Home  »  Company  »  KPIT Technologies  »  Quotes  »  Accounting Policy
Enter the first few characters of Company and click 'Go'

Accounting Policies of KPIT Technologies Ltd. Company

Mar 31, 2017

Company Overview

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

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

These financial statements were authorized for issue by the Company''s Board of Directors on 26 April 2017.

1. Significant accounting policies

Basis of preparation of standalone financial statements

The standalone financial statements are prepared in accordance with the Indian Accounting Standards ("Ind-AS") as specified under Section 133 of the Companies Act, 2013 read with the Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 and the provisions of Companies Act, 2013. The standalone financial statements are presented in millions of Indian rupees rounded off to two decimal places, unless otherwise stated.

The Company adopted Ind-AS from April 1, 2016 and accordingly the transition was carried out, from the accounting principles generally accepted in India as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules,

2014 (IGAAP), in accordance with Ind-AS 101 - First time adoption of Indian Accounting Standards. Accordingly, the impact on transition has been recorded in opening reserves as at April 1, 2015 and all the periods presented have been restated accordingly. Reconciliations and descriptions of the effect of the transition has been summarized in Note 2.1, 2.2 and 2.3.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

These financial statements have been prepared on the historical cost basis, except for share based payments, defined benefit obligations and certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

Use of estimates

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

Critical accounting estimates a. Revenue Recognition

The Company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date.

b. Impairment of goodwill

Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions. The recoverable amount of cash generating units is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment test is performed at the level of the cash-generating unit or groups of cash-generating units which are benefiting from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes.

c. Income tax

Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.

d. Measurement of defined benefit obligation and key actuarial assumptions

Information about assumptions and estimation uncertainties in respect of defined benefit obligation and share based payment in note 36 and note 43 respectively.

1.1 Current-non-current classification

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

Assets

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

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

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

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

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

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

Liabilities

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

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

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

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

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

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

Operating cycle

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

1.2 Revenue recognition

The Company derives revenues primarily from software development and related services and from the sale of licenses and products. Arrangements with customers for software related services are either on a fixed-price or on a time-and-material basis.

Revenue from software development and services, on time and material basis, is recognized based on software development, services rendered and related costs incurred based on timesheets and are billed to clients as per the contractual terms. Revenue from the end of the last billing to the Balance Sheet date is recognized as unbilled revenues.

Revenue from fixed-price contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage-of-completion method based on costs expended subject to the cost (both incurred and expected future cost) being identified and being measured reliably.

When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the

current contract estimates. Earnings in excess of billings are classified as unbilled revenue while billings in excess of earnings are classified as unearned revenue.

Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement. Revenue from client training, support and other services arising due to the sale of software products is recognized as the services are performed.

For the arrangements for sale of license, related services and maintenance services, that meet the criteria for separately identifiable components, the Company has measured the revenue in respect of each separable component of a transaction at its fair value to allocate the consideration in accordance with principles given in Ind AS 18. The price that is regularly charged for an item when sold separately is the best evidence of its fair value. In cases where the company is unable to establish objective and reliable evidence of fair value for the software development and related services, the company has used a residual method to allocate the arrangement consideration. In these cases the balance of the consideration, after allocating the fair values of undelivered components of a transaction has been allocated to the delivered components for which specific fair values do not exist.

Revenue from sale of third party licenses is recognized only when the sale is completed by passing ownership.

Advances received for services and products are separately reported in the financials as advance received from customers.

The Company accounts for volume and / or trade discounts to customers as a reduction of revenue. Also, when the level of discount varies with increases in levels of revenue transactions, the company recognizes the liability based on its estimate of the customer''s future purchases. The company recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.

Revenue from sale of goods is recognized upon actual delivery of goods along with transfer of significant risks and rewards to the customers.

Expenses reimbursed by customers during the project execution are recorded as a reduction to associated costs.

The Company presents revenues from products gross of excise duties in its Statement of Profit and Loss.

Interest income is recognized using effective interest rate method.

Dividend income is recognized when the right to receive payment is established.

1.3 Borrowing costs

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

The exchange differences arising from foreign currency borrowings, to the extent that they are regarded as an adjustment to interest costs, are regrouped from other exchange differences to finance costs.

