Mar 31, 2023
A. SIGNIFICANT ACCOUNTING POLICIES1. Corporate information
Tata Elxsi Limited ("the Company") is a public limited company incorporated under the provisions of the Companies Act applicable in India in the year 1989 and domiciled in India. The Company has its registered office in Bengaluru, Karnataka, India. The shares of the Company are listed on the BSE and National Stock Exchange in India.
The Company provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry.
The Company is head quartered in Bengaluru, and operates through delivery centers in Bengaluru, Chennai, Delhi, Hyderabad, Kozhikode, Pune, Mumbai and Thiruvananthapuram.
The Companyâs operations are located in multiple cities in India, and in multiple international locations including United Kingdom (UK), United States of America (USA), France, Germany, Japan, Ireland, Netherlands, South Africa, Canada, Spain, Dubai, Malaysia, Poland and Italy.
2. Basis of preparation of financial statements.2.1 Statement of compliance
These financial statements are prepared in accordance with Indian Accounting Standards ("Ind ASâ), the provisions of the Companies Act, 2013 ("the Companies Actâ), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBIâ). The Ind AS are prescribed under Section 133 of the Companies Act read with the Companies (Indian Accounting Standards) Rules as amended from time to time.
These financial statements were authorised
for issue by the Board of Directors on May 18, 2023
2.2 Basis of preparation and presentation
These financial statements have been prepared on a historical cost convention and on an accrual basis of accounting, except for the following assets and liabilities which have been measured at fair value:
⢠Derivative financial instruments
⢠Fair value of plan assets less present value of defined benefit obligations
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities have been classified as current and non-current as per the Companyâs normal operating cycle. Based on the nature of services rendered to customers and time elapsed between deployment of resources and the realisation in cash and cash equivalents of the consideration for such services rendered, the Company has considered an operating cycle of 12 months The statement of cash flows have been prepared under the indirect method.
All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.
2.3 Use of estimates and judgement
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented. Estimates and underlying assumptions are reviewed on an ongoing basis. Appropriate change in estimates are made as management become aware of changes in circumstances surrounding the estimates. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
The Company uses the following critical accounting estimates in preparation of its financial statements:
The Company uses the percentage of completion method using the input (cost expended) method to measure progress towards completion in respect of fixed price contracts. Percentage of completion method relies on estimates of total expected contract revenue and costs. This method is followed where reasonable dependable estimate of the revenue and costs applicable to various elements of the contract can be made. Key factors reviewed to estimate the future costs to complete include estimates of future manpower costs and productivity efficiency. These estimates are assessed continually during the term of the contracts and the recognised revenue and profit are subject to revision as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes probable.
Fair value measurement of financial instruments
When the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Provision for income tax and deferred tax assets
The Company uses estimates and judgements based on the relevant rulings in the areas of allocation of revenue, costs, allowances and disallowances which is exercised while determining the provision for income tax. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
The Companyâs major tax jurisdictions are India, UK and the USA. The Company also files tax returns in other foreign jurisdictions. Significant judgment is involved in determining the provision for income taxes, including the amount expected to be paid or
recovered in connection with uncertain tax positions.
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note 2.9.
Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits and compensated absences) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognised in the financial statements. A contingent asset is neither recognised nor disclosed in the financial statements. (Refer Note 33)
The accounting of employee benefit plans in the nature of defined benefit requires the Company to use assumptions. These assumptions have been explained under employee benefits note.
Cash dividend to the equity holders of the Company
The Company recognises a liability to make cash distributions to equity holders of the Company when the distribution is authorised, and the distribution is no longer at the discretion of the Company. Final dividends on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgement. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate.
The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the non-cancellable period of a lease.
The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
The Company earns revenue primarily from providing information technology, engineering design, systems integration and support services, sale of licenses and maintenance of equipment. The Company recognises revenue as follows Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects
to receive in exchange for those products or
services.
⢠Revenue from time and material and job contracts is recognised on output basis measured by units delivered, efforts expended, etc.
⢠Revenue related to fixed price maintenance and support services contracts where the Company is ready to provide services is recognised based on time elapsed mode and revenue is straight lined over the period of performance.
⢠In respect of other fixed-price contracts, revenue is recognised using percentage-of-completion method (''POC methodâ) of accounting with contract cost incurred determining the degree of completion of the performance obligation. The contract cost used in computing the revenues include cost of fulfilling warranty obligations.
⢠Revenue from the sale of distinct internally developed software and manufactured systems and third party software is recognised upfront at the point in time when the system / software is delivered to the customer. In cases where implementation and / or customisation services rendered significantly modifies or customises the software, these services and software are accounted for as a single performance obligation and revenue is recognised over time on a POC method.
⢠Revenue from the sale of distinct third party hardware is recognised at the point in time when control is transferred to the customer.
⢠The solutions offered by the Company may include supply of third-party equipment or software. In such cases, revenue for supply of such third party products are recorded at gross or net basis depending on whether the Company is acting as the principal or as an agent of the customer. The Company recognises revenue in the gross amount of consideration when it is acting as a principal and at net amount of consideration when it is acting as an agent.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Unearned and deferred revenue ("contract liabilityâ) is recognised when there is billings is in excess of revenues.
In accordance with Ind AS 37 , the Company recognises an onerous contract provision when the unavoidable costs of meeting the obligations under a contract exceed the economic benefits to be received.
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a
new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation, a cumulative adjustment is accounted for. The Company disaggregates revenue from contracts with customers by geography and nature of services.
Use of significant judgements in revenue recognition
⢠The Companyâs contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
⢠Judgement is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, service level credits, performance bonuses, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is
reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
⢠The Company uses judgement to determine an appropriate standalone selling price for a performance obligation. The Company allocates the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, the Company uses the expected cost plus margin approach to allocate the transaction price to each distinct performance obligation.
⢠The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
⢠Contract fulfilment costs are generally expensed as incurred except for certain software licence costs which meet the criteria for capitalisation. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations
and whether costs are expected to be recovered (Refer note 8).
I nterest income is accounted for using the effective interest method.
Export benefits are accounted for, in the year of exports, based on eligibility and when there is no uncertainty in receiving the same. Foreign currency gains and losses are reported on net basis
2.6 Leases Company as a lessee
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
⢠the contract involves the use of an identified asset;
⢠the Company has the right to obtain substantially all the economic benefits from use of the asset throughout the period of use; and
⢠the Company has the right to direct the use of the asset
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate standalone price of the non-lease components. The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception
shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the
Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.
The Company recognises the amount of the re-measurement of lease liability as an adjustment to the right-of-use asset. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in statement of profit and loss.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of all assets that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
The functional currency of the Company is Indian Rupee.
I ncome and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not translated.
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognised in statement of profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
Current income tax for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the taxable income for that period and reflects the uncertainty related to income tax, if any. The tax rates and tax laws used to compute the amount are those that are enacted by the balance sheet date. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognised amounts and where it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The current income tax expense includes income taxes payable by the Company and its branches in India and overseas. The current tax payable by the Company in India is Indian income tax payable for their worldwide income after taking credit for tax relief available for export operations in Special Economic Zones (SEZs).
Current income tax payable by overseas branches of the Company is computed in accordance with the tax laws applicable in the jurisdiction in which the respective
branch operates. The taxes paid are generally available for set off against the Indian income tax liability of the Companyâs worldwide income.
Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
Deferred income tax is recognised using the balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred income tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
Inventory comprise of computer systems and software, components and spares. Components and spares are valued at lower of cost and net realisable value.
Cost is determined on the basis of specific identification method.
Computer systems and software, components and spares intended for customer support are written off over the effective life of the systems maintained, as estimated by the management.
Financial assets and liabilities are recognised 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.
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short- term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets 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
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset gives 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
Financial assets are measured at fair value through profit or loss (''FVTPLââ) unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
Derivative financial instruments
The Company is exposed to foreign currency fluctuations on foreign currency assets and liabilities. 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 counterparty for these contracts is generally a bank. Derivatives are recognised and measured at fair value. Attributable transaction costs are recognised in the statement of profit and loss as expenses. Subsequent changes in fair value of such derivative instruments are recognised in profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amounts are presented in the standalone balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognised.
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of
the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
2.12 Property, plant and equipment
Property, plant and equipment are stated at costs less accumulated depreciation (other than freehold land) and impairment loss, if any.
The cost includes purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
The Company identifies and determines cost of each component / part of property, plant and equipment separately, if the component/ part has a cost which is significant to the total cost of the property, plant and equipment and has useful life that is materially different from that of the remaining asset.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use. Gains or losses arising from de-recognition of property, plant and equipment and intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of property, plant and equipment and are recognised in the statement of profit and
loss when the property, plant and equipment is derecognised.
Depreciation is provided for property, plant and equipment on the straight-line basis over the estimated useful life from the date the assets are ready for intended use. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful life on a straightline basis of amortisation is mentioned below:
Type of asset |
Useful lives |
Buildings |
30 years * |
Plant and equipment |
6 years * |
Computer equipment |
3 to 6 years |
Air conditioners |
6 years * |
Vehicles |
8 years |
Office equipment |
5 years |
Electrical installations |
6 years * |
Furniture and fixtures |
6 years * |
* The Management believes that the useful lives as given below best represents the period over which the management expects to use these assets based on an internal assessment and technical evaluation where necessary. Hence, the useful lives of some of these assets is different from the useful lives as prescribed under part C of Schedule II of the Companies Act.
Leasehold improvements are depreciated over the lower of the lease term and their useful lives.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date are disclosed under ''other assetsâ. The cost of property, plant and equipment not ready to use before the balance sheet date is disclosed under ''Capital work in progressâ.
Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
Amount paid towards the acquisition of property, plant and equipment outstanding as of each reporting date and the cost of property, plant and equipment not ready for intended use before such date are disclosed under capital work-in-progress.
The capital work- in-progress is carried at cost, comprising direct cost, related incidental expenses and attributable interest.
Intangible assets purchased are measured at cost as of the date of acquisition, as applicable, less accumulated amortisation and accumulated impairment, if any. Intangible assets are amortised on a straight line basis over their estimated useful lives from the date that they are available for use. The estimated useful lives of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any.
The estimated useful life on a straightline basis of amortisation is mentioned below:
Type of asset |
Useful lives |
Computer Software |
6 years |
Employee benefits include contribution to provident fund, superannuation fund, gratuity fund, compensated absences, pension and employee state insurance scheme.
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits.
Benefits such as salaries, wages etc. and the expected cost of ex-gratia are recognised in the period in which the employee renders the related service. A liability is recognised for the amount expected to be paid when there is a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Gratuity and Pension are defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations, being carried out at the date of each balance sheet date. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Past service cost, both vested and unvested, is recognised as an expense at the earlier of (a) when the plan amendment or curtailment occurs; and (b) when the entity recognises related restructuring costs or termination benefits.
The retirement benefit obligations recognised in the balance sheet represents the present value of the defined obligations 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. Under a defined benefit plan, it is the Companyâs obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on the Company.
Contributions to defined contribution plans
like provident fund and superannuation, funds are recognised as expense when employees have rendered services entitling them to such benefits.
Compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as undiscounted liability at the balance sheet date. Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as an actuarially determined liability at the present value of the defined benefit obligation at the balance sheet date. Actuarial gains/losses are immediately taken to the standalone statement of profit and loss.
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the year. The Company did not have any potentially dilutive securities in any of the years presented.
2.16 ImpairmentFinancial assets (other than those carried at fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Non-financial assetsProperty, plant and equipment and Intangible assets
Property, plant and equipment and
intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss.
Ministry of Corporate Affairs ("MCAâ) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from April 1, 2023, as below:
Ind AS 1 - Presentation of Financial Statements
The amendments require companies to
disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected to influence decisions of primary users of general purpose financial statements. The Company does not expect this amendment to have any significant impact in its financial statements.
The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company is evaluating the impact, if any, in its financial statements.
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertaintyâ. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company does not expect this amendment to haveany significant impact in its financial statements.
Mar 31, 2022
A. SIGNIFICANT ACCOUNTING POLICIES1. Corporate information
Tata Elxsi Limited ("the Companyâ) is a public limited Company incorporated in India in the year 1989 and domiciled in India. The Company has its registered office in Bengaluru, Karnataka, India. It has its listings on the Bombay Stock exchange and National Stock Exchange in India.
The Company provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry.
The Company is head quartered in Bengaluru, and operates through delivery centers in Bengaluru, Chennai, pune, Mumbai and Thiruvananthapuram. The Companyâs operations are located in multiple cities in India, and in multiple international locations including USA, UK, France, Germany, Japan, Ireland, Netherlands, South Africa, portugal, Canada, and Spain.
The Board of Directors of the Company at their meeting held on October 14, 2020 have approved the alteration to the Articles of Association of the Company. The same has been approved by the shareholders through a special resolution passed vide postal ballot effective December 1, 2020, where in, Tata Sons Private Limited shall have the right to nominate 1/3rd (one third) of the total number of Directors (including the Chairman) on the Board. Accordingly, in accordance with provisions of IND AS 110, Consolidated Financial Statements, the Company has become a Subsidiary of Tata Sons Private Limited effective December 1, 2020.
2. BASIS Of PREPARATION Of Financial STATEMENTS.2.1 Statement of compliance.
These financial statements are prepared in accordance with Indian Accounting Standards
("Ind ASâ), the provisions of the Companies Act, 2013 ("the Companies Actâ), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBIâ). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
These financial statements were authorised for issue by the Board of Directors on April 20, 2022.
2.2 Basis of preparation and presentation
These financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.
2.3 Use of estimates and judgement
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
Key sources of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of percentage of completion of contracts and recognition of probable loss, useful lives of property, plant and equipment, provision for income tax and valuation of deferred tax assets, provision for warranty and other provisions and contingent liabilities.
Percentage of completion of contracts
The Company uses the percentage of completion method using the input (cost expended) method to measure progress towards completion in respect of fixed price contracts. percentage of completion method relies on estimates of total expected contract revenue and costs. This method is followed where reasonable dependable estimate of the revenue and costs applicable to various elements of the contract can be made. Key factors reviewed to estimate the future costs to complete include estimates of future manpower costs and productivity efficiency. These estimates are assessed continually during the term of the contracts and the recognised revenue and profit are subject to revision as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes probable.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Provision for income tax and valuation of deferred tax assets
The Companyâs major tax jurisdictions are India, United Kingdom (UK) and the United States of America (USA). The Company also files tax returns in other foreign jurisdictions. Significant judgment is involved in determining the provision for income taxes, including the amount expected to be paid or recovered in connection with uncertain tax positions.
