2.01 MATERIAL ACCOUNTING POLICIES AND KEY ACCOUNTING ESTIMATES AND JUDGEMENTS
MATERIAL ACCOUNTING POLICIES:
a) Basis of Preparation of Financial Statements:
These financial statements are the separate financial statements of the Company (also called standalone financial
statements) prepared in accordance with Indian Accounting Standards (‘Ind AS’) notified under Section 133 of the
Companies Act, 2013, read together with the Companies (Indian Accounting Standards) Rules, 2015 as amended and
other relevant provision of the Act. The accounting policies are applied consistently to all the periods presented in the
financial statements.
The standalone financial statements of the Company have been prepared and presented in accordance with Ind AS.
These standalone financial statements have been prepared and presented under the historical cost convention, on the
accrual basis of accounting except for certain financial assets and financial liabilities that are measu red at fair values at the
end of each reporting period, as stated in the accounting policies set out below. The accounting policies have been applied
consistently over all the periods presented in these standalone financial statements.
b) Use of estimates, assumptions and judgements
The preparation of the standalone financial statements in conformity with Ind AS requires the management to make
estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities on the date of the standalone financial statements, and the reported amounts of revenues
and expenses for the year reported. Actual results could differ from those estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the
estimates are revised, and future periods are affected.
The key source of estimation of uncertainty as at the date of standalone 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 the following:
2.02 Summary of Significant Accounting Policies:
a) Current vs non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
An asset is treated as current when it is:
• Expected to be realized or intended to be sold or consumed in normal operating cycle.
• Held primarily for purpose of trading.
• Expected to be realized within twelve months after the reporting period.
• Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months
after the reporting period.
All other assets are classified as non-current.
A liability is treated as current when it is:
• It is expected to settle in the normal operating cycle.
• It is due to be settled within twelve months after the reporting date.
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current.
b. Revenue
The Company derives its revenues primarily from software development, Software implementation, maintenance of
software/ hardware and related services, business process services, Sale of IT and other products.
Revenue is recognized on satisfaction of performance obligation upon transfer of control of promised products or services
to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products
or services. The Company does not expect to have any contracts where the period between the transfer of the promised
goods or services to the customer and payment by the customer exceeds one year. As a consequence, it does not adjust
any of the transaction prices for the time value of money.
Goods and Service tax (GST) is not received by the Company on its own account. Rather, it is tax collected on service
rendered by the seller on behalf of the government. Accordingly, it is initially included and subsequently gets excluded from
the gross revenue.
Revenues from software services & projects comprise income from time-and-material and fixed price contracts.
Revenue from time and material contracts is recognized when the services are rendered in accordance with the terms of
contracts with clients. Revenue from fixed price contracts is recognized using the percentage-of-completion method (POC
method), calculated as the proportion of the cost of effort incurred up to the reporting date to estimated cost of total effort.
The Company uses judgement to estimate the future cost-to-completion of the contracts which is used to determine the
degree of completion of the performance obligation.
Maintenance revenue is recognized ratable over the period of underlying maintenance agreements.
Revenue from sale of services is shown as net of applicable discounts and pricing incentives to customer.
Revenues from sale of goods is recognized on transfer of significant risks and rewards where it is probable that economic
benefits will flow to the Company and there is neither continuing managerial involvement nor effective control over the
goods sold.
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.
Accrued revenues are recognised when there is excess of revenue earned over billings on contracts. Accrued revenues are
classified as accruals - 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 revenue is recognised when there are billings in excess of revenues. The billing schedules agreed with
customers could include periodic performance-based payments and/or milestone-based progress payments. Advances
received for services are reported as liabilities until all conditions for revenue recognition are met.
Interest income is recognized as it accrues in the Statement of Profit and Loss using effective interest rate method.
Dividend income is recognized in the Statement of Profit and Loss on ly when the right to receive the dividend is established,
it is probable that the economic benefit associated with the Dividend will flow to the Company, and the amount of the
dividend can be reliably measure
c. Property, Plant and Equipment
Measurement and recognition:
An item of property, plant and equipment that qualifies as an asset is measured on initial recognition at cost. Following initial
recognition, items of property, plant and equipment are carried at its cost less accumulated depreciation and accumulated
impairment losses.
The Company identifies and determines cost of each part of an item of property, plant and equipment separately, if the part
has a cost which is significant to the total cost of that item of property, plant and equipment and has useful life that is
materially different from that of the remaining item.
