of India (Ãthe ActÃ) and Accounting Standards
referred in Section 211 (3C) of the Act.
2. Fixed Assets
Fixed assets are stated at cost of acquisition, including any cost
attributable for bringing the asset to its working condition for its
intended use, less accumulated depreciation.
Tangible Assets
a. Depreciation on assets for own use is provided on Straight Line
Method on pro-rata basis at the rates prescribed under Schedule XIV to
the Act, except for leasehold land and building and leasehold
improvements, which are amortised over the period of the lease. Assets
costing less than Rs. 5,000 each are depreciated fully in the year of
acquisition.
b. Assets given to employees on contractual obligations are
depreciated to the extent of 50% of the value over a period of four
years, at the end of which these assets are transferred to the
respective employees at the residual book value.
Intangible Assets
Commercial Rights associated with business and customers are amortised
over a period of five years. Computer Software having benefit of more
than one year is capitalised and amortised over a period of 3 to 6
years.
Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The
reduction, if any, is treated as an impairment loss and is recognised
in the Profit and Loss Account. If at the Balance Sheet date there is
an indication that a previously assessed impairment loss no longer
exists, the recoverable amount is reassessed and the asset is reflected
at the recoverable amount.
3. Valuation of Investments
Long term investments are stated at cost and provision is made for
diminution, other than temporary, in value of investments. Current
investments are valued at lower of cost and market value/ net asset
value.
4. Revenue Recognition
a. In Call Centre Activity, revenue is recognised as the related
services are performed, based on actual utilisation or minimum
utilisation level, as appropriate, specified in the agreements.
In Claim Processing Activity, revenue is recognised based on number of
claims processed, at contractual rates.
In respect of I.T Division, revenue is billed to clients as per terms
of specific contracts once the related services are rendered. On
fixed-price contracts, revenue is recognised based on milestones
achieved as specified in the contracts on the basis of work completed.
Revenue from rendering technical project and other services is
recognised during the period in which services are rendered.
b. Interest income is accounted on accrual basis and dividend income
is accounted on right to receipt basis.
c. In respect of other heads of income, the Company follows the
practice of accounting of such income on accrual basis.
5. Foreign Currency Transactions
a. Foreign currency transactions are recorded at the exchange rates
prevailing on the date of such transactions. Foreign currency monetary
assets and liabilities as at the Balance Sheet date are translated at
the rates of exchange prevailing on the Balance Sheet date. Gain and
losses arising on account of differences in foreign exchange rates on
settlement/ translation of foreign currency monetary assets and
liabilities are recognised in the Profit and Loss Account. Non monetary
foreign currency items are carried at cost.
b. Forward exchange contracts are accounted for, by amortising the
difference between the forward rate and the exchange rate on the date
of the transaction over the life of the contract.
c. In respect of transactions related to foreign branches, all revenue
and expense transactions during the year are reported at an average
rate. Monetary assets and liabilities are translated at the rate
prevailing on the Balance Sheet date whereas non-monetary assets and
liabilities are translated at the rate prevailing on the date of the
transaction. Net gain/ loss on foreign currency translation in respect
of transactions of all foreign branches, which are integral to the
Company, are recognised in the Profit and Loss Account.
d. Any profit or loss arising on settlement or cancellation of other
derivative contracts (forward contracts in respect of firm commitments
or highly probable forecast transactions, swaps and currency options)
is recognised as income or expense for the year. Pursuant to The
Institute of Chartered Accountants of IndiaÃs announcement ÃAccounting
for DerivativesÃ, the Company marks-to-market all such outstanding
derivative contracts at the year-end and the resulting mark-to-market
losses, if any, are recognised in the Profit and Loss Account.
6. Employee Benefits
a. Defined Contribution Plan
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund and Superannuation Fund.
Under the Provident Fund Plan, the Company contributes to a Government
administered provident fund on behalf of its employees and has no
further obligation beyond making its contribution.
The Superannuation Fund applicable to certain employees, constitutes an
insured benefit, which is classified as a defined contribution plan as
the Company makes contributions to an insurance company and has no
further obligation beyond making the payment to the insurance company.
The Company makes contributions to State plans namely EmployeeÃs State
Insurance Fund and EmployeeÃs Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
The CompanyÃs contributions to the above funds are charged to revenue
every year.
b. Defined Benefit Plan
The Company has a Defined Benefit plan namely Gratuity for all of its
employees in India. The gratuity scheme is funded through Group
Gratuity Policy with Life Insurance Corporation of India (ÃLICÃ). The
Company also has an unfunded, non contributory pension benefit plan at
certain foreign branches.
The liability for the defined benefit plan of Gratuity and Pension is
determined on the basis of an actuarial valuation carried out by an
Independent actuary at the year-end using Projected Unit Credit Method.
Termination benefits are recognised as an expense as and when incurred.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account as income or expense.
c. Other Employee Benefits
The employees of the Company are entitled to leave encashment as per
the leave policy of the Company. The liability in respect of leave
encashment is provided, based on an actuarial valuation carried out by
an independent actuary as at the year end using Projected Unit Credit
Method. Short term compensated absences, if any, are provided on cost
to company basis.
7. Taxation
a. Provision for Income Tax is made after considering exemptions and
deductions available under the Income Tax Act, 1961, of India and legal
advice from time to time. Provision for Income Tax in respect of
overseas branches are made as per the tax laws applicable to the
relevant country.
b. 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
crystallise.
8. Provisions and Contingent Liabilities
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not, require an outflow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure as specified in
Accounting Standard 29 Ã ÃProvisions, Contingent Liabilities and
Contingent Assetsà is made.
9. Leases
a. Leases of assets under which all the risks and benefits of
ownership are substantially transferred to the lessee are classified as
finance leases. Finance leases are capitalised at the estimated present
value of the minimum lease payments. Each lease payment is allocated
between the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The corresponding rental
obligations, net of finance charges, are included in secured loans. The
interest element of the finance charge is charged to the Profit and
Loss Account over the lease period. Leased assets are being depreciated
over the lease period.
b. Assets acquired as leases where a significant portion of the risks
and rewards of the ownership are retained by the lessor are classified
as Operating Leases. Lease rentals are charged to the Profit and Loss
Account on accrual basis.
10. Accounting for Employee Stock Options
Stock options granted to employees under the Employee Stock Option
Scheme are accounted as per the accounting treatment prescribed in the
Guidance Note on Accounting for Employee Share-based Payments issued by
the Institute of Chartered Accountants of India.
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