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note 2.9.
Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. provisions (excluding retirement benefits and compensated absences) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognised in the financial statements. A contingent asset is neither recognised nor disclosed in the financial statements. (Refer Note 33)
2.4 Revenue recognition
The Company earns revenue primarily from providing information technology, engineering design, systems integration and support services, sale of licenses and maintenance of equipment. The Company recognises revenue as follows Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects
to receive in exchange for those products or
services.
⢠Revenue from time and material and job contracts is recognised on output basis measured by units delivered, efforts expended, etc.
⢠Revenue related to fixed price maintenance and support services contracts where the Company is ready to provide services is recognised based on time elapsed mode and revenue is straight lined over the period of performance.
⢠In respect of other fixed-price contracts, revenue is recognised using percentage-of-completion method (''POC methodâ) of accounting with contract cost incurred determining the degree of completion of the performance obligation. The contract cost used in computing the revenues include cost of fulfilling warranty obligations.
⢠Revenue from the sale of distinct internally developed software and manufactured systems and third party software is recognised upfront at the point in time when the system / software is delivered to the customer. In cases where implementation and / or customisation services rendered significantly modifies or customises the software, these services and software are accounted for as a single performance obligation and revenue is recognised over time on a pOC method.
⢠Revenue from the sale of distinct third party hardware is recognised at the point in time when control is transferred to the customer.
⢠The solutions offered by the Company may include supply of third-party equipment or software. In such cases, revenue for supply of such third party products are recorded at gross or net basis depending
on whether the Company is acting as the principal or as an agent of the customer. The Company recognises revenue in the gross amount of consideration when it is acting as a principal and at net amount of consideration when it is acting as an agent.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Unearned and deferred revenue ("contract liabilityâ) is recognised when there is billings in excess of revenues.
I n accordance with Ind AS 37, the Company recognises an onerous contract provision when the unavoidable costs of meeting the obligations under a contract exceed the economic benefits to be received.
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation a cumulative adjustment is accounted for. The Company disaggregates revenue from contracts with customers by geography and nature of services.
Use of significant judgements in revenue
recognition
⢠The Companyâs contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
⢠Judgement is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, service level credits, performance bonuses, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
⢠The Company uses judgement to determine an appropriate standalone
selling price for a performance obligation. The Company allocates the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, the Company uses the expected cost plus margin approach to allocate the transaction price to each distinct performance obligation.
⢠The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
⢠Contract fulfilment costs are generally expensed as incurred except for certain software licence costs which meet the criteria for capitalisation. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered (refer note 8).
I nterest income is accounted for using the effective interest method.
Export benefits are accounted for, in the year of exports, based on eligibility and when there is no uncertainty in receiving the same. Foreign currency gains and losses are reported on net basis.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate standalone price of the non-lease components.
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised insubstance fixed lease payments.
The Company recognises the amount of the re-measurement of lease liability as an adjustment to the right-of-use asset. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in statement of profit and loss.
The functional currency of the Company is Indian Rupee.
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not translated.
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognised in statement of profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
The current income tax expense includes income taxes payable by the Company and its branches in India and overseas. The current tax payable by the Company in India is Indian income tax payable for their worldwide income after taking credit for tax relief available for export operations in Special Economic Zones (SEZs).
Current income tax payable by overseas branches of the Company is computed in accordance with the tax laws applicable in the jurisdiction in which the respective branch operates. The taxes paid are generally available for set off against the Indian income tax liability of the Companyâs worldwide income. Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
Deferred income tax is recognised using the balance sheet approach. Deferred income
tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred income tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in
the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
Inventory comprise of computer systems and software, components and spares. Components and spares are valued at lower of cost and net realisable value.
Cost is determined on the basis of specific identification method.
Computer systems and software, components and spares intended for customer support are written off over the effective life of the systems maintained, as estimated by the management.
Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. 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.
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short- term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets 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
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset gives 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
Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in profit or loss.
financial liabilities at fair value through profit or loss
Financial liabilities are classified as measured at amortised cost or FVTpL. A financial liability is classified as at FVTpL if it is classified as held for trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTpL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
Derecognition Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognised.
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
2.12 Property, plant and equipment
property, plant and equipment are stated at costs less accumulated depreciation (other than freehold land) and impairment loss, if any.
The cost includes purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance. Depreciation is provided for property, plant and equipment on the straight-line basis over the estimated useful life from the date the assets are ready for intended use. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
*The Management believes that the useful lives as given below best represents the period over which the management expects to use these assets based on an internal assessment and technical evaluation where necessary. Hence, the useful lives of some of these assets is different from the useful lives as prescribed under part C of Schedule II of the Act.
The estimated useful life on a straightline basis of amortisation is mentioned below:
Type of asset |
Useful lives |
Buildings |
30 years * |
plant and equipment |
6 years * |
Computer equipment |
3 to 6 years |
Air conditioners |
6 years * |
Vehicles |
8 years |
Office equipment |
5 years |
Electrical installations |
6 years * |
Furniture and fixtures |
6 years * |
Leasehold improvements are depreciated over the lower of the lease term and their useful lives.
capital work-in-progress:
Amount paid towards the acquisition of property, plant and equipment outstanding as of each reporting date and the cost of property, plant and equipment not ready for intended use before such date are disclosed under capital work-in-progress.
The capital work- in-progress is carried at cost, comprising direct cost, related incidental expenses and attributable interest.
Intangible assets purchased are measured at cost as of the date of acquisition, as applicable, less accumulated amortisation and accumulated impairment, if any. Intangible assets are amortised on a straight line basis over their estimated useful lives from the date that they are available for use. The estimated useful lives of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any.
The estimated useful life on a straightline basis of amortisation is mentioned below:
Type of asset |
Useful lives |
Technical Know-how |
3 years |
Computer Software |
6 years |
Intangible assets under development.
Expenditure on research and development eligible for capitalisation are carried as intangible assets under development where such assets are not yet ready for their intended use.
Employee benefits include contribution to provident fund, superannuation fund, gratuity fund, compensated absences, pension and employee state insurance scheme.
Defined benefit plans
Gratuity and pension are defined benefit plans, the cost of providing benefits is determined using the projected unit Credit Method, with actuarial valuations, being carried out at the date of each statement of financial position. The retirement benefit obligations recognised in the statement of financial position represents the present value of the defined obligations 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. under a defined benefit plan, it is the Companyâs obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on the Company.
Defined contribution plans
Contributions to defined contribution plans like provident fund and superannuation, funds are recognised as expense when employees have rendered services entitling them to such benefits.
Compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as undiscounted liability at the balance sheet date. Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as an actuarially determined liability at the present value of the defined benefit obligation at the balance sheet date.
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management reporting structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilitiesâ.
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.
2.17 Impairment(i) Financial assets (other than a fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is
impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Property, plant and equipment and Intangible assets
property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGu) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGu) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss.
Based on the nature of products/ activities of the company and the normal time between acquisition of assets and their realisation in cash and cash equivalents, the company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
2.19 Impact of COVID-19 (pandemic)
The Company has taken into account all the possible impacts of COVID-19 in preparation of these financial statements, including but not limited to its assessment of, liquidity and going concern assumption, recoverable values of its financial and non-financial assets, impact on revenue recognition owing to changes in cost budgets of fixed price contracts, impact on leases and impact on effectiveness of its hedges. The Company has carried out this assessment based on available internal and external sources of information upto the date of approval of these financial statements and believes that the impact of COVID-19 is not material to these financial statements and expects to recover the carrying amount of its assets. The impact of COVID-19 on the financial statements may differ from that estimated as at the date of approval of these financial statements owing to the nature and duration of COVID-19.
Ministry of Corporate Affairs ("MCAâ) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1st, 2022, as below:
Ind AS 16 - Proceeds before intended use
The amendments mainly prohibit an entity from deducting from the cost of property, plant and equipment amounts received from selling items produced
while the company is preparing the asset for its intended use. Instead, an entity will recognise such sales proceeds and related cost in profit or loss. The Company does not expect the amendments to have any impact in its recognition of its property, plant and equipment in its financial statements.
Ind AS 37 - Onerous Contracts - Costs of Fulfilling a Contract
The amendments specify that that the ''cost of fulfillingâ a contract comprises the ''costs that relate directly to the contractâ. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts. The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
I nd AS 109 - Annual Improvements to Ind AS (2021)
The amendment clarifies which fees an entity includes when it applies the ''10 percentâ test of Ind AS 109 in assessing whether to derecognise a financial liability. The Company does not expect the amendment to have any significant impact in its financial statements.
I nd AS 106 - Annual Improvements to Ind AS (2021)
The amendments remove the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives were described in that illustration. The Company does not expect the amendment to have any significant impact in its financial statements.
Mar 31, 2021
A. Significant accounting policies1. Corporate information
Tata Elxsi Limited (âthe Companyâ) is a public limited company incorporated in India in the year 1989 and domiciled in India. The Company has its registered office in Bengaluru, Karnataka, India. It has its listings on the Bombay Stock exchange and National Stock Exchange in India.
The Company provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry.
The Company is head quartered in Bengaluru, and operates through delivery centers in Bengaluru, Chennai, Pune, Mumbai and Thiruvananthapuram.
The Company''s operations are located in multiple cities in India, and in multiple international locations including USA, UK, France, Germany, Japan, Ireland, Netherlands, South Africa, Portugal, Canada, and Spain.
The Board of Directors of the Company at their meeting held on October 14, 2020 have approved the alteration to the Articles of Association of the Company. The same has been approved by the shareholders through a special resolution passed vide postal ballot effective December 1, 2020, where in, Tata Sons Private Limited shall have the right to nominate 1/3rd (one third) of the total number of Directors (including the Chairman) on the Board. Accordingly, in accordance with provisions of IND AS 110, Consolidated Financial Statements, the Company has become a Subsidiary of Tata Sons Private Limited effective December 1, 2020.
2. Basis of preparation of financial statements.2.1 Statement of compliance
These financial statements are prepared in accordance with Indian Accounting Standards (âInd ASâ), the provisions of the Companies Act, 2013 (âthe Companies Actâ), as applicable and guidelines issued by the Securities and Exchange Board of India (âSEBIâ). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
These financial statements were authorized for issue by the Board of Directors on April 22, 2021.
2.2 Basis of preparation and presentation
These financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.
2.3 Use of estimates and judgement
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.
Key sources of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of percentage of completion of contracts and recognition of probable loss, useful lives of property, plant and equipment, provision for income tax and valuation of deferred tax assets, provision for warranty and other provisions and contingent liabilities.
Percentage of completion of contracts
The Company uses the percentage of completion method using the input (cost expended) method to measure progress towards completion in respect
of fixed price contracts. Percentage of completion method relies on estimates of total expected contract revenue and costs. This method is followed where reasonable dependable estimate of the revenue and costs applicable to various elements of the contract can be made. Key factors reviewed to estimate the future costs to complete include estimates of future manpower costs and productivity efficiency. These estimates are assessed continually during the term of the contracts and the recognized revenue and profit are subject to revision as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes probable.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Provision for income tax and valuation of deferred tax assets
The Company''s major tax jurisdictions are India, United Kingdom (UK) and the United States of America (USA). The Company also files tax returns in other foreign jurisdictions. Significant judgment is involved in determining the provision for income taxes, including the amount expected to be paid or recovered in connection with uncertain tax positions.
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note 2.9.
Provisions and contingent liabilities
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits and compensated absences) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognized in the financial statements. A contingent asset is neither recognized nor disclosed in the financial statements. (Refer Note 33)
The Company earns revenue primarily from providing information technology, engineering design, systems integration and support services, sale of licenses and maintenance of equipment. The Company recognizes revenue as follows
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services.
⢠Revenue from time and material and job contracts is recognised on output basis measured by units delivered, efforts expended, etc.
⢠Revenue related to fixed price maintenance and support services contracts where the Company is ready to provide services is recognised based on time elapsed mode and revenue is straight lined over the period of performance.
⢠In respect of other fixed-price contracts, revenue is recognised using percentage-of-completion method (âPOC method'') of accounting with contract cost incurred determining the degree of completion of the performance obligation. The contract cost used in computing the revenues include cost of fulfilling warranty obligations.
⢠Revenue from the sale of distinct internally developed software and manufactured systems and third party software is recognised upfront at the point in time when the system / software is delivered to the customer. In cases where implementation and / or customisation services rendered significantly modifies or customises the software, these services and software are accounted for as a single performance obligation and revenue is recognised over time on a POC method.
⢠Revenue from the sale of distinct third party hardware is recognised at the point in time when control is transferred to the customer.
⢠The solutions offered by the Company may include supply of third-party equipment or software. In such cases, revenue for supply of such third party products are recorded at gross or net basis depending on whether the Company is acting as the principal or as an agent of the
customer. The Company recognises revenue in the gross amount of consideration when it is acting as a principal and at net amount of consideration when it is acting as an agent.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Unearned and deferred revenue (âcontract liabilityâ) is recognised when there is billings in excess of revenues.
In accordance with Ind AS 37, the Company recognises an onerous contract provision when the unavoidable costs of meeting the obligations under a contract exceed the economic benefits to be received.
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation a cumulative adjustment is accounted for. The Company disaggregates revenue from contracts with customers by geography and nature of services.
Use of significant judgements in revenue recognition
⢠The Company''s contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
⢠Judgement is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, service level credits, performance bonuses, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
⢠The Company uses judgement to determine an appropriate standalone selling price for a performance obligation. The Company allocates the transaction price to each performance obligation on the basis of the relative standalone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, the Company uses the expected cost plus margin approach to allocate the transaction price to each distinct performance obligation.
⢠The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
⢠Contract fulfilment costs are generally expensed as incurred except for certain software licence costs which meet the criteria
for capitalisation. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered (refer note 8).
Interest income is accounted for using the effective interest method.
Export benefits are accounted for, in the year of exports, based on eligibility and when there is no uncertainty in receiving the same.