1.4 Property, plant and equipment

Property, plant and equipment are carried at cost of acquisition or construction less accumulated depreciation and/or accumulated impairment loss, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. If significant parts of an item of property, plant and equipment have different useful lives , then they are accounted for as separate items (major components) of property, plant and equipment. The cost and related accumulated depreciation are eliminated from the standalone financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss. Assets under construction are disclosed as capital work-in-progress.

1.5 Intangible assets

Intangible assets are stated at cost less accumulated amortization and accumulated impairment, ifany.

In case of internally generated intangibles, costs incurred

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

Intangible fixed assets are derecognized on disposal or when no future economic benefits are expected from its use and subsequent disposal or when the economic benefits are not measurable.

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

Leasehold land and vehicles taken on lease are amortized over shorter of useful lives and period of lease.

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

Capitalized development costs are amortized over a period of3to4 years.

The estimated useful life of an identifiable intangible asset is 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 asset.

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

Depreciation and amortization methods, useful lives and residual values are reviewed at the end of each financial year and adjusted if appropriate.

1.7 Impairment

a. Financial assets

The Company assesses at each Balance Sheet date whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recorded as an impairment gain or loss in Statement of Profit and Loss.

b. Non- financial assets

i. Property, plant and equipment and intangible assets

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

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

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

ii. Goodwill

CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is indication for impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit prorate on the basis of the carrying amount of each asset in the unit.

1.8 Inventories

Inventories which comprise raw materials, work-in- progress, finished goods and stores and spares, are carried at the lower of cost and net realizable value.

Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, weighted average cost method is used. In the case of manufactured inventories and work in progress, fixed production overheads are allocated on the basis of normal capacity of production facilities.

1.9 Leases

a. Finance lease

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

b. Operating lease

Lease arrangements where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor, are classified as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on straight line basis over the term of the lease, unless the increase in rentals is in line with expected general inflation.

1.10 Earnings per share

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

1.11 Foreign currency transactions

a. Functional and presentation currency.

Indian Rupee is the Company''s functional as well as presentation currency.

b. Transactions in foreign currencies are translated to the functional currency of the Company at the exchange rates prevailing on the date of the transaction. Monetary items denominated in foreign currencies are translated into the functional currency at the year-end rates. The exchange differences so determined and also the realized exchange differences are recognized in the Statement of Profit and Loss. Non-monetary items denominated in foreign currencies and measured at fair value are translated into the functional currency at the exchange rate prevalent at the date when the fair value was determined. Non-monetary items denominated in foreign currencies and measured at historical cost are translated into the functional currency at the exchange rate prevalent at the date of transaction.

c. Translation of foreign operations

For translating the financial statements of foreign branches, their functional currencies are determined. The results and the financial position of the foreign branches are translated into presentation currency so that the foreign operation could be included in the standalone financial statements.

1.12 Employee benefits

i) Post-employment benefit plans

Defined benefit plan

The Company''s gratuity scheme is a defined benefit plan. For defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with independent actuarial valuations being carried out at each Balance Sheet date. Remeasurement of net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effects of asset ceiling (if any, excluding interest) are recognized in Other Comprehensive Income for the period in which they occur. Net interest expense and other expenses related to defined benefit plans are recognized in Statement of Profit and Loss. Past service cost is recognized immediately to the extent that the benefits are already vested or amortized on a straight-line basis over the average period until the benefits become vested.

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

Defined contribution plan

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

Compensated absences

The employees of certain locations can carry-forward a portion of the unutilized accrued compensated absences and utilize it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method. Remeasurement gains/losses are recognized in the Statement of Profit and Loss in the period in which they arise.

ii) Other employee benefits

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

1.13 Income taxes

Income tax expense comprises current and deferred income tax. Income tax expense is recognized in the Statement of profit and Loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the standalone financial statements.

Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of branches where it is expected that the earnings of the branch will not be distributed in the foreseeable future. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Minimum Alternate Tax

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

1.14 Provisions, Contingent liabilities and Contingent assets

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

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

No provision is recognized for

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

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

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

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

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

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

Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established the Company recognizes any impairment loss on the assets associated with that contract.

Warranty

The Company has an obligation by way of warranty to maintain the software during the period of warranty, as per the contractual requirements, for certain products/ licenses. Costs associated with such sale are accrued at the time when related revenues are recorded and included in cost of service delivery. The Company estimates such cost based on historical experience and the estimates are reviewed periodically for material changes in the assumptions.