The cost of an item of property, plant and equipment comprises of its purchase price including import duties and other non¬
refundable purchase taxes or levies, directly attributable cost of bringing the asset to its working condition for its intended
use and the initial estimate of decommissioning, restoration and similar liabilities, if any. Any trade discounts and rebates
are deducted in arriving at the purchase price. Cost includes cost of replacing a part of a plant and equipment if the
recognition criteria are met. Expenditure related to plans, designs and drawings of buildings or plant and machinery is
capitalized under relevant heads of property, plant and equipment if the recognition criteria are met. Costs in nature of
repairs and maintenance are recognized in the Statement of Profit and Loss as and when incurred.
Capital work in progress and Capital advances:
Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work in progress. Advances
given towards acquisition of fixed assets outstanding at each Balance Sheet date are disclosed as Other Non-Current
Assets.
Depreciation:
Depreciation on each part of an item of property, plant and equipment is provided using the Straight-Line Method based on
the useful life of the asset as estimated by the management and is charged to the Statement of Profit and Loss as per the
requirement of Schedule II of the Companies Act, 2013. The estimate of the useful life of the assets has been assessed
based on technical advice which considers the nature of the asset, the usage of the asset, expected physical wear and tear,
the operating conditions of the asset etc. The estimated useful life of items of property, plant and equipment is mentioned
below:
Freehold land is not depreciated. Leasehold land and Leasehold improvements are amortized over the period of the lease.
The Company, based on the historical experience & internal technical assessment and management estimate,
depreciates certain items of property plant and equipment (as mentioned above) over estimated useful lives which are
different from the useful lives prescribed under Schedule II to the Companies Act, 2013. The management believes that
these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be
used.
The useful lives, residual values of each part of an item of property, plant and equipment and the depreciation methods are
reviewed at the end of each financial year. If any of these expectations differ from previous estimates, such change is
accounted for as a change in an accounting estimate.
All assets Costing up to ' 5000/- are expensed out in the year of purchase/use.
Derecognition:
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic
benefits are expected from its use or disposal. The gain or loss arising from the Derecognition of an item of property, plant
and equipment is measured as the difference between the net disposal proceeds and the carrying amount of the item and is
recognized in the Statement of Profit and Loss when the item is derecognized.
Intangible Assets
Measurement at recognition:
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets arising on acquisition of
business are measured at fair value as at date of acquisition. Internally generated intangibles including research cost are
not capitalized and the related expenditure is recognized in the Statement of Profit and Loss in the period in which the
expenditure is incurred.
Amortization:
Intangible Assets with finite lives are amortized on a Straight-Line basis over the estimated useful economic life. The
amortization expense on intangible assets with finite lives is recognized in the Statement of Profit and Loss. The estimated
useful life of intangible assets is mentioned below:
The amortization period and the amortization method for an intangible asset with finite useful life is reviewed at the end of
each financial year. If any of these expectations differ from previous estimates, such change is accounted for as a change in
an accounting estimate.
Derecognition:
The carrying amount of an intangible asset is derecognized on disposal or when no future economic benefits are expected
from its use or disposal. The gain or loss arising from the Derecognition of an intangible asset is measured as the difference
between the net disposal proceeds and the carrying amount of the intangible asset and is recognized in the Statement of
Profit and Loss when the asset is derecognized.
d. Impairment of Assets:
Carrying Amount of Tangible assets, Intangible assets, Investment in Subsidiaries (which are carried at the cost) are tested
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair
value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an
appropriate valuation model is used.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or company’s assets (cash¬
generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of
the impairment at the end of each reporting period.
e) Borrowi n g costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings
and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the
interest cost. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective
asset. All other borrowing costs are expensed in the period they occur.
f) Financial Instruments
Financial assets and financial liabilities are recognized when a Company becomes a party to the contractual provisions of
the instruments.
Initial Recognition and Measurement - Financial Assets and Financial Liabilities
Financial assets and financial 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 and ancillary costs related to borrowings) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in the
Statement of Profit and Loss.
Classification and Subsequent Measurement: Financial Assets.
The Company classifies financial assets as subsequently measured at amortized cost, fair value through Other
Comprehensive Income (“FVTOCI”) or fair value through profit or loss (“FVTPL”) on the basis of following:
- the entity’s business model for managing the financial assets and
- the contractual cash flow characteristics of the financial asset.
Amortized Cost:
A financial asset is classified and measured at amortized cost if both of the following conditions are met:
- the financial asset is held within a business model whose objective is to hold financial 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.