Foreign currency gains and losses are reported on net basis.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company accounts for each lease component within the contract as a lease separately from nonlease components of the contract and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straightline method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of
property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.
The Company recognises the amount of the remeasurement of lease liability as an adjustment to the right-of-use asset. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in statement of profit and loss.
Ministry of Corporate Affairs (âMCAâ) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, has notified Ind AS 116 Leases which replaces the existing lease standard, Ind AS 17 leases, and other interpretations. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a single, on-balance sheet lease accounting model for lessees.
The Company has adopted Ind AS 116, effective annual reporting period beginning April 1, 2019 and applied the standard to its leases, modified retrospectively, with the cumulative effect of initially applying the Standard, recognised on the date of initial application (April 1, 2019). Accordingly, the Company has not restated the comparative information. Instead, the cumulative effect of initially applying this standard has been recognised as an adjustment to the opening balance of retained earnings as on April 1, 2019.
For transition, the Company has elected not to apply the requirements of Ind AS 116 leases for which the underlying asset is of low value on a lease-by-lease basis. The Company has used the practical expedient provided by the standard when applying Ind AS 116 to leases previously classified as operating leases under Ind AS 17 and therefore, has not reassessed whether a contract, is or contains a lease, at the date of initial application, relied on its assessment of whether leases are onerous, applying Ind AS 37 immediately before the date of initial application as an alternative to performing an impairment review, excluded initial direct costs from measuring the right of use asset at the date of initial application and used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate at 1 April 2019. The weighted-average rate applied is 8.5% for the leases having tenure of less than 3 years and 11% for those having more than 3 years.
On transition, the Company recognised a lease liability measured at the present value of the remaining lease payments. The right-of-use asset is recognised at its carrying amount as if the standard had been applied since the commencement of the lease, but discounted using the lessee''s incremental borrowing rate as at April 1, 2019. Accordingly, a right-of-use asset of '' 5,285.41 lakhs and a corresponding lease liability of '' 5,777.14 lakhs has been recognized. The cumulative effect on transition in retained earnings net off taxes is a debit of '' 319.90 lakhs. The principal portion of the lease payments and interest thereon have been disclosed under cash flow from financing activities. The lease
payments for operating leases as per Ind AS 17 -Leases, were earlier reported under cash flow from operating activities.
On application of Ind AS 116, the nature of expenses has changed from lease rent in previous periods to depreciation cost for the right-to-use asset, and finance cost for interest accrued on lease liability.
The functional currency of the Company is Indian Rupee.
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognized in the statement of profit and loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not translated.
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognized in statement of profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.
The current income tax expense includes income taxes payable by the Company and its branches in India and overseas. The current tax payable by the Company in India is Indian income tax payable for their worldwide income after taking credit for tax relief available for export operations in Special Economic Zones (SEZs).
Current income tax payable by overseas branches of the Company is computed in accordance with the tax laws applicable in the jurisdiction in which the respective branch operates. The taxes paid are generally available for set off against the Indian income tax liability of the Company''s worldwide income.
Advance taxes and provisions for current income taxes are presented in the balance sheet after offsetting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred income tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set
off against future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
Inventory comprise of computer systems and software, components and spares.
Components and spares are valued at lower of cost and net realizable value.
Cost is determined on the basis of specific identification method.
Computer systems and software, components and spares intended for customer support are written off over the effective life of the systems maintained, as estimated by the management.
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. 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.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are shortterm balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Financial assets at amortized cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business whose objective is to hold these assets 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
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset gives 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
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognized in profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the risks and
rewards of the transferred assets, the transferred assets are not derecognised.
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
2.12 Property, plant and equipment
Property, plant and equipment are stated at costs less accumulated depreciation (other than freehold land) and impairment loss, if any.
The cost includes purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Subsequent expenditure on fixed assets after its purchase / completion is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
Depreciation is provided for property, plant and equipment on the straight-line basis over the estimated useful life from the date the assets are ready for intended use. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
* The Management believes that the useful lives as given below best represents the period over which the management expects to use these assets based on an internal assessment and technical evaluation where necessary. Hence, the useful lives of some of these assets is different from the useful lives as prescribed under part C of Schedule II of the Act.
Type of asset |
Useful lives |
Buildings |
30 years * |
Plant and equipment |
6 years * |
Computer equipment |
3 to 6 years |
Air conditioners |
6 years * |
Vehicles |
8 years |
Office equipment |
5 years |
Electrical installations |
6 years * |
Furniture and fixtures |
6 years * |
The estimated useful life on a straightline basis of amortization is mentioned below:
Leasehold improvements are depreciated over the lower of the lease term and their useful lives.
Amount paid towards the acquisition of property, plant and equipment outstanding as of each reporting date and the cost of property, plant and equipment not ready for intended use before such date are disclosed under capital work-in-progress.
The capital work- in-progress is carried at cost, comprising direct cost, related incidental expenses and attributable interest.
Intangible assets purchased are measured at cost as of the date of acquisition, as applicable, less accumulated amortization and accumulated impairment, if any.
Intangible assets are amortized on a straight line basis over their estimated useful lives from the date that they are available for use.
The estimated useful lives of the intangible assets and the amortization period are reviewed at the end of each financial year and the amortization period is revised to reflect the changed pattern, if any.
The estimated useful life on a straightline basis of amortization is mentioned below:
Type of asset |
Useful lives |
Technical Know-how |
3 years |
Computer Software |
6 years |
Intangible assets under development.
Expenditure on research and development eligible for capitalization are carried as intangible assets
under development where such assets are not yet ready for their intended use.
Employee benefits include contribution to provident fund, superannuation fund, gratuity fund, compensated absences, pension and employee state insurance scheme.
Gratuity and Pension are defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations, being carried out at the date of each statement of financial position. The retirement benefit obligations recognized in the statement of financial position represents the present value of the defined obligations 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. Under a defined benefit plan, it is the Company''s obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on the Company.
Contributions to defined contribution plans like provident fund and superannuation, funds are recognized as expense when employees have rendered services entitling them to such benefits.
Compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as undiscounted liability at the balance sheet date. Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as an actuarially determined liability at the present value of the defined benefit obligation at the balance sheet date.
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management reporting structure. The operating segments are the segments for which separate financial information is available
and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue / expenses / assets / liabilitiesâ.
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.
2.17 Impairment(i) Financial assets (other than a fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
(ii) Non-financial assetsProperty, plant and equipment and Intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
Based on the nature of products/activities of the company and the normal time between acquisition of assets and their realisation in cash and cash equivalents, the company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
On March 24, 2021, the Ministry of Corporate Affairs (âMCAâ) through a notification, amended Schedule III of the Companies Act, 2013. The amendments revise Division I, II and III of Schedule III and are applicable from April 1, 2021. Key amendments relating to Division II which relate to companies whose financial statements are required to comply with Companies (Indian Accounting Standards) Rules 2015 are:
- Certain additional disclosures in the statement of changes in equity such as changes in equity share capital due to prior period errors and restated balances at the beginning of the current reporting period.
- Specified format for disclosure of shareholding of promoters.
- Specified format for ageing schedule of trade receivables, trade payables, capital
work-in-progress and intangible asset under development.
- Specific disclosure under âadditional regulatory requirement'' such as compliance with approved schemes of arrangements, compliance with number of layers of companies, title deeds of immovable property not held in name of company, loans and advances to promoters, directors, key managerial personnel (KMP) and related parties, details of benami property held etc.
- Additional disclosures relating to Corporate Social Responsibility (CSR), undisclosed income and crypto or virtual currency specified under the head âadditional information'' in the notes forming part of the standalone financial statements.
The amendments are extensive and the Company will evaluate the same to give effect to them as required by law.
Mar 31, 2019
A. SIGNIFICANT ACCOUNTING POLICIES
1. Corporate information
The Company is a public limited company incorporated in India in the year 1989 and domiciled in India. The Company has its registered office in Bengaluru, Karnataka, India. It has its listings on the Bombay Stock Exchange and National Stock Exchange in India.
The Company provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry.
The Company is headquartered in Bengaluru, and operates through delivery centers in Bengaluru, Chennai, Pune, Mumbai and Thiruvananthapuram.
The Company''s operations are located in multiple cities in India, and in multiple international locations including USA, UK, France, Germany, Japan, Ireland, Netherlands, South Africa, Portugal, Canada, and Spain.
2. Basis of preparation of financial statements.
2.1 Statement of compliance
These financial statements are prepared in accordance with Indian Accounting Standards ("Ind AS"), the provisions of the Companies Act, 2013 ("the Companies Act"), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBI"). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
These financial statements were authorized for issue by the Board of Directors on April 24, 2019.
2.2 Basis of preparation and presentation
These financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.
2.3 Use of estimates and judgement
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.
Key sources of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of percentage of completion of contracts and recognition of probable loss, useful lives of property, plant and equipment, provision for income tax and valuation of deferred tax assets, provision for warranty and other provisions and contingent liabilities.
Percentage of completion of contracts
The Company uses the percentage of completion method using the input (cost expended) method to measure progress towards completion in respect of fixed price contracts. Percentage of completion method relies on estimates of total expected contract revenue and costs. This method is followed where reasonable dependable estimate of the revenue and costs applicable to various elements of the contract can be made. Key factors reviewed to estimate the future costs to complete include estimates of future manpower costs and productivity efficiency. These estimates are assessed continually during the term of the contracts and the recognized revenue and profit are subject to revision as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes probable.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Provision for income tax and valuation of deferred tax assets
The Company''s major tax jurisdictions are India, United Kingdom (UK) and Japan. The Company also files tax returns in other foreign jurisdictions. Significant judgment is involved in determining the provision for income taxes, including the amount expected to be paid or recovered in connection with uncertain tax positions.
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note 2.9.
Provision for warranty
As per the terms of the contracts, the Company provides post-contract services / warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past technical estimates.
Provisions (other than provision for warranty) and contingent liabilities
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits and compensated absences) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognized in the financial statements. A contingent asset is neither recognized nor disclosed in the financial statements. (Refer Note 33)
2.4 Revenue recognition
Effective April 1, 2018, the Company has applied Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised. Ind AS 115 replaces Ind AS 18 Revenue and Ind AS 11 Construction Contracts. The Company has adopted Ind AS 115 using the cumulative effect method. The effect of initially applying this standard is recognised at the date of initial application (i.e. April 1, 2018). The standard is applied retrospectively only to contracts that are not completed as at the date of initial application and the comparative information in the statement of profit and loss is not restated - i.e. the comparative information continues to be reported under Ind AS 18 and Ind AS 11. Refer Note No 2.4 significant accounting policies- Revenue recognition in the Annual report of the Company for the year ended March 31,2018 The adoption of the standard did not have any material impact to the financial statements of the Company.
⢠Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services.
⢠Revenue from time and material and job contracts is recognised on output basis measured by units delivered, efforts expended, etc.
⢠Revenue related to fixed price maintenance and support services contracts where the Company is ready to provide services is recognised based on time elapsed mode and revenue is straight lined over the period of performance.
⢠In respect of other fixed-price contracts, revenue is recognised using percentage-of-completion method (''POC method'') of accounting with contract cost incurred determining the degree of completion of the performance obligation. The contract cost used in computing the revenues include cost of fulfilling warranty obligations.
⢠Revenue from the sale of distinct internally developed software and manufactured systems and third party software is recognised upfront at the point in time when the system / software is delivered to the customer. In cases where implementation and / or customisation services rendered significantly modifies or customises the software, these services and software are accounted for as a single performance obligation and revenue is recognised over time on a POC method .
⢠Revenue from the sale of distinct third party hardware is recognised at the point in time when control is transferred to the customer.
⢠The solutions offered by the Company may include supply of third-party equipment or software. In such cases, revenue for supply of such third party products are recorded at gross or net basis depending on whether the Company is acting as the principal or as an agent of the customer. The Company recognises revenue in the gross amount of consideration when it is acting as a principal and at net amount of consideration when it is acting as an agent.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Unearned and deferred revenue ("contract liability") is recognised when there is billings in excess of revenues.
In accordance with Ind AS 37, the Company recognises an onerous contract provision when the unavoidable costs of meeting the obligations under a contract exceed the economic benefits to be received.
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation a cumulative adjustment is accounted for.
The Company disaggregates revenue from contracts with customers by geography and nature of services. Use of significant judgements in revenue recognition
⢠The Company''s contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
⢠Judgement is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, service level credits, performance bonuses, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
⢠The Company uses judgement to determine an appropriate standalone selling price for a performance obligation. The Company allocates the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, the Company uses the expected cost plus margin approach to allocate the transaction price to each distinct performance obligation.
⢠The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
⢠Contract fulfilment costs are generally expensed as incurred except for certain software licence costs which meet the criteria for capitalisation. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered( refer note 8)
2.5 Other income
Interest income is accounted for using the effective interest method.
Export benefits are accounted for, in the year of exports, based on eligibility and when there is no uncertainty in receiving the same.
Foreign currency gains and losses are reported on net basis.
2.6 Leases Finance lease
Assets taken on lease by the Company in its capacity as lessee, where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalized at the inception of the lease at lower of the fair value or the present value of the minimum lease payments and a liability is recognized for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vests with the lessor, are recognized as operating lease. Operating lease payments are recognized on a straight line basis over the lease term, unless the lease agreement explicitly states that increase is on account of inflation in the statement of profit and loss.
2.7 Foreign currency:
The functional currency of the Company is Indian Rupee.
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognized in the statement of profit and loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not translated.
2.8 Taxes on income
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognized in statement of profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.
2.9 Current income taxes
The current income tax expense includes income taxes payable by the Company and its branches in India and overseas. The current tax payable by the Company in India is Indian income tax payable for their worldwide income after taking credit for tax relief available for export operations in Special Economic Zones (SEZs).
Current income tax payable by overseas branches of the Company is computed in accordance with the tax laws applicable in the jurisdiction in which the respective branch operates. The taxes paid are generally available for set off against the Indian income tax liability of the Company''s worldwide income.
Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
Deferred income taxes
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred income tax asset are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
2.10 Inventories
Inventory comprise of computer systems and software, components and spares. Components and spares are valued at lower of cost and net realizable value. Cost is determined on the basis of specific identification method.