1.15 Research and development

Costs incurred during the research phase of a project are expensed when incurred. Costs incurred in the development phase are recognized as an intangible asset in accordance with policy defined in 1.5.

1.16 Employee stock option

In respect of stock options granted pursuant to the Company''s Employee Stock Option Scheme, the Company recognizes employee compensation expense, using the grant date fair value in accordance with Ind-AS 102 - Share Based Payment, on straight line basis over the period over which the employees would become unconditionally entitled to apply for the shares.

1.17 Investment in subsidiaries

Investment in subsidiaries are measured at cost less impairment.

1.18 Financial instruments

a. Initial recognition

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability.

b. Subsequent measurement

i) Non-derivative financial instruments

Financial assets carried at amortized cost

A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through other comprehensive income

A financial asset is subsequently measured at fair value through Other Comprehensive Income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through profit or loss

A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.

However, in cases where the Company has made an irrevocable election for particular investments in equity instruments that would otherwise be measured at fair value through profit or loss, the subsequent changes in fair value are recognized in Other Comprehensive Income.

Financial liabilities

Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit and loss. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.

ii) Derivative financial instruments

The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The Company does not use derivative financial instruments for speculative purposes. The counter-party to the Company''s foreign currency forward contracts is generally a bank.

Financial assets or financial liabilities, at fair value through profit or loss

Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss, when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets/ liabilities in this category are presented as current assets/ current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.

Cash flow hedge

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

The Company designates certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on firm commitments and highly probable forecast transactions.

Hedging instruments are initially measured at fair value and are re-measured at subsequent reporting dates. The effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions any cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve is retained until the forecast transaction occurs. When a hedged transaction occurs or is no longer expected to occur, the net cumulative gain or loss recognized in cash flow hedging reserve is transferred to the Statement of Profit and Loss.

The amount recognized in Other Comprehensive Income is reclassified to profit or loss as a reclassification adjustment in the same period as the hedged cash flows affect profit or loss, and in the same line item in the Statement of Profit and Loss and Other Comprehensive Income.

iii) Treasury Shares

When any entity within the Group (KPIT Technologies Limited and its subsidiaries) purchases the Company''s ordinary shares, the consideration paid including any directly attributable incremental cost is presented as a deduction from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/ from share premium.

c. Derecognition of financial instruments

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. 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.

d. Fair value of financial instruments

The Company uses discounted cash flow analysis method for the fair value of its financial instruments except for employee stock options (ESOP) , where Black and Scholes options pricing model is used. The method of assessing fair value results in general approximation of value and such value may never actually be realized.

For all other financial instruments the carrying amount approximates fair value due to short maturity of those instruments.

1.19 Recent accounting pronouncements

Standards issued but not yet effective

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind-AS 7 : Statement of cash flows and Ind-AS 102 : Share based payment. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7 : Statement of cash flows and IFRS 2 : Share based payment, respectively. The amendments are applicable to the Company from 01 April 2017.

(i) Amendment to Ind-AS 7

The amendment to Ind-AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement.

The Company is evaluating the requirements of the amendment and the impact on the standalone financial statements is being evaluated.

(ii) Amendment to Ind-AS 102

The amendment to Ind-AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market based performance conditions and non-vesting conditions are reflected in the ''fair values'', but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share based payment transaction are modified with the result that it becomes an equity-settled share based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.

The Company is evaluating the requirements of the amendment and the impact on the standalone financial statements is being evaluated.

2 First time adoption of Ind-AS :

2.1 Explanation of transition to Ind-AS

a. These are the Company''s first standalone financial statements prepared in accordance with Ind-AS.

b. The accounting policies set out in Note 1 have been applied in preparing the standalone financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind-AS Balance Sheet as at 1 April 2015 (the Company''s date of transition).

c. In preparing its opening Ind-AS Balance Sheet and in presenting the comparative information for the year ended 31 March 2016, the Company has adjusted amounts reported previously in standalone financial statements, prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian Generally Accepted Accounting

Principles (IGAAP)). An explanation of how the transition from IGAAP to Ind-AS has affected the Company''s financial position, financial performance and cash flows is set out in the following tables and notes.

