2 Significant Accounting Policies
2.1 Basis of preparation of financial statements
The financial statements have been prepared in accordance with the Indian Accounting
Standards (referred to as "Ind AS") as notified under the Companies (Indian Accounting
Standards) Rules, 2015 read with Section 133 of the Companies Act, 2013 (as amended from
time to time) and presentation requirements of Division II of Schedule III to the Companies
Act, 2013, (Ind AS compliant Schedule III), as applicable to the standalone financial statement.
These financial statements have been prepared in Indian Rupee which is also the functional
currency of the Company and all values are rounded to the thousands, except when otherwise
indicated. These financial statements have been prepared on historical cost basis, except for
certain financial assets and liabilities which are measured at fair value or amortized cost at the
end of each reporting period, as explained in the accounting policies below.
2.2 Significant accounting judgements, estimates and assumptions.
The preparation of the Company's standalone financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of
contingent liabilities. Uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of assets or liabilities
affected in future periods.
Critical accounting estimates
i. Goodwill: Excess consideration paid over business value transferred under
scheme of arrangement is considered as Goodwill and will be impaired over a
period of time on straight line basis. Goodwill arising on business combinations is
carried at cost, net of accumulated impairment losses. Goodwill is not amortized
but is tested for impairment annually, or more frequently if indicators of
impairment exist, in accordance with Ind AS 36 - Impairment of Assets.
ii. Taxes: Deferred tax assets are recognized to the extent that it is probable that
taxable profit will be available against which the same can be utilized. A significant
management judgement is required to determine the amount of deferred tax assets
that can be recognized, based upon the likely timing and the level of future taxable
profits together with future tax planning strategies.
iii. Provisions and Contingent Liability: The timing of recognition and quantification
of the liability (including litigations) requires the application of judgement to
existing facts and circumstances, which can be subject to change. The carrying
amounts of provisions and liabilities are reviewed regularly and revised to take
account of changing facts and circumstances.
2.3 Current versus non-current classification
The Company presents assets and liabilities in the standalone balance sheet based on
current/ non-current classification.
An asset is treated as current when it is:
i. "Expected to be realized or intended to be sold or consumed in normal operating
cycle,"
ii. Held primarily for the purpose of trading,
iii. Expected to be realized within twelve months after the reporting period, or
iv. Cash or cash equivalent unless restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
i. It is expected to be settled in the company's normal operating cycle.
ii. It is held primarily for the purpose of being traded;
iii. It is due to be settled within twelve months after the reporting date; or
iv. The company does not have an unconditional right to defer settlement of the
liability for at least twelve months after the reporting date. Terms of a liability that
could, at the option of the counterparty, result in its settlement by the issue of
equity instruments do not affect its classification.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating cycle for current and non-current classification
Operating cycle is the time between the acquisition of assets for processing and their
realization in cash or cash equivalents. The company has taken Operating cycle to be twelve
months.
2.4 Fair value measurement of financial instruments
The Company measures financial instruments, such as, Investments at fair value at each
balance sheet date using valuation techniques. 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:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset
or liability
The principal or the most advantageous market must be accessible by the Company. The fair
value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's
ability to generate economic benefits by using the asset in its highest and best use or by selling
it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the standalone
financial statements are categorized within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable For assets and liabilities that are recognized in the
standalone financial statements on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by re-assessing categorization (based
on the lowest level input that is significant to the fair value measurement as a whole) at the
end of each reporting period.
For assets and liabilities that are recognized in the standalone financial statements on a
recurring basis, the Company determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorization (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above.
2.5 Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if
capitalization criteria are met, directly attributable cost of bringing the asset to its working
condition for the intended use and initial estimate of decommissioning, restoring and similar
liabilities. Any trade discounts and rebates are deducted in arriving at the purchase price.
Such a cost includes the cost of replacing part of the plant and equipment. When significant
parts of plant and equipment are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful lives. Likewise, when a major
inspection is performed, its cost is recognized in the carrying amount of the plant and
equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognized in profit or loss as incurred. Gains or losses arising from
derecognition of Property, plant and equipment are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognized in the
statement of profit and loss when the asset is derecognized.