Computer systems and software, components and spares intended for customer support are written off over the effective life of the systems maintained, as estimated by the management.
2.11 Financial instruments
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. 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.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short- term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Financial assets at amortized cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business whose objective is to hold these assets 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
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset gives 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
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognized in profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
Derecognition Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
2.12 Property, plant and equipment
Property, plant and equipment are stated at costs less accumulated depreciation (other than freehold land) and impairment loss, if any.
The cost includes purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Subsequent expenditure on fixed assets after its purchase / completion is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
Depreciation is provided for property, plant and equipment on the straight-line basis over the estimated useful life from the date the assets are ready for intended use. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
* The Management believes that the useful lives as given below and in note 2.13, best represents the period over which the management expects to use these assets based on an internal assessment and technical evaluation where necessary. Hence, the useful lives of some of these assets is different from the useful lives as prescribed under part C of Schedule II of the Act.
The estimated useful lives are as mentioned below:
Type of asset |
Method |
Useful lives |
Buildings |
Straight line |
30 years * |
Plant and equipment |
Straight line |
6 years * |
Computer equipment |
Straight line |
3 to 6 years |
Air conditioners |
Straight line |
6 years * |
Vehicles |
Straight line |
8 years |
Type of asset |
Method |
Useful lives |
Office equipment |
Straight line |
5 years |
Electrical installations |
Straight line |
6 years * |
Furniture and fixtures |
Straight line |
6 years * |
Leasehold improvements are depreciated over the lower of the lease term and their useful lives. Capital work-in-progress:
Amount paid towards the acquisition of property, plant and equipment outstanding as of each reporting date and the cost of property, plant and equipment not ready for intended use before such date are disclosed under capital work-in-progress.
The capital work- in-progress is carried at cost, comprising direct cost, related incidental expenses and attributable interest.
2.13 Intangible assets
Intangible assets purchased are measured at cost as of the date of acquisition, as applicable, less accumulated amortization and accumulated impairment, if any.
Intangible assets are amortized on a straight line basis over their estimated useful lives from the date that they are available for use.
The estimated useful lives of the intangible assets and the amortization period are reviewed at the end of each financial year and the amortization period is revised to reflect the changed pattern, if any.
The estimated useful lives are as mentioned below:
Type of asset |
Method |
Useful lives |
Technical Know-how |
Straight line |
3 years * |
Computer Software |
Straight line |
6 years |
Intangible assets under development.
Expenditure on research and development eligible for capitalization are carried as intangible assets under development where such assets are not yet ready for their intended use.
2.14. Employee benefits
Employee benefits include contribution to provident fund, superannuation fund, gratuity fund, compensated absences and employee state insurance scheme.
Defined benefit plans
Gratuity is a defined benefit plan, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations, being carried out at the date of each statement of financial position. The retirement benefit obligations recognized in the statement of financial position represents the present value of the defined obligations 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. Under a defined benefit plan, it is the Company''s obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on the Company.
Defined contribution plans
Contributions to defined contribution plans like provident fund and superannuation, funds are recognized as expense when employees have rendered services entitling them to such benefits.
Compensated absences:
Compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as undiscounted liability at the balance sheet date. Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as an actuarially determined liability at the present value of the defined benefit obligation at the balance sheet date.
2.15 Segment reporting
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management reporting structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities".
2.16 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.
2.17 Impairment
(i) Financial assets (other than a fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
(ii) Non-financial assets
Property, plant and equipment and Intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
2.18 Operating cycle:
Based on the nature of products/activities of the company and the normal time between acquisition of assets and their realisation in cash and cash equivalents, the company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
2.19 Recent Indian Accounting Standards (Ind AS)
Ministry of Corporate Affairs ("MCA") through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, has notified the following new and amendments to Ind AS which the Company has not applied as they are effective from April 1, 2019:
Ind AS 116-Leases
Ind AS 116 will replace the existing leases standard, Ind AS 17 Leases. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a single, on-balance sheet lessee accounting model for lessees. A lessee recognises right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17.
The standard allows for two methods of transition: the full retrospective approach, requires entities to retrospectively apply the new standard to each prior reporting period presented and the entities need to adjust equity at the beginning of the earliest comparative period presented, or the modified retrospective approach, under which the date of initial application of the new leases standard, lessees recognize the cumulative effect of initial application as an adjustment to the opening balance of retained earnings as of annual periods beginning on or after April 1, 2019.
The Company will adopt this standard using modified retrospective method effective April 1, 2019. Accordingly, the Company will not restate comparative information, instead, the cumulative effect of initially applying this Standard will be recognised as an adjustment to the opening balance of retained earnings as on April 1, 2019. On that date, the Company will recognise a lease liability measured at the present value of the remaining lease payments. The right-of-use asset is recognised at its carrying amount as if the standard had been applied since the commencement date, but discounted using the lessee''s incremental borrowing rate as at April 1, 2019. In accordance with the standard, the Company will elect not to apply the requirements of Ind AS 116 to short-term leases and leases for which the underlying asset is of low value.
On transition, the Company will be using the practical expedient provided the standard and therefore, will not reassess whether a contract, is or contains a lease, at the date of initial application.
The Company is in the process of finalising changes to systems and processes to meet the accounting and reporting requirements of the standard.
Based on preliminary assessment, the Company does not expect a significant impact to opening retained earnings on adoption of Ind AS 116. There will be reclassification in the cash flow categories in the statement of cash flows.
Ind AS 12 - Income taxes (amendments relating to income tax consequences of dividend and uncertainty over income tax treatments)
This amendment clarifies that the Company shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. The Company does not expect any impact from this amendment. The amendment does not amend situations where the entity pays a tax on dividend which is effectively a portion of dividends paid to taxation authorities on behalf of shareholders. Such amount paid or payable to taxation authorities continues to be charged to equity as part of dividend, in accordance with Ind AS 12.
The amendment to Appendix C of Ind AS 12 specifies that the amendment is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. It outlines: (1) the entity has to use judgement, to determine whether each tax treatment should be considered separately or whether some can be considered together. The decision should be based on the approach which gives better clarity of the resolution of the uncertainty (2) the entity is to assume that the taxation authority will have full knowledge of all relevant information while examining any amount (3) entity has to consider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates would depend upon the probability. The Company does not expect any significant impact of the amendment on its financial statements.
Ind AS 109 - Financial instruments
The amendments to the above Ind AS relate to the existing requirements regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. The Company does not expect this amendment to have any impact on its financial statements.
Ind AS 19 - Employee benefit
The amendments to the above Ind AS clarify that if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the re-measurement. In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Company does not expect this amendment to have any significant impact on its financial statements.
Ind AS 23 - Borrowing Costs
The amendments to the above Ind AS clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. The Company does not expect any impact from this amendment.
Ind AS 28 - Long-term Interests in Associates and Joint Ventures
The amendments clarify that an entity applies Ind AS 109 Financial Instruments, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. The Company does not currently have any long-term interests in associates and joint ventures.
Ind AS 103 - Business Combinations and Ind AS 111 - Joint Arrangements
The amendments to Ind AS 103 relating to re-measurement clarify that when an entity obtains control of a business that is a joint operation, it re-measures previously held interests in that business. The amendments to Ind AS 111 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not re-measure previously held interests in that business.
Mar 31, 2018
Notes forming part of the financial statements
A. SIGNIFICANT ACCOUNTING POLICIES
1. Corporate information
The Company is a public limited company incorporated in India in the year 1989 and domiciled in India. The Company has its registered office in Bengaluru, Karnataka, India. It has its listings on the Bombay Stock exchange and National Stock Exchange in India.
The Company provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry.
The Company is headquartered in Bengaluru, and operates through delivery centers in Bengaluru, Chennai, Pune, Mumbai and Thiruvananthapuram.
The Company''s operations are located in multiple cities in India, and in multiple international locations including USA, UK, France, Germany, Japan, Ireland, Netherlands, South Africa, Portugal, Canada and Dubai.
2. Basis of preparation of financial statement.
2.1 Statement of compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as "Ind AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 with effect from April 1, 2017. Previous periods have been restated to Ind AS. In accordance with Ind AS 101 First-time Adoption of Indian Accounting Standards, the Company has presented a reconciliation from the presentation of financial statements under Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 ("Previous GAAP") to Ind AS of Shareholders'' equity as at March 31, 2017 and April 1, 2016 and of the comprehensive net income for the year ended March 31, 2017. (Refer note 2.19)
2.2 Basis of preparation and presentation
These financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS), the provisions of the Companies Act, 2013 ("the Companies Actâ), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBI"). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. As these are the Company''s first financial statements prepared in accordance with Ind AS, Ind AS 101, First-Time Adoption of Indian accounting Standards has been applied.
Up to the year ended March 31, 2017, the Company prepared its financial statements in accordance with the requirements of the Indian GAAP ("Previous GAAP"), which included Standards notified under the Companies (Accounting Standards) Rules, 2006. The date of transition to Ind AS is April 1, 2016. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flow of the Company is provided in Note No. 2.19.
All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.
These financial statements were authorized for issue by the Board of Directors on April 26, 2018.
2.3 Use of estimates and judgment
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.
Key source of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of percentage of completion of contracts and recognition of probable loss, useful lives of property, plant and equipment, provision for income tax and valuation of deferred tax assets, provision for warranty and other provisions and contingent liabilities.
Percentage of completion of contracts
The Company uses the percentage of completion method using the input (cost expended) method to measure progress towards completion in respect of fixed price contracts. Percentage of completion method relies on estimates of total expected contract revenue and costs. This method is followed where reasonable dependable estimate of the revenue and costs applicable to various elements of the contract can be made. Key factors reviewed to estimate the future costs to complete include estimates of future manpower costs and productivity efficiency. These estimates are assessed continually during the term of the contracts and the recognized revenue and profit are subject to revision as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes probable.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Provision for income tax and valuation of deferred tax assets
The Company''s major tax jurisdictions are India, United Kingdom (UK) and the United States of America (USA). The Company also files tax returns in other foreign jurisdictions. Significant judgment is involved in determining the provision for income taxes, including the amount expected to be paid or recovered in connection with uncertain tax positions.
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note 2.9.
Provision for warranty
As per the terms of the contracts, the Company provides post-contract services / warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past technical estimates.
Provisions (other than provision for warranty) and contingent liabilities
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits and compensated absences) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognized in the financial statements. A contingent asset is neither recognized nor disclosed in the financial statements. (Refer Note 32)
2.4 Revenue recognition
The Company earns revenue primarily from providing information technology, engineering design, systems integration and support services, sale of licenses and maintenance of equipment. The Company recognizes revenue as follows:
Sale of goods
Revenue from sale of internally developed and third party products which do not require significant modification is recognized upon delivery, which is when the absolute right to use passes to the customer and the Company does not have any material remaining service obligations.
Rendering of services
a) Revenue from services is recognized upon rendering of the services. Revenue from maintenance contracts is recognized over the period of the contracts.
b) Revenue from software development on fixed price, fixed time frame contracts is recognized as per the proportionate or percentage of completion method with related costs incurred determining the degree of completion. Losses on such contracts are recognized when probable. On time and materials contracts, revenue is recognized as the related services are rendered and costs are incurred.
c) In respect of orders procured, for which sales are effected directly to the customers by the vendors, the Company accounts only for the commission, installation and other charges to which it is entitled.
d) Revenue from bundled contracts that involve supplying computer equipment, licensing software and providing services is allocated separately for each element based on their relative fair values.
e) Unbilled revenue represents cost and earnings in excess of billings as at the end of the reporting period.
f) ''Unearned revenue'' represents billing in advance as per contractual terms and advance payments received from customers for whom no services are rendered are presented as ''Advance from customers''.
The Company accounts for volume discounts and pricing incentives to customers by reducing the amount of revenue recognized at the time of revenue recognition.
Revenues are shown net of taxes and applicable discounts and allowances.
2.5 Other income
Interest income is accounted using the effective interest method.
Export benefits are accounted for, in the year of exports, based on eligibility and when there is no uncertainty in receiving the same.
Foreign currency gains and losses are reported on net basis.
2.6 Leases Finance lease
Assets taken on lease by the Company in its capacity as lessee, where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalized at the inception of the lease at lower of the fair value or the present value of the minimum lease payments and a liability is recognized for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vests with the lessor, are recognized as operating lease. Operating lease payments are recognized on a straight line basis over the lease term, unless the lease agreement explicitly states that increase is on account of inflation in the statement of profit and loss.
2.7 Foreign currency:
The functional currency of the Company is Indian Rupee.
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognized in the statement of profit and loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not translated.
2.8 Taxes on income
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognized in statement of profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.
2.9 Current income taxes
The current income tax expense includes income taxes payable by the Company and its branches in India and overseas. The current tax payable by the Company in India is Indian income tax payable for their worldwide income after taking credit for tax relief available for export operations in Special Economic Zones (SEZs).
Current income tax payable by overseas branches of the Company is computed in accordance with the tax laws applicable in the jurisdiction in which the respective branch operates. The taxes paid are generally available for set off against the Indian income tax liability of the Company''s worldwide income.
Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
Deferred income taxes
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred income tax asset are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
2.10 Inventories
Inventory comprise of computer systems and software, components and spares.
Components and spares are valued at lower of cost and net realizable value.
Cost is determined on the basis of specific identification method.
Computer systems and software, components and spares intended for customer support are written off over the effective life of the systems maintained, as estimated by the management.
2.11 Financial instruments
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. 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.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Financial assets at amortized cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business whose objective is to hold these assets 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
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset gives 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
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognized in profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
Derecognition
Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognized on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognized.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in profit or loss.
2.12 Property, plant and equipment
Property, plant and equipment are stated at costs less accumulated depreciation (other than freehold land) and impairment loss, if any.
The cost includes purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Subsequent expenditure on fixed assets after its purchase / completion is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
Depreciation is provided for property, plant and equipment on the straight-line method over the estimated useful life from the date the assets are ready for intended use. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Leasehold improvements are depreciated over the lower of the lease term and their useful lives.
Capital work-in-progress:
Amount paid towards the acquisition of property, plant and equipment outstanding as of each reporting date and the cost of property, plant and equipment not ready for intended use before such date are disclosed under capital work-in-progress.