FVTOCI:
A financial asset is classified and measu red at FVTOCI if both of the following conditions are met:
- the financial asset is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling financial assets; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
FVTPL:
A financial asset is classified and measured at FVTPL unless it is measured at cost or at FVTOCI.
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending
on the classification of the financial assets.
g) Impairment of Financial Assets:
The Company assesses on a forward-looking basis the expected credit loss associated with its assets carried at amortized
cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The Company determines if there has been a significant increase in credit risk of the financial asset since initial recognition,
an amount of reasonable provision is measured and recognized as loss of allowance on the basis of historical experience
and internal technical analysis.
Classification and Subsequent measurement: Financial Liabilities
The Company’s financial liabilities include trade and other payables, loans an borrowings including bank overdrafts,
financial guarantee contracts and derivative financial instruments.
Financial Liabilities at FVTPL:
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or are designated upon initial
recognition as FVTPL.
Gains or losses on financial liabilities held for trading are recogn ized in the Statement of Profit and Loss.
Other Financial Liabilities:
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized
cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter
period, to the net carrying amount on initial recognition.
Derecognition of Financial Assets and Financial Liabilities:
The Company de-recognizes 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.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
h) Investment in Subsidiaries & Associates:
A Subsidiary is an entity that is controlled by another entity. An investor controls an investee if and only if the investor has the
following; (i) Power over the investee, (ii) exposure, or rights, to variable returns from its involvement with the investee and
(iii) the ability to use its power over the investee to affect the amount of the investor’s returns.
The Company’s investments in its Subsidiary are accounted for at cost.
i) Fair Value
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above.
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. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the
fair value hierarchy that categorizes into three levels, described as follows, the inputs to valuation techniques used to
measure value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or
liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
Level 1 — quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3 — inputs that are unobservable for the asset or liability Business
For assets and liabilities that are recognized in the financial statements at fair value on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of
each reporting period and discloses the same.
j) Foreign Currency Translation
Initial Recognition:
On initial recognition, transactions in foreign currencies entered into by the Company are recorded in the functional
currency (i.e. Indian Rupees), by applying to the foreign currency amount, the spot exchange rate between the functional
currency and the foreign currency at the date of the transaction. Exchange differences arising on foreign exchange
transactions settled during the year are recogn ized in the Statement of Profit and Loss.
Measurement of foreign currency items at reporting date:
Foreign currency monetary items of the Company are translated at the closing exchange rates. Non-monetary items that
are measured at historical cost in a foreign currency, are translated using the exchange rate at the date of the transaction.
Non-monetary items that are measured at fair value in a foreign currency, are translated using the exchange rates at the
date when the fair value is measured.
Exchange differences arising out of these translations are recognized in the Statement of Profit and Loss.
k) IncomeTaxes
Tax expense is the aggregate amount included in the determination of profit or loss for the period in respect of current tax
and deferred tax.
Current tax:
Current tax is the amount of income taxes payable in respect of taxable profit for a period. Taxable profit differs from ‘profit
before tax’ as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible in accordance with applicable tax laws.
Current tax is measured using tax rates that have been enacted by the end of reporting period for the amounts expected to
be recovered from or paid to the taxation authorities.
Deferred tax:
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit under Income Tax Act, 1961.
Deferred tax liabilities are generally recognized for all taxable temporary differences. However, in case of temporary
differences that arise from initial recognition of assets or liabilities in a transaction (other than business combination) that
affect neither the taxable profit nor the accounting profit, deferred tax liabilities are not recognized. Also, for temporary
differences if any that may arise from initial recognition of goodwill, deferred tax liabilities are not recognized.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent it is probable that taxable
profits will be available against which those deductible temporary difference can be utilized. In case of temporary
differences that arise from initial recognition of assets or liabilities in a transaction (other than business combination) that
affect neither the taxable profit nor the accounting profit, deferred tax assets are not recogn ized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow the benefits of part or all of such deferred tax
assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the
Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
Presentation of current and deferred tax:
Current and deferred tax are recognized as income or an expense in the Statement of Profit and Loss, except when they
relate to items that are recognized in Other Comprehensive Income, in which case, the current and deferred tax income/
expense are recognized in Other Comprehensive Income.
The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the
recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously. In case of deferred tax assets and deferred tax liabilities, the same are offset if the Company has a legally
enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and
deferred tax liabilities relate to income taxes levied by the same tax authority on the Company.
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