2.6 Intangible asset
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortization and accumulated impairment losses. The useful lives of intangible
assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized
over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortization period and the amortization
method for an intangible asset with a finite useful life are reviewed at least at the end of each
reporting period with the affect of any change in the estimate being accounted for on a
prospective basis. 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 amortization
period or method, as appropriate, and are treated as changes in accounting estimates. The
amortization expense on intangible assets with finite lives is recognized in the statement of
profit and loss unless such expenditure forms part of carrying value of another asset.
Gains or losses arising from derecognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and are
recognized in the statement of profit and loss when the asset is derecognized.
2.7 Depreciation and Amortization
Goodwill arising on business combinations is carried at cost, net of accumulated impairment
losses. Goodwill is not amortized but is tested for impairment annually, or more frequently if
indicators of impairment exist, in accordance with Ind AS 36 - Impairment of Assets.
2.8 "Impairment of Financial and Non-Financial Assets"
"The impairment provisions for Financial Assets are based on assumptions about risk of
default and expected cash loss rates. The Company uses judgement in making these
assumptions and selecting the inputs to the impairment calculation, based on Company's past
history, existing market conditions as well as forward looking estimates at the end of each
reporting period."
In the case of non-financial assets, assessment of impairment indicators involves consideration
of future risks. Further, the company estimates the assets' recoverable amount, which is higher
of an asset's or Cash Generating Units (CGU's) fair value less costs of disposal and its 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.
2.9 Revenue Recognition
The company is primarily engaged in the business as "System Integrator, Security and
Surveillance, IOT Solutions, Software Products and Services" in the area of Information
Technology.
Revenue from operation
Revenues from customer contracts are considered for recognition and measurement when the
contract has been approved by the parties, in writing, to the contract, the parties to contract
are committed to perform their respective obligations under the contract, and the contract is
legally enforceable. Revenue is recognized upon transfer of control of promised products or
services ("performance obligations") to customers in an amount that reflects the consideration
the Company has received or expects to receive in exchange for these products or services
("transaction price"). When there is uncertainty as to collectability, revenue recognition is
postponed until such uncertainty is resolved.
Contract balances
i. Trade receivables: The amounts billed on the customer for work performed and are
unconditionally due for payment i.e., only passage of time is required before payment falls
due, are disclosed in the balance sheet as trade receivables.
ii. Contract liabilities: A contract liability is the obligation to transfer goods or services to a
customer for which the Company has received consideration or is due from the customer. If
a customer pays consideration before the Company transfers goods or services to the
customer, a contract liability is recognised when the payment is made or the payment is due
(whichever is earlier).
Contract liabilities are recognised as revenue when the Company performs under the contract.
Interest income
Interest income from a financial asset is recognised using an effective interest rate method.
Dividend
Dividend income is recognised when the Company's right to receive the payment is
established, which is generally when shareholders approve the dividend.
2.10 Taxes on income
Current income tax
Tax expense for the year comprises current and deferred tax. The tax currently payable is
based on taxable profit for the year. Taxable profit differs from net profit as reported in the
standalone statement of profit and loss because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Company's liability for current tax is calculated using the tax rates and tax
laws that have been enacted or substantively enacted by the end of the reporting period.
Current income tax relating to items recognised outside profit or loss is recognised outside
profit or loss (either in other comprehensive income or in equity). Current tax items are
recognised in correlation to the underlying transaction either in OCI or directly in equity.
Management periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes at
the reporting date.
"Deferred tax liabilities are recognised for all taxable temporary differences, except:"
i. When the deferred tax liability arises from the initial recognition of goodwill or an
asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss.
ii. In respect of taxable temporary differences associated with investments in
subsidiary and interests in joint ventures, when the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward
of unused tax credits and any unused tax losses. Deferred 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, except:
i. When the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
ii. In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred tax assets are
recognised only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which
the temporary differences can be utilised.
The carrying amount of deferred 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 tax asset to be utilised. Unrecognized deferred tax assets are re¬
assessed at each reporting date and are recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the year when the asset is realized or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or
loss (either in other comprehensive income or in equity). Deferred tax items are recognised in
correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to
set off current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
"All other acquired tax benefits realized are recognised in profit or loss."