The capital work-in-progress is carried at cost, comprising direct cost, related incidental expenses and attributable interest.
2.13 Intangible assets
Intangible assets purchased are measured at cost as of the date of acquisition, as applicable, less accumulated amortization and accumulated impairment, if any.
Intangible assets are amortized on a straight line basis over their estimated useful lives from the date that they are available for use.
The estimated useful lives of the intangible assets and the amortization period are reviewed at the end of each financial year and the amortization period is revised to reflect the changed pattern, if any.
Intangible assets under development
Expenditure on research and development eligible for capitalization are carried as intangible assets under development where such assets are not yet ready for their intended use.
2.14. Employee benefits
Employee benefits include contribution to provident fund, superannuation fund, gratuity fund, compensated absences and employee state insurance scheme.
Defined benefit plans
Gratuity is a defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations, being carried out at the date of each statement of financial position. The retirement benefit obligations recognized in the statement of financial position represents the present value of the defined obligations 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. Under a defined benefit plan, it is the Company''s obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on the Company.
Defined contribution plans
Contributions to defined contribution plans are recognized as expense when employees have rendered services entitling them to such benefits.
Compensated absences:
Compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as undiscounted liability at the balance sheet date. Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are stated as an actuarially determined liability at the present value of the defined benefit obligation at the balance sheet date.
2.15 Segment reporting
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management reporting structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities".
2.16 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.
2.17 Impairment
(i) Financial assets (other than a fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
(ii) Non-financial assets
Property, plant and equipment and Intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
2.18 Operating cycle:
Based on the nature of products/activities of the company and the normal time between acquisition of assets and their realization in cash and cash equivalents, the company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
2.19 Explanation of Transition to Ind AS
The transition as at April 1, 2016 to Ind AS was carried out from Previous GAAP. The reconciliations of equity and total comprehensive income in accordance with Previous GAAP to Ind AS are explained below.
Explanations for reconciliation of equity and profit
i) Under Ind AS, financial instruments other than those designated at fair value through profit or loss and fair value through other comprehensive income are measured at amortized cost. Under Previous GAAP they are recognized at cost. Security deposits are carried at amortized cost using effective interest rate method.
ii) Under Ind AS, the transaction cost (premium) of derivative contracts (options) is charged to profit or loss on the dates of inception. Under Previous GAAP, it is charged over the period of the option contract.
iii) Under Ind AS, liability for dividend is recognized in the period in which the obligation to pay is established. Under Previous GAAP, a liability is recognized in the period to which the dividend relates, even though the dividend may be approved by the shareholders subsequent to the reporting date. Consequently, proposed dividend including dividend tax for the financial year 2015-16 amounting to '' 5,246.81 lakhs has been reversed as at April 1, 2016 and since the same was approved by shareholders in 2016-17, it has been reduced in financial year 2016-17.
iv) Under Previous GAAP, actuarial gains and losses were recognized in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of re-measurement of net defined benefit liability/asset which is recognized in other comprehensive income. Consequently, the tax effect of the same has also being recognized in other comprehensive income instead of statement of profit and loss.
v) On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as at April 1, 2016, measured as per the Previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment.
vi) The transition to Ind AS did not have impact on statement of cash flow.
2.20 Recently notified Indian Accounting Standards (Ind AS), effective on or after April 1, 2018
Ministry of Corporate Affairs ("MCA") through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new amendments to Ind AS which the company has not applied as they are effective for annual periods beginning on or after April 1, 2018:
Ind AS 115 - Revenue from Contracts with Customers
Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 Revenue, Ind AS 11 Construction Contracts when it becomes effective.
The core principle of Ind AS 115 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Under Ind AS 115, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when ''control'' of the goods or services underlying the particular performance obligation is transferred to the customer.
The Company has completed its evaluation of the possible impact of Ind AS 115 and will adopt the standard with all related amendments to all contracts with customers retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company does not expect the impact of the adoption of the new standard to be material on its retained earnings and to its net income on an ongoing basis.
Ind AS 21 - The effect of changes in Foreign Exchange rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.
Rights, preferences and contingencies attached to equity shares
The Company has only one class of equity shares, having a par value of '' 10/-. Each holder of equity share is entitled to one vote per share. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amount. However, as on date no such preferential amounts exist. The distribution will be in proportion to number of equity shares held by the shareholders.
Warranty claims:
Provision for warranty represents present value of management''s best estimate of the future outflow of economic benefits that will be required in respect of services provided, the estimated cost of which is accrued at the time of providing service. Management estimates the related provision for future warranty claims based on historical warranty claim information and is adjusted regularly to reflect new information. The products are generally covered under a free warranty period ranging up to 3 months.
The tax rate used for 2017-18 reconciliation above is the corporate tax rate of 34.608% payable by corporate entities in India on taxable profits under Indian tax law.
The Company benefits from the tax holiday available for units set up under the Special Economic Zone Act, 2005. These tax holidays are available for a period of fifteen years from the date of commencement of operations. Under the SEZ scheme, the unit which begins providing services on or after April 1, 2005 will be eligible for deductions of 100% of profits or gains derived from export of services for the first five years, 50% of such profit or gains for a further period of five years and 50% of such profits or gains for the balance period of five years subject to fulfillment of certain conditions.
*EPS for the comparative period has been represented giving effect of the Bonus issue of Shares. (Refer Note 27).
Mar 31, 2017
1. Corporate information
Tata Elxsi Limited was incorporated in 1989. The Company provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry.
The company is headquartered in Bengaluru, and operates through delivery centres in Bengaluru, Chennai, Pune, Mumbai and Tiruvananthapuram.
Its sales operations are located in multiple cities in India, and in multiple international locations including Dubai, France, Germany, Japan, UK, Ireland, Netherlands and USA.
2. Significant accounting policies
2.1. Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956 Act"), as applicable. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
2.2. Use of estimates
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known / materialize.
2.3. Inventories
Components and spares are valued at lower of cost and net realizable value. Cost is determined on the basis of specific identification method.
Computer systems and software, components and spares intended for customer support are written off over the effective life of the systems maintained, as estimated by the management.
2.4. Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short- term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.5 . Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.6. Depreciation and amortization
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets,
in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.
Leasehold land is amortized over the duration of the lease
Assets costing less than Rs, 5,000 each are fully depreciated in the year of capitalization.
Intangible assets are amortized over their estimated useful life as follows:
In-house technical know-how - 3 years.
The estimated useful life of the intangible assets and the amortization period are reviewed at the end of each financial year and the amortization period is revised to reflect the changed pattern, if any.
2.7. Revenue recognition
Sale of goods
Income from sale of goods is recognized upon transfer of risks and rewards of ownership to the goods, which generally coincide with the despatch. Sales exclude taxes and levies.
Income from services
a) Income from services is recognized upon rendering of the services. Income from maintenance contracts relating to the year is recognized when the contracts are entered into on a time proportionate basis. The income excludes taxes and levies.
b) Revenue from software development on fixed price, fixed time frame contracts is recognized as per the proportionate completion method. On time and materials contracts, revenue is recognized as the related services are rendered.
c) In respect of orders procured, for which sales are effected directly to the customers by the vendors, the Company accounts only for the commission, installation and other charges to which it is entitled.
2.8 Other income
Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established. Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same.
2.9 Fixed Assets (Tangible / Intangible)
Fixed assets, are carried at cost less accumulated depreciation / amortization and impairment losses, if any. The cost of fixed assets comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Subsequent expenditure on fixed assets after its purchase / completion is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
Capital work-in-progress:
Projects under which assets are not ready for their intended use and other capital work- in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
Intangible assets under development:
Expenditure on research and development (Refer Note 2.17) eligible for capitalization are carried as intangible assets under development where such assets are not yet ready for their intended use.
2.10. Foreign currency transactions and translations
Initial recognition
a) Company: Transactions in foreign currencies entered into by the Company and its integral foreign operations are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.
b) Integral foreign operations: Transactions in foreign currencies entered into by the Company''s integral foreign operations are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.
c) Non-integral foreign operations: Transactions of non-integral foreign operations are translated at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet date
a) Company: Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.
b) Integral foreign operations: Foreign currency monetary items (other than derivative contracts) of the Company''s integral foreign operations outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company''s integral foreign operations are carried at historical cost.
c) Non-integral foreign operations: All assets and liabilities of non-integral foreign operations are translated at the year-end rates.
Treatment of exchange differences.
a) Company: Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the Statement of Profit and Loss.
b) Integral foreign operations: Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Company''s integral foreign operations are recognized as income or expense in the Statement of Profit and Loss.
c) Non-integral foreign operations: The exchange differences on translation of balances relating to no integral foreign operations are accumulated in a "Foreign currency translation reserve" until disposal of the operation, in which case the accumulated balance in "Foreign currency translation reserve" is recognized as income / expense in the same period in which the gain or loss on disposal is recognized.
Accounting of forward contracts
Premium / discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortized over the period of the contracts if such contracts relate to monetary items as at the Balance Sheet date. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or as expense in the period in which such cancellation or renewal is made.
Refer Note 2.21 for accounting for forward exchange contracts relating to firm commitments and highly probable forecast transactions.
2.11. Investments
Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments includes acquisition charges such as brokerage, fees and duties.
2.12. Employee benefits
Employee benefits include contribution to provident fund, superannuation fund, gratuity fund, compensated absences and employee state insurance scheme.
Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and employee state insurance scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by employees.
Defined benefit plans
For defined benefit plans in the form of gratuity fund, the cost of providing benefits is determined using the Projected Unit Credit method. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise is 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, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the schemes.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognized during the period when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service. The cost of such compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and
(b) in case of non-accumulating compensated absences, when the absences occur.
Long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognized as a liability at the present value of the defined benefit obligation as at the Balance Sheet date less the fair value of the plan assets out of which the obligations are expected to be settled.
2.13. Segment reporting
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities".
2.14. Leases
Assets leased by the Company in its capacity as lessee where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. Such leases are capitalized at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the less or are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
2.15. Earnings per share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.
2.16. Taxes on income
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.
Minimum alternate tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.
Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets are recognized for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. However, if there is unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realize the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their reliability.
Current and deferred tax relating to items directly recognized in equity are recognized in equity and not in the Statement of Profit and Loss.
2.17. Research and development expenses
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss unless a product''s technological feasibility has been established, in which case such expenditure is capitalized. The amount capitalized comprises expenditure that can be directly attributed or allocated on a reasonable and consistent basis to creating, producing and making the asset ready for its intended use. Fixed assets utilized for research and development are capitalized and depreciated in accordance with the policies stated for tangible fixed assets and intangible assets. Disclosure of aggregate of research and development expenses charged to Profit and Loss account as per AS 26.
2.18. Impairment of assets
The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired:
(a) an intangible asset that is not yet available for use; and (b) an intangible asset that is amortized over a period exceeding ten years from the date when the asset is available for use.
If the carrying amount of the assets exceeds the estimated recoverable amount, an impairment is recognized for such excess amount. The impairment loss is recognized as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognized for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognized.
2.19. Provisions and contingencies
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes.
2.20. Provision for warranty
As per the terms of the contracts, the Company provides post-contract services / warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past technical estimates.
2.21. Derivative contracts
The Company enters into derivative contracts in the nature of foreign currency options, forward contracts with an intention to hedge its existing assets and liabilities, firm commitments and highly probable transactions. Derivative contracts which are closely linked to the existing assets and liabilities are accounted as per the policy stated for Foreign Currency Transactions and Translations.
All other derivative contracts are marked-to-market and losses are recognized in the Statement of Profit and Loss. Gains arising on the same are not recognized, until realized, on grounds of prudence.
2.22. Insurance claims
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
2.23. Service tax input credit/VAT.
Service tax/VAT input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is no uncertainty in availing / utilizing the credits.
The Company has only one class of Equity Share, having a par value of ''10/-. Each holder of equity share is entitled to one vote per share. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amount. However, as on date no such preferential amounts exist. The distribution will be in proportion to number of equity shares held by the shareholders.
(vi) The amount of further interest due and payable even in the succeeding - year, until such date when the interest dues as above are actually paid
Dues to micro and small enterprises have been determined to the extent such parties have been identified on the basis of information collected by the management. This has been relied upon by the auditors.
22.3 Details on derivatives instruments and unheeded foreign currency exposures
I. The following derivative positions are open as at 31 March, 2017. These transactions have been undertaken to act as economic hedges for the Company''s exposures to various risks in foreign exchange markets and may / may not qualify or be designated as hedging instruments. The accounting for these transactions is stated in Notes
2.10 and 2.21
Mar 31, 2015
1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the relevant provisions of the
Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956
Act"), as applicable. The financial statements have been prepared on
accrual basis under the historical cost convention. The accounting
policies adopted in the preparation of the financial statements are
consistent with those followed in the previous year.
2.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known/materialise.
2.3 Inventories
Components and spares are valued at lower of cost and net realisable
value. Cost is determined on the basis of specific identification
method.
Computer systems and software, components and spares intended for
customer support are written off over the effective life of the systems
maintained, as estimated by the management.
2.4 Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
2.5 Cash flow statement
Cash flows are reported using the indirect method, whereby
profit/(loss) before extraordinary items and tax is adjusted for the
effects of transactions of non-cash nature and any deferrals or
accruals of past or future cash receipts or payments. The cash flows
from operating, investing and financing activities of the Company are
segregated based on the available information.
2.6 Depreciation and amortisation
Depreciable amount for assets is the cost of an asset, or other amount
substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the
straight-line method as per the useful life prescribed in Schedule II
to the Companies Act, 2013 except in respect of the following
categories of assets, in whose case the life of the assets has been
assessed as under based on technical advice, taking into account the
nature of the asset, the estimated usage of the asset, the operating
conditions of the asset, past history of replacement, anticipated
technological changes, manufacturers warranties and maintenance
support, etc.:
Air Conditioners - 6 years Plant and Machinery - 6 years Furniture and
Fixtures - 6 years Electrical Equipments - 6 years
Leasehold land is amortised over the duration of the lease
Assets costing less than Rs. 5,000 each are fully depreciated in the year
of capitalisation Intangible assets are amortised over their estimated
useful life as follows:
In-house Technical Know-How - 3 years.
The estimated useful life of the intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation period is revised to reflect the changed pattern, if any.