2.2 Optional exemptions availed and mandatory exceptions

In preparing these financial statements, the Company has availed certain optional exemptions and mandatory exceptions in accordance with Ind-AS 101 as explained below:

a. Optional exemptions availed

i. Share based payments

The Company has elected to apply the share based payment exemption available under Ind-AS 101 on application of Ind-AS 102- "Share Based Payment", to the grants that are vested before the transition date. Accordingly, only the unvested options as at the date of transition to Ind-AS have been fair valued.

ii. Deemed cost

The Company has availed the exemption under Ind-AS 101 on deemed cost, where it has elected to continue with the carrying value for all of its property, plant and equipment, and intangible assets, measured as per IGAAP and use that as its deemed cost as at the date of transition to Ind-AS.

b. Mandatory exceptions from full retrospective application

i Hedge accounting exceptions

The Company had followed hedge accounting under IGAAP which is aligned to Ind-AS. Accordingly, the Company continues to apply hedge accounting on and after the date of transition to Ind-AS.

ii Estimates

As per Ind AS 101, an entity''s estimates in accordance with Ind AS at the date of transition to Ind AS at the end of the comparative period presented in the entity''s first Ind AS financial statements are consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error.

2.3 Reconciliations

a. The below mentioned reconciliations provide the quantification of the effect of significant differences arising on the transition from IGAAP to Ind-AS, in accordance with Ind-AS 101:

Notes explaining the effects of transaction from IGAAP to Ind-AS:

i Effect of fair valuation of security deposits and amortization of advance rentals under Ind-AS.

ii Effect of deferred taxes recognized on the Ind-AS adjustments.

iii Effect of financial liabilities initially measured at fair value and subsequently measured at amortized cost with the corresponding impacts on the Statement of Profit and Loss.

iv Under Ind-AS, dividend and dividend distribution tax is recorded as a liability on the date of approval by the shareholders while under IGAAP it is recognized in the period to which it relates.

v As per Ind-AS, share based payments are measured at fair value, whereas under IGAAP they are measured at intrinsic value.

vi As per Ind-AS, actuarial gains/(losses) are recorded in other comprehensive income as items that will not be reclassified to profit or loss.

vii Under Ind-AS, the effective portion of gains/(losses) on hedging instruments in cash flow hedges are recorded in other comprehensive income as items that will be reclassified to profit or loss.

Cash flow statement:

There are no material reconciliation items to the cash flow statement, as previously reported under IGAAP and Ind-AS.

Note:

(i) With respect to one of the intangible assets, the Company is unable to track separately the future economic benefits and the expected cash flows, but yielding results at the combined business level. Further, it is difficult to assess the period over which the benefits are expected to flow. Hence, during the year ended 31 March 2017, the Company has impaired the intangible asset, resulting in an impairment loss ofRs, 36.08 million, recognized under depreciation and amortization expense in the Statement of Profit and Loss.

16.1 The Company declares and pays dividends in Indian rupees. The dividend proposed to be distributed to equity shareholders for the year ended 31 March 2017 is '' 434.50 million i.e. '' 2.20 per share (Previous year'' 217.25 million i.e. '' 1.10 per share). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

Dividends during the year ended 31 March 2017 include '' 1.10 per share towards final dividend for the year ended 31 March

2016. Dividends during the year ended 31 March 2016 include '' 1.10 per share towards interim dividend for the year ended 31 March 2016 and '' 1.10 per share towards final dividend for the year ended 31 March 2015.

16.2 In the event of liquidation of the Company, the holders of equity shares will be entitled to receive a share in the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

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

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

16.7 Capital Management

The Company''s objective is to safeguard its ability to continue as a going concern and to maintain investor, creditor and market confidence and to maximize shareholder value. In order to fulfil its objective, the management of the Company monitors the return on capital as well as the level of dividends to ordinary shareholders.


Mar 31, 2016

Company overview

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

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

Basis for preparation of financial statements

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

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

Use of estimates

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

1.1 Revenue recognition

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

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

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

Interest income is recognized on time proportion basis.