2.11 Earnings Per Share
Basic earnings per equity share is computed by dividing the net profit attributable to the
equity shareholders of the Company by the weighted average number of equity shares
outstanding during the period. The weighted average number of equity shares outstanding
during the period is adjusted for events such as fresh issue, bonus issue that have changed the
number of equity shares outstanding, without a corresponding change in resources.
Diluted earnings per equity share is computed by dividing the net profit attributable to the
equity shares holders of the Company by the weighted average number of equity shares
considered for deriving basic earnings per equity share and also the weighted average number
of equity shares that could have been issued upon 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. Dilutive potential equity shares are determined
independently for each period presented.
2.12 Leases
Where the Company is lessee
The Company applies a single recognition and measurement approach for all leases, except
for short-term leases and leases of low-value assets. The Company recognises lease liabilities
to make lease payments and right-of-use assets representing the right to use the underlying
assets.
i) Right-of-use asset
"The Company recognises right-of-use assets at the commencement date of the lease (i.e., the
date the underlying asset is available for use). Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use assets are depreciated on
a straight-line basis over the shorter of the lease term and the estimated useful lives of the
assets.
The right-of-use assets are also subject to impairment."
ii) Lease Liabilities
At the commencement date of the lease, the company recognises lease liabilities measured at
the present value of lease payments to be made over the lease term. The lease payments
include fixed payments (including in substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on an index or a rate, and amounts expected
to be paid under residual value guarantees. The lease payments also include the exercise price
of a purchase option reasonably certain to be exercised by the Company and payments of
penalties for terminating the lease, if the lease term reflects the Company exercising the option
to terminate. Variable lease payments that do not depend on an index or a rate are recognised
as expenses (unless they are incurred to produce inventories) in the period in which the event
or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in the lease
is not readily determinable. After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments) or a change
in the assessment of an option to purchase the underlying asset.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e.,
those leases that have a lease term of 12 months or less from the commencement date and do
not contain a purchase option). It also applies the lease of low-value assets recognition
exemption to leases of office equipment that are considered to be low value. Lease payments
on short-term leases and leases of low-value assets are recognised as expense on a straight¬
line basis over the lease term.
2.13 Foreign currencies transactions and translation
The Company's financial statements are presented in Indian Rupee, which is also the
Company's functional currency.
In preparing the financial statements, transactions in the currencies other than the Company's
functional currency are recorded at the rates of exchange prevailing on the date of transaction.
At the end of each reporting period, monetary items denominated in the foreign currencies
are re-translated at the rates prevailing at the end of the reporting period. Non-monetary items
carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing on the date when the fair value was determined. Non-monetary items are
measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the retranslation or settlement of other monetary items are
included in the statement of profit and loss for the period.
2.14 Cash and Cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short¬
term deposits with an original maturity of three months or less, which are subject to an
insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and
cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral part of the Company's cash management.
2.15 Employee benefits
Defined benefit plans
Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial
valuation on Projected Unit Credit Method made at the end of the financial year. Actuarial
gains and losses for both defined benefit plans are recognized in full in the period in which
they occur in the statement of OCI.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling,
excluding amounts included in net interest on the net defined benefit liability and the return
on plan assets (excluding amounts included in net interest on the net defined benefit liability),
are recognised immediately in the standalone balance sheet with a corresponding debit or
credit to retained earnings through OCI in the period in which they occur. Re-measurements
are not reclassified to profit or loss in subsequent periods.
"Net interest is calculated by applying the discount rate to the net defined benefit liability or
asset. Past service costs are recognised in profit or loss on the earlier of:
• The date of the plan amendment or curtailment, and
• The date that the Company recognises related restructuring costs
Termination benefits
The Company recognizes termination benefit as a liability and an expense when the Company
has a present obligation as a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate
can be made of the amount of the obligation. If the termination benefits fall due more than 12
months after the balance sheet date, they are measured at present value of future cash flows
using the discount rate determined by reference to market yields at the balance sheet date on
government bonds.
Compensated Absences
The Company treats accumulated leave expected to be carried forward beyond twelve
months, as long-term employee benefit for measurement purposes. Such long-term
compensated advances are provided for based on the actuarial valuation using the projected
unit credit method at the year-end. Remeasurement gains/losses on defined benefit plans are
immediately taken to the Statement of Profit & Loss and are not deferred.
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