2.7 Revenue recognition Sale of goods
Income from sales of goods is recognised upon passage of risks and
rewards of ownership to the goods, which generally coincide with the
despatch. Sales exclude taxes and levies.
Income from services
a) Income from services is recognised upon rendering of the services.
Income from maintenance contracts relating to the year is recognised
when the contracts are entered into on a time proportionate basis. The
income excludes taxes and levies.
b) Revenue from software development on fixed price, fixed time frame
contracts is recognised as per the proportionate completion method. On
time and materials contracts, revenue is recognised as the related
services are rendered.
c) In respect of orders procured, for which sales are effected directly
to the customers by the vendors, the Company accounts only for the
commission, installation and other charges to which it is entitled.
2.8 Other income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive it is established.
2.9 Fixed Assets (Tangible/Intangible)
Fixed assets, are carried at cost less accumulated
depreciation/amortisation and impairment losses, if any. The cost of
fixed assets comprises its purchase price net of any trade discounts
and rebates, any import duties and other taxes (other than those
subsequently recoverable from the tax authorities), any directly
attributable expenditure on making the asset ready for its intended
use, other incidental expenses and interest on borrowings attributable
to acquisition of qualifying fixed assets up to the date the asset is
ready for its intended use. Subsequent expenditure on fixed assets
after its purchase/completion is capitalised only if such expenditure
results in an increase in the future benefits from such asset beyond
its previously assessed standard of performance.
Capital work-in-progress:
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
Intangible assets under development:
Expenditure on Research and development (Refer Note 2.17) eligible for
capitalisation are carried as Intangible assets under development where
such assets are not yet ready for their intended use.
2.10 Foreign currency transactions and translations Initial recognition
(i) Company: Transactions in foreign currencies entered into by the
Company and its integral foreign operations are accounted at the
exchange rates prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the transaction.
(ii) Integral foreign operations: Transactions in foreign currencies
entered into by the Company''s integral foreign operations are accounted
at the exchange rates prevailing on the date of the transaction or at
rates that closely approximate the rate at the date of the transaction.
(iii) Non-integral foreign operations: Transactions of non-integral
foreign operations are translated at the exchange rates prevailing on
the date of the transaction or at rates that closely approximate the
rate at the date of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet
date
(i) Company: Foreign currency monetary items (other than derivative
contracts) of the Company, outstanding at the balance sheet date are
restated at the year-end rates. Non-monetary items of the Company are
carried at historical cost.
(ii) Integral foreign operations: Foreign currency monetary items
(other than derivative contracts) of the Company''s integral foreign
operations outstanding at the balance sheet date are restated at the
year-end rates. Non-monetary items of the Company''s integral foreign
operations are carried at historical cost.
(iii) Non-integral foreign operations: All assets and liabilities of
non-integral foreign operations are translated at the year-end rates.
Treatment of exchange differences
(i) Company: Exchange differences arising on settlement/restatement of
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
(ii) Integral foreign operations: Exchange differences arising on
settlement/restatement of foreign currency monetary assets and
liabilities of the Company''s integral foreign operations are recognised
as income or expense in the Statement of Profit and Loss.
(iii) Non-integral foreign operations: The exchange differences on
translation of balances relating to non-integral foreign operations are
accumulated in a "Foreign currency translation reserve" until disposal
of the operation, in which case the accumulated balance in "Foreign
currency translation reserve" is recognised as income/expense in the
same period in which the gain or loss on disposal is recognised.
Accounting of forward contracts
Premium/discount on forward exchange contracts, which are not intended
for trading or speculation purposes, are amortised over the period of
the contracts if such contracts relate to monetary items as at the
Balance Sheet date. Any profit or loss arising on cancellation or
renewal of such a forward exchange contract is recognised as income or
as expense in the period in which such cancellation or renewal is made.
Refer Note 2.21 for accounting for forward exchange contracts relating
to firm commitments and highly probable forecast transactions.
2.11 Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments include acquisition charges such as
brokerage, fees and duties.
2.12 Employee benefits
Employee benefits include contribution to provident fund,
superannuation fund, gratuity fund, compensated absences and employee
state insurance scheme.
Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and
employee state insurance scheme are considered as defined contribution
plans and are charged as an expense based on the amount of contribution
required to be made and when services are rendered by employees.
Defined benefit plans
For defined benefit plans in the form of gratuity fund, the cost of
providing benefits is determined using the Projected Unit Credit
method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognised in the Statement
of Profit and Loss in the period in which they occur. Past service cost
is recognised immediately to the extent that the benefits are already
vested and otherwise is 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, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the schemes.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognised as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled
2.13 Segment reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the executive Management
in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market/ fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under "unallocated revenue/ expenses/ assets/
liabilities".
2.14 Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to 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 a straight-line basis over the
lease term.
2.15 Earnings per share
Basic earnings per share is computed by dividing the profit/(loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the
profit(loss) after tax (including the post tax effect of extraordinary
items, if any) as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are
adjusted for share splits/reverse share splits and bonus shares, as
appropriate.
2.16 Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets are recognised for timing differences of items other than
unabsorbed depreciation and carry forward losses only to the extent
that reasonable certainty exists that sufficient future taxable income
will be available against which these can be realised. However, if
there are unabsorbed depreciation and carry forward of losses and items
relating to capital losses, deferred tax assets are recognised only if
there is virtual certainty supported by convincing evidence that there
will be sufficient future taxable income available to realise the
assets. Deferred tax assets and liabilities are offset if such items
relate to taxes on income levied by the same governing tax laws and the
Company has a legally enforceable right for such set off. Deferred tax
assets are reviewed at each balance sheet date for their realisability.
Current and deferred tax relating to items directly recognised in
equity are recognised in equity and not in the Statement of Profit and
Loss.
2.17 Research and development expenses
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product''s technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
2.18 Impairment of assets
The carrying values of assets/cash generating units at each balance
sheet date are reviewed for impairment if any indication of impairment
exists. The following intangible assets are tested for impairment each
financial year even if there is no indication that the asset is
impaired:
(a) an intangible asset that is not yet available for use; and (b) an
intangible asset that is amortised over a period exceeding ten years
from the date when the asset is available for use.
If the carrying amount of the assets exceed the estimated recoverable
amount, an impairment is recognised for such excess amount. The
impairment loss is recognised as an expense in the Statement of Profit
and Loss, unless the asset is carried at revalued amount, in which case
any impairment loss of the revalued asset is treated as a revaluation
decrease to the extent a revaluation reserve is available for that
asset.
The recoverable amount is the greater of the net selling price and
their value in use. Value in use is arrived at by discounting the
future cash flows to their present value based on an appropriate
discount factor.
When there is indication that an impairment loss recognised for an
asset (other than a revalued asset) in earlier accounting periods no
longer exists or may have decreased, such reversal of impairment loss
is recognised in the Statement of Profit and Loss, to the extent the
amount was previously charged to the Statement of Profit and Loss. In
case of revalued assets such reversal is not recognised.
2.19 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes.
2.20 Provision for warranty
As per the terms of the contracts, the Company provides post-contract
services/warranty support to some of its customers. The Company
accounts for the post-contract support/provision for warranty on the
basis of the information available with the Management duly taking into
account the current and past technical estimates.
2.21 Derivative contracts
The Company enters into derivative contracts in the nature of foreign
currency options, forward contracts with an intention to hedge its
existing assets and liabilities, firm commitments and highly probable
transactions. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Currency Transactions and Translations.
All other derivative contracts are marked-to-market and losses are
recognised in the Statement of Profit and Loss. Gains arising on the
same are not recognised, until realised, on grounds of prudence.
2.22 Insurance claims/Claims with ECGC
Insurance claims and claims with ECGC are accounted for on the basis of
claims admitted/expected to be admitted and to the extent that there is
no uncertainty in receiving the claims.
2.23 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.
Mar 31, 2014
1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in accordance
with the Generally Accepted Accounting Principles in India (Indian
GAAP) to comply with the Accounting Standards notified under Section
211(3C) of the Companies Act, 1956 ("the 1956 Act") (which continue to
be applicable in respect of Section 133 of the Companies Act, 2013
("the 2013 Act") in terms of General Circular 15/2013 dated 13th
September, 2013 of the Ministry of Corporate Affairs) and the relevant
provisions of the 1956 Act/ 2013 Act, as applicable. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year
1.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known/materialise.
1.3 Inventories
Components and spares are valued at lower of cost and net realizable
value. Cost is determined on the basis of specific identification method.
Computer systems and software, components and spares intended for
customer support are written off over the effective life of the systems
maintained, as estimated by the management.
1.4 Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to in Significant risk of changes in value.
1.5 Cash flow statement
Cash flows are reported using the indirect method, whereby Profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from operating,
investing and financing activities of the Company are segregated based
on the available information.
1.6 Depreciation and amortisation
Depreciation has been provided on the straight-line method as per the
rates prescribed in Schedule XIV to the Companies Act, 1956 except in
respect of the following categories of assets, in whose case the life
of the assets has been assessed as under:
Leasehold land is amortised over the duration of the lease
Assets costing less than Rs. 5,000 each are fully depreciated in the year
of capitalisation Intangible assets are amortised over their estimated
useful life as follows:
In-house Technical Know-How  3 years.
The estimated useful life of the intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to refect the changed pattern.
1.7 Revenue recognition
Sale of goods
Income from sales of goods is recognised upon passage of risks and
rewards of ownership to the goods, which generally coincide with the
despatch. Sales exclude taxes and levies.
Income from services
a) Income from services is recognized upon rendering of the services.
Income from maintenance contracts relating to the year is recognized
when the contracts are entered into on a time proportionate basis. The
income excludes taxes and levies.
b) Revenue from software development on fixed price, fixed time frame
contracts is recognised as per the proportionate completion method. On
time and materials contracts, revenue is recognised as the related
services are rendered.
c) In respect of orders procured, for which sales are effected directly
to the customers by the vendors, the Company accounts only for the
commission, installation and other charges to which it is entitled.
1.8 Other income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive it is established.
1.9 Fixed Assets (Tangible/Intangible)
Fixed assets, are carried at cost less accumulated
depreciation/amortisation and impairment losses, if any. The cost of
fixed assets comprises its purchase price net of any trade discounts and
rebates, any import duties and other taxes (other than those
subsequently recoverable from the tax authorities), any directly
attributable expenditure on making the asset ready for its intended
use, other incidental expenses and interest on borrowings attributable
to acquisition of qualifying fixed assets up to the date the asset is
ready for its intended use. Subsequent expenditure on fixed assets after
its purchase/completion is capitalised only if such expenditure results
in an increase in the future Benefits from such asset beyond its
previously assessed standard of performance.
Capital work-in-progress:
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
Intangible assets under development:
Expenditure on Research and development (Refer Note 2.17) eligible for
capitalisation are carried as Intangible assets under development where
such assets are not yet ready for their intended use.
1.10 Foreign currency transactions and translations
Initial recognition
(i) Company: Transactions in foreign currencies entered into by the
Company and its integral foreign operations are accounted at the
exchange rates prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the transaction.
(ii) Integral foreign operations: Transactions in foreign currencies
entered into by the Company''s integral foreign operations are accounted
at the exchange rates prevailing on the date of the transaction or at
rates that closely approximate the rate at the date of the transaction.
(iii) Non-integral foreign operations: Transactions of non-integral
foreign operations are translated at the exchange rates prevailing on
the date of the transaction or at rates that closely approximate the
rate at the date of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet
date
(i) Company: Foreign currency monetary items (other than derivative
contracts) of the Company, outstanding at the balance sheet date are
restated at the year-end rates. Non-monetary items of the Company are
carried at historical cost.
(ii) Integral foreign operations: Foreign currency monetary items
(other than derivative contracts) of the Company''s integral foreign
operations outstanding at the balance sheet date are restated at the
year-end rates. Non-monetary items of the Company''s integral foreign
operations are carried at historical cost.
(iii) Non-integral foreign operations: All assets and liabilities of
non-integral foreign operations are translated at the year-end rates.
Treatment of exchange differences
(i) Company: Exchange differences arising on settlement/restatement of
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
(ii) Integral foreign operations: Exchange differences arising on
settlement/restatement of foreign currency monetary assets and
liabilities of the Company''s integral foreign operations are recognised
as income or expense in the Statement of Profit and Loss.
(iii) Non-integral foreign operations: The exchange differences on
translation of balances relating to non-integral foreign operations are
accumulated in a "Foreign currency translation reserve" until disposal
of the operation, in which case the accumulated balance in "Foreign
currency translation reserve" is recognised as income / expense in the
same period in which the gain or loss on disposal is recognised.
Accounting of forward contracts
Premium/discount on forward exchange contracts, which are not intended
for trading or speculation purposes, are amortised over the period of
the contracts if such contracts relate to monetary items as at the
Balance Sheet date. Refer Note 2.21 for accounting for forward exchange
contracts relating to firm commitments and highly probable forecast
transactions.
1.11 Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments include acquisition charges such as
brokerage, fees and duties.
1.12 Employee Benefits
Employee Benefits include contribution to provident fund, superannuation
fund, gratuity fund, compensated absences and employee state insurance
scheme.
Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and
employee state insurance scheme are considered as defined contribution
plans and are charged as an expense based on the amount of contribution
required to be made and when services are rendered by employees.
Defined benefit plans
For Defined benefit plans in the form of gratuity fund, the cost of
providing Benefits is determined using the Projected Unit Credit method,
with actuarial valuations being carried out at each Balance Sheet date.
Actuarial gains and losses are recognised in the Statement of Profit and
Loss in the period in which they occur. Past service cost is recognised
immediately to the extent that the Benefits are already vested and
otherwise is 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, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the schemes.
Short-term employee Benefits
The undiscounted amount of short-term employee Benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These Benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long-term employee Benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognised as a liability at the present value of
the Defined benefit obligation as at the Balance Sheet date less the fair
value of the plan assets out of which the obligations are expected to
be settled
1.13 Segment reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
Profit/loss amounts are evaluated regularly by the executive Management
in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified to
segments on the basis of their relationship to the operating activities
of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market/ fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under "unallocated revenue/ expenses/ assets/
liabilities".
1.14 Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised at
the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to 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 a straight-line basis.