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

1.2 Borrowing costs

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

1.3 Current-non-current classification

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

Assets

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

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

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

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

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

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

Liabilities

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

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

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

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

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

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

Operating cycle

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

1.4 Fixed assets

Tangible fixed assets:

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

Intangible fixed assets:

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

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

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

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

1.5 Depreciation and amortization :

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

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

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

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

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

1.6 Impairment of fixed assets

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

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

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

1.7 Investments

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

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

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

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

1.8 Inventories

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

1.9 Leases

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

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

1.10 Earnings per share

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

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

1.11 Foreign currency transactions

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

b. Derivative instruments and hedge accounting

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

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

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

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

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

c. Translation of foreign operations

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

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

1.12 Employee benefits

i) Post-employment benefit plans Defined benefit plan

The Company''s gratuity scheme is a defined benefit plan. For defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with independent actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested or amortised on a straight-line basis over the average period until the benefits become vested.

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

Defined contribution plan

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

Compensated absences

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

ii) Other employee benefits

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

1.13 Accounting for taxes on income

Income-tax

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

Deferred tax

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

Minimum Alternate Tax

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

1.14 Provisions, Contingent liabilities and Contingent assets

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

No provision is recognized for -

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

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

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

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

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

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

Warranty

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

1.15 Research and development

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

1.16 Employee stock option

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


Mar 31, 2015

Basis for preparation of financial statements

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

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

Use of estimates

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

1.1 Revenue recognition

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

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

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

Interest income is recognized on time proportion basis.

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

1.2 Borrowing costs

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

1.3 Current-non-current classification

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

Assets

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

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

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

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

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

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

Liabilities

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

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

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

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

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

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

Operating cycle

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

1.4 Fixed assets

Tangible fixed assets:

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

Intangible fixed assets:

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

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

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

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

1.5 Depreciation and amortization :

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

Type of asset Useful life (Number of years)

Buildings'11 25

Plant and equipment111 4

Office equipment111 10

Owned vehicle111 5

Furniture and fixtures'11 8

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

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

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

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

1.6 Impairment of fixed assets

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

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

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

1.7 Investments

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

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

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

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

1.8 Inventories

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

1.9 Leases

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

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

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

1.10 Earnings per share

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

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

1.11 Foreign currency transactions

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

b. Derivative instruments and hedge accounting

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

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

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

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

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

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

c. Translation of foreign operations

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

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

1.12 Employee benefits

i) Post-employment benefit plans Defined benefit plan

The Company's gratuity scheme is a defined benefit plan. For defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with independent actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested or amortised on a straight-line basis over the average period until the benefits become vested.

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

Defined contribution plan

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

Compensated absences

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

ii) Other employee benefits

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

1.13 Accounting for taxes on income

Income tax

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

Deferred tax

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

Minimum alternate tax

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

1.14 Provisions, Contingent liabilities and Contingent assets

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

No provision is recognized for -

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

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

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

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

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

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

Warranty

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

1.15 Research and development

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

1.16 Employee stock option

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

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

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

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

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

2.6 Also refer note 28

Notes:

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

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

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

Notes:

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

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


Mar 31, 2013

Basis for preparation of financial statements

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

1.1 Revenue recognition

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

Interest income is recognized on time proportion basis.

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

1.2 Borrowing Costs

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

1.3 Trade receivables and advances

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

1.4 Fixed Assets

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

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

1.5 Depreciation / Amortization / Diminution

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

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

1.6 Impairment of Fixed Assets

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

1.7 Investments

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

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

1.8 Leases

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

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

1.9 Earnings per share

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

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

1.10 Foreign currency transactions

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

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

(b) Derivative instruments and hedge accounting

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

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

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

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

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

1.11 Retirement benefits to employees

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

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

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

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

1.12 Accounting for Taxes on Income

Tax expense comprises of current and deferred tax.

(a) Income Tax Provision

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

(b) Deferred Tax Provision

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

1.13 Provisions, Contingent Liabilities and Contingent Assets

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

No Provisions is recognized for -

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

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

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

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

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

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

1.14 Research and Development

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

1.15 Provision for Warranty

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

1.16 Employee Stock Option

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

1.17 Use of Estimates

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


Mar 31, 2012

Basis for preparation of financial statements

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

1.1 Revenue recognition

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

Interest income is recognized on time proportion basis

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

1.2 Borrowing Costs

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

1.3 Trade receivables and advances:

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

1.4 Fixed Assets

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

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

1.5 Depreciation/ Amortization/ Diminution

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

- Certain Buildings - 7.5%

- Plant and Equipment (Computers) - 25%

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

- Certain Furniture and Fixtures - 12.5%

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

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

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

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

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

1.6 Impairment of Fixed Assets

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

1.7 Investments

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

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

1.8 Leases

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

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

1.9 Earnings per share

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

1.10 Foreign currency transactions

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

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

(b) Derivative instruments and hedge accounting

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

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

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

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

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

1.11 Retirement benefits to employees

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

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

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

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

1.12 Accounting for Taxes on Income

Tax expense comprises current and deferred tax.

