| 1. Basis of preparation of financial statements
The accompanying financial statements are prepared in accordance with
Indian Generally Accepted Accounting Principles (GAAP) under the
historical cost convention, on the basis of a going concern basis,
while revenue, expenses, assets and Liabilities accounted/recognized on
accrual basis. GAAP comprises mandatory accounting standards issued by
the Institute of Chartered Accountants of India (ICAI), the provisions
of the Companies Act, 1956. Accounting policies are consistently
applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a
change in the accounting policy hitherto in use.
Management evaluates all recently issued or revised accounting
standards on an ongoing basis. The financial statements are prepared
under the historical cost convention. Recognition of income and
expenses, accrual basis of accounting is followed.
2. Use of Estimates
The preparation of financial statements in conformity with GAAP
requires Management to make estimates and assumptions that affect the
reported balances of assets and liabilities and disclosures relating to
contingent assets and liabilities as at the date of the financial
statements and reported amounts of income and expenses during the
period. Examples of such estimates include provisions for doubtful
debts, future obligations under retirement benefit plans, income taxes,
post-sales customer support and the useful lives of fixed assets and
intangible assets.
Management periodically assessed using external and internal sources
whether there is an indication that an asset may be impaired.
Contingencies are recorded when it is probable that a liability will be
incurred, and the amount can be reasonably estimated. Actual results
could differ from those estimates.
3. Revenue Recognition
Revenue from contracts priced on a time and material basis are
recognised when services are rendered and related costs are incurred.
Revenue from turnkey contracts, which are generally time bound fixed
price contracts, are recognised over the life of the contract using the
proportionate completion method, with contract costs determining the
degree of completion. Foreseeable losses on such contracts are
recognised when probable.
Revenue from the sale of equipments are recognised upon delivery, which
is when the title passes to the customer.
Revenue from sale of software licenses are recognised upon delivery.
Revenue from maintenance contracts are recognised on pro-rata basis
over the period of the contract.
In respect of Business Process Outsourcing (BPO) services, revenue on
time and material and unit priced contracts is recognised as the
related services are rendered, whereas revenue from fixed price
contracts is recognised using the proportionate completion method with
contract cost determining the degree of completion.
Revenue is reported net of discounts.
4. Expenditure
Expenses are accounted on accrual basis and provisions are made for all
known losses and liabilities.
5. Cash and cash equivalents
The Group considers all highly liquid financial instruments, which are
readily convertible into known amounts of cash that are subject to an
insignificant risk of change in value and having original maturities of
three months or less from the date of purchase, to be cash equivalents.
6. Fixed Assets, intangible assets and capital work-in-progress
Fixed Assets are stated at cost, less accumulated depreciation. All
direct costs are capitalized until fixed assets are ready for use
including taxes, duties, freight and other incidental expenses relating
to acquisition and installation. Capital work-in-progress comprises
outstanding advances paid to acquire fixed assets, and the cost of
fixed assets that are not yet ready for their intended use at the
balance sheet date. Intangible assets are recorded at the consideration
paid for acquisition.
7. Depreciation and amortization
Depreciation on fixed assets is applied on straight-line method,
pro-rata for the period of usage, in accordance with the rates
prescribed under schedule XIV of the Companies Act, 1956.
8. Income tax
Income taxes are computed using the tax effect accounting method, in
accordance with the Accounting Standard (AS 22) "Accounting for Taxes
on Income" which includes current taxes and deferred taxes. Deferred
income taxes reflect the impact if current year timing differences
between taxable income and accounting income for the year and the
relevant of timing difference of earlier years. Deferred tax asset and
liabilities are measured at the tax rates that are expected to apply to
the period when the asset / liability is realized, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the
balance sheet date. Deferred Tax assets are recognized and carried
forward only to the extent that there is a reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.
9. Employee Benefits
The company has recognized the employee benefits in the books of
accounts as per management estimates.
10. Provisions, Contingent liabilities and Contingent assets
A provision is recognised when the Group 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 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. A contingent asset is neither recognised
nor disclosed in the financial statements.
11. Earnings per share
In determining earnings per share, the company considers the net profit
after tax expense. The number of shares used in computing basic
earnings per is the weighted average shares used in outstanding during
the period.
12. Investments
Long term trade investments are stated at cost & all other investments
are carried at lower of cost or fair value.
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