1.15 Earnings per share
Basic earnings per share is computed by dividing the Profit/(loss) after
tax (including the post tax effect of extraordinary items, if any) by
the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the
Profit/(loss) after tax (including the post tax effect of extraordinary
items, if any) as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net Profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are
adjusted for share splits / reverse share splits and bonus shares, as
appropriate.
1.16 Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961 and applicable Foreign tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic Benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of losses
are recognised only if there is virtual certainty that there will be
sufficient future taxable income available to realise such assets.
Deferred tax assets are recognised for timing differences of other
items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if
such items relate to taxes on income levied by the same governing tax
laws and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
reliability.
Current and deferred tax relating to items directly recognised in
equity are recognised in equity and not in the Statement of Profit and
Loss.
1.17 Research and development expenses
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product''s technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
1.18 Impairment of assets
The carrying values of assets/cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of re-valued assets.
1.19 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
Benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to refect the current best estimates. Contingent liabilities
are disclosed in the Notes.
1.20 Provision for warranty
As per the terms of the contracts, the Company provides post-contract
services/warranty support to some of its customers. The Company
accounts for the post-contract support/provision for warranty on the
basis of the information available with the Management duly taking into
account the current and past technical estimates.
1.21 Derivative contracts
The Company enters into derivative contracts in the nature of foreign
currency options, forward contracts with an intention to hedge its
existing assets and liabilities, firm commitments and highly probable
transactions. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Currency Transactions and Translations.
All other derivative contracts are marked-to-market and losses are
recognised in the Statement of Profit and Loss. Gains arising on the
same are not recognised, until realised, on grounds of prudence.
1.22 Insurance claims/Claims with ECGC
Insurance claims and claims with ECGC are accounted for on the basis of
claims admitted/expected to be admitted and to the extent that there is
no uncertainty in receiving the claims.
1.23 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing/utilising the credits.
1.24 Operating Cycle
Based on the nature of products/activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
Mar 31, 2013
1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
1.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
1.3 Inventories
Components and spares are valued at lower of cost and net realizable
value. Cost is determined on the basis of specific identification
method.
Computer systems and software, components and spares intended for
customer support are written off over the effective life of the systems
maintained, as estimated by the management.
1.4 Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
1.5 Cash flow statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
1.6 Depreciation and amortisation
Depreciation has been provided on the straight-line method as per the
rates prescribed in Schedule XIV to the Companies Act, 1956 except in
respect of the following categories of assets, in whose case the life
of the assets has been assessed as under:
Leasehold land is amortised over the duration of the lease
Assets costing less than Rs. 5,000 each are fully depreciated in the
year of capitalisation
Intangible assets are amortised over their estimated useful life as
follows:
In-house Technical Know-How - 3 years.
The estimated useful life of the intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern.
1.7 Revenue recognition
Sale of goods
Income from sales of goods is recognised upon passage of risks and
rewards of ownership to the goods, which generally coincide with the
despatch. Sales exclude taxes and levies.
Income from services
a) Income from services is recognized upon rendering of the services.
Income from maintenance contracts relating to the year is recognized
when the contracts are entered into on a time proportionate basis. The
income excludes taxes and levies.
b) Revenue from software development on fixed price, fixed time frame
contracts is recognised as per the proportionate completion method. On
time and materials contracts, revenue is recognised as the related
services are rendered.
c) In respect of orders procured, for which sales are effected directly
to the customers by the vendors, the Company accounts only for the
commission, installation and other charges to which it is entitled.
1.8 Other income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive it is established.
1.9 Fixed Assets (Tangible / Intangible)
Fixed assets, are carried at cost less accumulated depreciation /
amortisation and impairment losses, if any. The cost of fixed assets
comprises its purchase price net of any trade discounts and rebates,
any import duties and other taxes (other than those subsequently
recoverable from the tax authorities), any directly attributable
expenditure on making the asset ready for its intended use, other
incidental expenses and interest on borrowings attributable to
acquisition of qualifying fixed assets up to the date the asset is
ready for its intended use. Subsequent expenditure on fixed assets
after its purchase / completion is capitalised only if such expenditure
results in an increase in the future benefits from such asset beyond
its previously assessed standard of performance.
Capital work-in-progress:
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
Intangible assets under development:
Expenditure on Research and development (Refer Note 2.17) eligible for
capitalisation are carried as Intangible assets under development where
such assets are not yet ready for their intended use.
1.10 Foreign currency transactions and translations
Initial recognition
(i) Company: Transactions in foreign currencies entered into by the
Company and its integral foreign operations are accounted at the
exchange rates prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the transaction.
(ii) Integral foreign operations: Transactions in foreign currencies
entered into by the Company''s integral foreign operations are accounted
at the exchange rates prevailing on the date of the transaction or at
rates that closely approximate the rate at the date of the transaction.
(iii) Non-integral foreign operations: Transactions of non-integral
foreign operations are translated at the exchange rates prevailing on
the date of the transaction or at rates that closely approximate the
rate at the date of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet
date
(i) Company: Foreign currency monetary items (other than derivative
contracts) of the Company, outstanding at the balance sheet date are
restated at the year-end rates. Non-monetary items of the Company are
carried at historical cost.
(ii) Integral foreign operations: Foreign currency monetary items
(other than derivative contracts) of the Company''s integral foreign
operations outstanding at the balance sheet date are restated at the
year- end rates. Non-monetary items of the Company''s integral foreign
operations are carried at historical cost.
(iii) Non-integral foreign operations: All assets and liabilities of
non-integral foreign operations are translated at the year-end rates.
Treatment of exchange differences
(i) Company: Exchange differences arising on settlement / restatement
of foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
(ii) Integral foreign operations: Exchange differences arising on
settlement / restatement of foreign currency monetary assets and
liabilities of the Company''s integral foreign operations are recognised
as income or expense in the Statement of Profit and Loss.
(iii) Non-integral foreign operations: The exchange differences on
translation of balances relating to non- integral foreign operations
are accumulated in a "Foreign currency translation reserve" until
disposal of the operation, in which case the accumulated balance in
"Foreign currency translation reserve" is recognised as income /
expense in the same period in which the gain or loss on disposal is
recognised.
Accounting of forward contracts
Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date. Refer Note 2.21 for accounting for forward
exchange contracts relating to firm commitments and highly probable
forecast transactions.
1.11 Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments include acquisition charges such as
brokerage, fees and duties.
1.12 Employee benefits
Employee benefits include contribution to provident fund,
superannuation fund, gratuity fund, compensated absences and employee
state insurance scheme.
Defined contribution plans
The Company''s contribution to provident fund, superannuation fund and
employee state insurance scheme are considered as defined contribution
plans and are charged as an expense as they fall due based on the
amount of contribution required to be made.
Defined benefit plans
For defined benefit plans in the form of gratuity fund, the cost of
providing benefits is determined using the Projected Unit Credit
method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognised in the Statement
of Profit and Loss in the period in which they occur. Past service cost
is recognised immediately to the extent that the benefits are already
vested and otherwise is 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, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the schemes.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognised as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled
1.13 Segment reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the executive Management
in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Inter-segment revenue is accounted on the
basis of transactions which are primarily determined based on market /
fair value factors. Revenue, expenses, assets and liabilities which
relate to the Company as a whole and are not allocable to segments on
reasonable basis have been included under "unallocated revenue /
expenses / assets / liabilities".
1.14 Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to 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 a straight-line basis.
1.15 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the
profit / (loss) after tax (including the post tax effect of
extraordinary items, if any) as adjusted for dividend, interest and
other charges to expense or income relating to the dilutive potential
equity shares, by the weighted average number of equity shares
considered for deriving basic earnings per share and the weighted
average number of equity shares which could have been issued on the
conversion of all dilutive potential equity shares. Potential equity
shares are deemed to be dilutive only if their conversion to equity
shares would decrease the net profit per share from continuing ordinary
operations. Potential dilutive equity shares are deemed to be converted
as at the beginning of the period, unless they have been issued at a
later date. The dilutive potential equity shares are adjusted for the
proceeds receivable had the shares been actually issued at fair value
(i.e. average market value of the outstanding shares). Dilutive
potential equity shares are determined independently for each period
presented. The number of equity shares and potentially dilutive equity
shares are adjusted for share splits / reverse share splits and bonus
shares, as appropriate.
1.16 Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961 and applicable Foreign tax laws. Minimum Alternate Tax (MAT)
paid in accordance with the tax laws, which gives future economic
benefits in the form of adjustment to future income tax liability, is
considered as an asset if there is convincing evidence that the Company
will pay normal income tax. Accordingly, MAT is recognised as an asset
in the Balance Sheet when it is probable that future economic benefit
associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
Current and deferred tax relating to items directly recognised in
equity are recognised in equity and not in the Statement of Profit and
Loss.
1.17 Research and development expenses
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product''s technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
1.18 Impairment of assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of
impairment exists, the recoverable amount of such assets is estimated
and impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
1.19 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes.
1.20 Provision for warranty
As per the terms of the contracts, the Company provides post-contract
services / warranty support to some of its customers. The Company
accounts for the post-contract support / provision for warranty on the
basis of the information available with the Management duly taking into
account the current and past technical estimates.
1.21 Derivative contracts
The Company enters into derivative contracts in the nature of foreign
currency options, forward contracts with an intention to hedge its
existing assets and liabilities, firm commitments and highly probable
transactions. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Currency Transactions and Translations.
All other derivative contracts are marked-to-market and losses are
recognised in the Statement of Profit and Loss. Gains arising on the
same are not recognised, until realised, on grounds of prudence.
1.22 Insurance claims / Claims with ECGC
Insurance claims and claims with ECGC are accounted for on the basis of
claims admitted / expected to be admitted and to the extent that there
is no uncertainty in receiving the claims.
1.23 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.
1.24 Operating Cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
Mar 31, 2012
1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention . The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
1.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialised.
1.3 Inventories
Components and spares are valued at lower of cost and net realizable
value. Cost is determined on the basis of specific identification
method.
Computer systems and software, components and spares intended for
customer support are written off over the effective life of the systems
maintained, as estimated by Management.
1.4 Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
1.5 Cash flow statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
1.6 Depreciation and amortisation
Depreciation has been provided on the straight-line method as per the
rates prescribed in Schedule XIV to the Companies Act, 1956 except in
respect of the following categories of assets, in whose case the life
of the assets has been assessed as under:
Leasehold land is amortised over the duration of the lease
Assets costing less than Rs.5,000 each are fully depreciated in the
year of capitalisation
Intangible assets are amortised over their estimated useful life as
follows:
In-house Technical Know-How - 3 years.
The estimated useful life of the intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern.
1.7 Revenue recognition
Sale of goods
Income from sales of goods is recognised upon passage of risks and
rewards of ownership to the goods, which generally coincide with the
despatch. Sales exclude taxes and levies.
Income from services
a) Income from services is recognized upon rendering of the services.
Income from maintenance contracts relating to the year is recognized
when the contracts are entered into on a time proportionate basis.The
income excludes taxes and levies.
b) Revenue from software development on fixed price, fixed time frame
contracts is recognised as per the proportionate completion method. On
time and materials contracts, revenue is recognised as the related
services are rendered.
c) In respect of orders procured, for which sales are effected directly
to the customers by the vendors, the Company accounts only for the
commission, installation and other charges to which it is entitled.
1.8 Other income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive it is established.
1.9 Tangible fixed assets
Fixed assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Subsequent expenditure
relating to fixed assets is capitalised only if such expenditure
results in an increase in the future benefits from such asset beyond
its previously assessed standard of performance.
Fixed assets retired from active use and held for sale are stated at
the lower of their net book value and net realisable value and are
disclosed separately in the Balance Sheet.
Capital work-in-progress:
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
1.10 Intangible Assets.
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
Refer note 2.18 for accounting for research and development expenses.
1.11 Foreign currency transactions and translations
Initial recognition
Transactions in foreign currencies entered into by the Company and its
integral foreign operations are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely
approximate the rate at the date of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet
date Foreign currency monetary items (other than derivative contracts)
of the Company and its net investment in non-integral foreign
operations outstanding at the Balance Sheet date are restated at the
year-end rates.
In the case of integral operations, assets and liabilities (other than
non-monetary items), are translated at the exchange rate prevailing on
the Balance Sheet date. Non-monetary items are carried at historical
cost. Revenue and expenses are translated at the average exchange rates
prevailing during the year. Exchange differences arising out of these
translations are charged to the Statement of Profit and Loss.
Accounting of forward contracts
Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date. Refer Note 2.22 for accounting for forward
exchange contracts relating to firm commitments and highly probable
forecast transactions.
1.12 Investments
Long-term investments (excluding investment properties), are carried
individually at cost less provision for diminution, other than
temporary, in the value of such investments. Current investments are
carried individually, at the lower of cost and fair value. Cost of
investments include acquisition charges such as brokerage, fees and
duties.
1.13 Employee benefits
Employee benefits include contribution to provident fund,
superannuation fund, gratuity fund and compensated absences. Defined
contribution plans
The Company's contribution to provident fund and superannuation fund
are considered as defined contribution plans and are charged as an
expense as they fall due based on the amount of contribution required
to be made.
Defined benefit plans
For defined benefit plans in the form of gratuity fund, the cost of
providing benefits is determined using the Projected Unit Credit
method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognised in the Statement
of Profit and Loss in the period in which they occur. Past service cost
is recognised immediately to the extent that the benefits are already
vested and otherwise is 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, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the schemes.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognised as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled.
1.14 Segment reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the executive Management
in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under "unallocated revenue / expenses / assets /
liabilities".
1.15 Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to 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 a straight-line basis.
1.16 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post - tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are
adjusted for share splits / reverse share splits and bonus shares, as
appropriate.
1.17 Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961 and Foreign Tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
Current and deferred tax relating to items in equity are recognised in
equity and not in the Statement of Profit and Loss.
1.18 Research and development expenses
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product's technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and
Intangible Assets.
1.19 Impairment of assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
1.20 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes.
1.21 Provision for warranty
As per the terms of the contracts, the Company provides post-contract
services / warranty support to some of its customers. The Company
accounts for the post-contract support / provision for warranty on the
basis of the information available with the Management duly taking into
account the current and past technical estimates.