(a) Income Tax Provision

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

(b) Deferred Tax Provision

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

1.13 Provisions, Contingent Liabilities and Contingent Assets

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

No Provisions is recognized for -

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

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

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

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

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

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

1.14 Provision for Warranty:

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

1.15 Employee Stock Option:

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

1.16 Use of Estimates:

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


Mar 31, 2011

Company Overview

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

1. Significant Accounting Policies

Basis for preparation of financial statements

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

Use of Estimates

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

1.1 Revenue recognition

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

Interest income is recognized on time proportion basis.

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

1.2 Expenditure

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

a) Borrowing Costs

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

b) Provision for Doubtful Debts

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

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

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

b) Intangible Assets

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

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

c) Capital Work-in-Progress

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

1.4 Depreciation/Amortization

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

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

- Leasehold land - Amortized over the lease period.

- Buildings - 1.63%

- Buildings (Hinjewadi) - 7.50%

- Plant and machinery

- Office equipments - 4.75%

- Office equipments (Hinjewadi) - 10.00%

- Electrical systems - 33.33%

- Electrical systems (Hinjewadi) - 10.00%

- Computers - 25.00%

(including software and peripherals)

- Furniture and fittings - 6.33%

Furniture and fittings (Hinjewadi) - 12.50%

- Vehicles - 9.50%

- Vehicles on lease - Amortized over the lease period

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

1.5 Goodwill

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

1.6 Impairment of Fixed Assets

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

1.7 Investments

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

1.8 Leases

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

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

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

1.9 Earnings per share

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

1.10 Foreign currency transactions

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

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

b) Derivative instruments and hedge accounting

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

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

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

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

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

1.11 Retirement benefits to employees

Gratuity:

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

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

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

Provident Fund:

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

Leave Accrual:

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

1.12 Accounting for Taxes on Income

a) Income Tax Provision

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

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

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

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

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

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

b) Deferred Tax Provision

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

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

In respect of unabsorbed depreciation and carry forward losses, deferred tax assets are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available to realize such assets. In other situations, deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realize these assets.

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

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

1.13 Provisions, Contingent Liabilities and Contingent Assets

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

No Provisions is recognized for -

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

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

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

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

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

1.14 Research and Development

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

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

2.7 Capital Commitments:

a) Tangible Assets

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

b) Intangible Assets

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


Mar 31, 2010

Basis for preparation of financial statements

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

Use of Estimates

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

1.1 Revenue recognition

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

Interest income is recognized on time proportion basis.

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

1.2 Expenditure

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

a) Borrowing Costs

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

b) Provision for Doubtful Debts

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

1.3 Fixed Assets, Intangible Assets and Capital Work in Progress

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

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

b) Intangible Assets

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

1.4 Depreciation/Amortization

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

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

1.5 Goodwill

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

1.6 Impairment of Fixed Assets

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

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

1.7 Investments

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

1.8 Leases

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

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

1.9 Foreign currency transactions

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

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

b) Derivative instruments and hedge accounting

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

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

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

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

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

1.10 Retirement benefits to employees

Gratuity

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

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

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

Provident Fund

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

Leave Accrual

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

1.11 Accounting for Taxes on Income

a) Income Tax Provision

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

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

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

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

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

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

b) Deferred Tax Provision

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

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

In the event of unabsorbed depreciation and carry forward losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient future taxable income will be available to realize such assets. In other situations, deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realize these assets.

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

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

1.12 Provisions, Contingent Liabilities and Contingent Assets

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

No Provisions is recognized for -

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

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

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

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

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

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

2.7 Capital Commitments:

a. Tangible Assets

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

b. Intangible Assets

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

Find IFSC