2.22 Derivative contracts
The Company enters into derivative contracts in the nature of foreign
currency options, forward contracts with an intention to hedge its
existing assets and liabilities, firm commitments and highly probable
transactions. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Currency Transactions and Translations.
All other derivative contracts are marked-to-market and losses are
recognised in the Statement of Profit and Loss. Gains arising on the
same are not recognised, until realised, on grounds of prudence.
1.23 Insurance claims / Claims with ECGC
Insurance claims and claims with ECGC are accounted for on the basis of
claims admitted / expected to be admitted and to the extent that there
is no uncertainty in receiving the claims.
Mar 31, 2011
1. Basis of preparation
The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles ("GAAP") under the historical
cost convention on the accrual basis of accounting and comply with the
accounting standards applicable in India and the provisions of the
Companies Act, 1956.
2. 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 expenses during the year. Example of
such estimates include provisions for doubtful debts, employee
benefits, provision for income taxes, the useful life of fixed assets,
etc..
3. Fixed assets and Intangible assets
Fixed Assets are stated at cost, less accumulated depreciation. Costs
include all expenses incurred to bring the assets to its present
location and condition.
Depreciation is provided on straight-line method on pro rata basis in
accordance with the provisions of Schedule XIV to the Companies Act,
1956, except that leasehold land and improvements to leasehold premises
is depreciated over the lease period on straight-line basis.
Software licenses are depreciated over a period of 6 years.
Individual assets costing less than Rs. 5,000/- are depreciated in full
in the year of its purchase.
Capital advances represent outstanding advance paid to acquire fixed
assets.
4. Impairment of assets
At each Balance Sheet date, the Company reviews the carrying amounts of
its fixed assets to determine whether there is any indication that
those assets suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of impairment loss.
Recoverable amount is the higher of an assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows expected from the continuing use of the asset and from its
disposal are discounted to their present value using a pre-discount
rate that reflects the current market assessment of time value of money
and the risks specific to the asset.
Reversal of impairment loss is recognised immediately as income in the
Profit and Loss account.
5. Leases
Where the Company, as a lessor, leases assets under finance lease such
amounts are recognised as receivables at an amount equal to the net
investment in the lease and the finance income is based on a constant
rate of return on the outstanding net investment.
Lease arrangements where the risks and rewards incident to ownership of
an asset substantially vest with the lessor, are recognised as
operating leases. Lease rents under operating leases are recognised in
the Profit and Loss account on a straight- line basis.
6. Inventories
Components and spares are valued at lower of cost and net realizable
value. Cost is determined on the basis of specific identification
method.
Computer systems and software, components and spares intended for
customer support are written off over the effective life of the systems
maintained, as estimated by management.
7. Income
Sales
Income from sales of goods is recognised upon passage of risks and
rewards of ownership to the goods, which generally coincide with the
delivery.
Services
a) Income from services is recognised upon rendering of the services.
Income from maintenance contracts relating to the year is recognised
when the contracts are entered into on a time proportionate basis.
b) Revenue from software development on fixed price, fixed time frame
contracts is recognised as per the proportionate completion method. On
time and materials contracts, revenue is recognised as the related
services are rendered.
c) In respect of orders procured, for which sales are effected directly
to the customers by the vendors, the Company accounts only for the
commission, installation and other charges to which it is entitled.
8. Employee Benefits
a) Post-employment benefit plans
Contributions to defined contribution retirement benefit schemes are
recognised as an expense when employees have rendered services
entitling them to contributions. For defined benefit schemes, the cost
of providing benefits is determined using the Projected Unit Credit
Method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognised in full in the
Profit and Loss account for the period in which they occur. Past
service cost is recognised immediately to the extent that the benefits
are already vested, and otherwise is 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.
b) Short-term 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 such as paid annual leave, overseas social
security contributions and performance incentives.
c) Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date.
9. Research and Development
Research and Development expenditure is recognised in the profit and
loss account when incurred. Assets acquired for research and
development activity are capitalised and depreciated in the same manner
as other fixed assets.
Expenses incurred in developing intellectual property, if they meet the
criteria of achieving technical feasibility, retention of control and
have the potential to provide economic benefits, are capitalised and
carried forward as intangible assets and amortised over their expected
useful life. Otherwise, such expenses are charged off to the Profit &
Loss Account in the year in which they are incurred
10. Foreign currency transactions
a) Income and expenses in foreign currencies are converted at exchange
rates prevailing on the date of the transaction.
Exchange differences arising on restatement / settlement of foreign
currency monetary liabilities having an initial term of 12 months or
more that are incurred for acquisition of fixed assets are translated
at year end exchange rates and the resulting gains / losses are
adjusted against the cost of the fixed assets. Exchange differences
arising on restatement of other foreign currency monetary assets and
liabilities, having an initial term of 12 months or more, are
accumulated in the Foreign Currency Monetary Item Translation
Difference Account and amortised over the balance period of such long
term asset/liability or up to March 31,2011 whichever is earlier.
Other foreign currency liabilities and assets are restated at the rates
ruling at the year-end. Exchange differences arising on restatement /
settlement of foreign currency balances are adjusted in the Profit and
Loss account.
Premium or discount on forward exchange contracts are amortised and
recognised in the Profit and Loss account over
the period of the contract. Forward contracts and currency options
outstanding at the Balance Sheet date, other than designated Cash Flow
hedges, are stated at fair values and any gains or losses are
recognised in the Profit and Loss account.
b) In the case of non-integral operations, assets and liabilities are
translated at the exchange rate prevailing on the Balance Sheet date.
Revenue and expenses are translated at exchange rates prevailing on the
date of transactions. Exchange differences arising out of these
translations are included in Exchange Reserve under Reserves and
Surplus.
c) In the case of integral operations, assets and liabilities (other
than non-monetary items), are translated at the exchange rate
prevailing on the Balance Sheet date. Non-monetary items are carried at
historical cost. Revenue and expenses are translated at exchange rates
prevailing on the date of transactions. Exchange differences arising
out of these translations are charged to the Profit and Loss account.
11. Taxation
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.
Minimum alternative tax (MAT) paid in accordance to the tax laws, which
gives rise to future economic benefits in the form of adjustment of
future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax after
the tax holiday period. Accordingly, MAT is recognised as an asset in
the Balance Sheet when it is probable that the future economic benefit
associated with it will flow to the Company and the asset can be
measured reliably.
Deferred tax expense or benefit is recognised on timing differences
being the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. 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 the event of unabsorbed depreciation and carry forward of losses,
deferred tax assets are recognised only to the extent that there is
virtual certainty that sufficient taxable income will be available to
realise 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 realise these assets.
Advance taxes and provisions for current income taxes are presented in
the Balance Sheet after offsetting advance taxes paid and income tax
provisions arising in the same tax jurisdiction and the Company intends
to settle the asset and liability on a net basis.
The Company offsets deferred tax assets and deferred tax liabilities if
it has a legally enforceable right and these relate to taxes on income
levied by the same governing taxation laws.
12. Subsidies
Subsidies not specifically related to fixed assets are credited to
capital reserve.
Other revenue subsidies are credited to Profit and Loss account or
deducted from related expenses.
13. Investments
Long-term investments are stated at cost, less provision for other than
temporary diminution in value.
14. Other Provisions and Contingencies
A provision is recognised when the Company has a present legal or
constructive obligation as a result of past event and it is probable
that an outflow of resources will be required to settle the obligation,
in respect of which reliable estimate can be made.
Provisions (excluding retirement benefits) are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current best
estimates. Contingent liabilities are not recognised in the financial
statements, but are disclosed. A contingent asset is neither recognised
nor disclosed in the financial statements.
Mar 31, 2010
1. Basis of preparation
The fnancial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles (ÃGAAPÃ) under the historical
cost convention on the accrual basis of accounting and comply with the
accounting standards applicable in India and the provisions of the
Companies Act, 1956.
2. Use of estimates
The preparation of fnancial 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 fnancial statements and
reported amounts of income and expenses during the year. Example of
such estimates include provisions for doubtful debts, employee
benefits, provision for income taxes, the useful life of fxed assets,
etc..
3. Fixed assets
Fixed Assets are stated at cost, less accumulated depreciation. Costs
include all expenses incurred to bring the assets to its present
location and condition.
Depreciation is provided on straight line method on pro rata basis in
accordance with the provisions of Schedule XIV to the Companies Act,
1956, except that leasehold land and improvements to leasehold premises
is depreciated over the lease period on straight-line basis.
Capital advances represent outstanding advance paid to acquire fxed
assets.
4. Impairment of assets
At each Balance Sheet date, the Company reviews the carrying amounts of
its fxed assets to determine whether there is any indication that those
assets suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the
extent of impairment loss.
Recoverable amount is the higher of an assetÃs net selling price and
value in use. In assessing value in use, the estimated future cash fows
expected from the continuing use of the asset and from its disposal are
discounted to their present value using a pre-discount rate that
reflects the current market assessment of time value of money and the
risks specific to the asset.
Reversal of impairment loss is recognised immediately as income in the
Profit and Loss account.
5. Leases
Where the Company, as a lessor, leases assets under Finance leases such
amounts are recognised as receivables at an amount equal to the net
investment in the lease and the fnance income is based on a constant
rate of return on the outstanding net investment.
Lease arrangements where the risks and rewards incident to ownership of
an asset substantially vest with the lessor, are recognised as
operating leases. Lease rents under operating leases are recognised in
the Profit and Loss account on a straight-line basis.
6. Inventories
Components and spares are valued at lower of cost and net realizable
value. Cost is determined on the basis of specific identification
method.
Computer systems and software, components and spares intended for
customer support are written of over the effective life of the systems
maintained, as estimated by management.
7. Income
Sales
Income from sales of goods is recognised upon passage of risks and
rewards of ownership to the goods, which generally coincide with the
delivery.
Services
a) Income from services is recognized upon rendering of the services.
Income from maintenance contracts relating to the year is recognized
when the contracts are entered into on a time proportionate basis.
b) Revenue from software development on fixed price, fixed time frame
contracts is recognised as per the proportionate completion method. On
time and materials contracts, revenue is recognised as the related
services are rendered.
c) In respect of orders procured, for which sales are effected directly
to the customers by the vendors, the Company accounts only for the
commission, installation and other charges to which it is entitled.
8. Employee Benefits
a) Post-employment benefit plans
Contributions to defined contribution retirement benefit schemes are
recognized as an expense when employees have rendered services
entitling them to contributions. For defined benefit schemes, the cost
of providing benefits is determined using the Projected Unit Credit
Method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognised in full in the
Profit and Loss account for the period in which they occur. Past
service cost is recognised immediately to the extent that the benefits
are already vested, and otherwise is 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.
b) Short-term 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 such as paid annual leave, overseas social
security contributions and performance incentives.
c) Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognized as a liability at the present value of
the defined benefit obligation at the Balance Sheet date.
9. Research and Development
Research and Development expenditure is recognised in the Profit and
Loss account when incurred. Assets acquired for research and
development activity are capitalised and depreciated in the same manner
as other fxed assets.
10. Foreign currency transactions
a) Income and expenses in foreign currencies are converted at exchange
rates prevailing on the date of the transaction.
Exchange differences arising on restatement / settlement of foreign
currency monetary liabilities having an initial term of 12 months or
more that are incurred for acquisition of fxed assets are translated at
year end exchange rates and the resulting gains / losses are adjusted
against the cost of the fxed assets. Exchange differences arising on
restatement of other foreign currency monetary assets and liabilities,
having an initial term of 12 months or more, are accumulated in the
Foreign Currency Monetary Item Translation Difference Account and
amortised over the balance period of such long term asset/liability or
up to March 31,2011 whichever is earlier.
Other foreign currency liabilities and assets are restated at the rates
ruling at the year-end. Exchange differences arising on
restatement/settlement of foreign currency balances are adjusted in the
Profit and Loss account.
Premium or discount on forward exchange contracts are amortized and
recognized in the Profit and Loss account over the period of the
contract. Forward contracts and currency options 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) In the case of non-integral operations, assets and liabilities are
translated at the exchange rate prevailing on the Balance Sheet date.
Revenue and expenses are translated at exchange rates prevailing on the
date of transactions. Exchange differences arising out of these
translations are included in ÃExchange Reserveà under Reserves and
Surplus.
c) In the case of integral operations, assets and liabilities (other
than non-monetary items), are translated at the exchange rate
prevailing on the Balance Sheet date. Non-monetary items are carried at
historical cost. Revenue and expenses are translated at exchange rates
prevailing on the date of transactions.. Exchange differences arising
out of these translations are charged to the Profit and Loss account.
11. Taxation
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 IncomeTaxAct,
1961.Tax expense relating to foreign operations is determined in
accordance with tax laws applicable in countries where such operations
are domiciled.
Minimum alternative tax (MAT) paid in accordance to the tax laws, which
gives rise to future economic benefits in the form of adjustment of
future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax after
the tax holiday period. Accordingly, MAT is recognized as an asset in
the Balance Sheet when it is probable that the future economic benefit
associated with it will fow to the Company and the asset can be
measured reliably.
Deferred tax expense or benefit is recognised on timing differences
being the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. 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 the event of unabsorbed depreciation and carry forward of losses,
deferred tax assets are recognised only to the extent that there is
virtual certainty that sufficient taxable income will be available to
realise 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 realise these assets.
Advance taxes and provisions for current income taxes are presented in
the Balance Sheet after offsetting advance taxes paid and income tax
provisions arising in the same tax jurisdiction and the Company intends
to settle the asset and liability on a net basis.
The Company offsets deferred tax assets and deferred tax liabilities if
it has a legally enforceable right and these relate to taxes on income
levied by the same governing taxation laws.
12. Subsidies
Subsidies not specifically related to fxed assets are credited to
capital reserve.
Other revenue subsidies are credited to Profit and Loss account or
deducted from related expenses
13. Investments
Long-term investments are stated at cost, less provision for other than
temporary diminution in value.
14. Other Provisions and Contingencies
A provision is recognised when the Company has a present legal or
constructive obligation as a result of past event and it is probable
that an outflow of resources will be required to settle the obligation,
in respect of which reliable estimate can be made.
Provisions (excluding retirement benefits) are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current best
estimates. Contingent liabilities are not recognized in the financial
statements, but are disclosed. A contingent asset is neither recognized
nor disclosed in the financial statements.
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