2 MATERIAL ACCOUNTING POLICIES:
2.1 Basis of Preparation:
In accordance with the notification issued by the Ministry
of Corporate Affairs, the Company has adopted Indian
Accounting Standards ("Ind AS") notified under the
Companies (Indian Accounting Standards) Rules, 2015
with effect from April 1,2017. The financial statements of
the Company are prepared and presented in accordance
with Ind AS.
The 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.
2.2 Summary of material accounting policies:
a) Use of Estimates:
The preparation of financial statements in conformity with
Ind AS requires the management to make judgements,
estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities
and the disclosure of contingent liabilities, at the end
of the reporting period. Although these estimates are
based on the management's best knowledge of current
events and actions, uncertainty about these assumptions
and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets
or liabilities in future periods. Any revision to accounting
estimates is recognized prospectively.
b) Current versus 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 realised or intended to be sold or
consumed in normal operating cycle.
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after
the reporting period, or
• 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 treated as current when:
• It is expected to be settled in normal operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after the
reporting period, or
• 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.
Defferred tax assets/ liabilities are classified as non¬
current assets/ liabilities.
c) Property, Plant & Equipment:
Property, plant and equipment ("PPE") are stated at
the cost of acquisition less accumulated depreciation
and write down for, impairment if any. Direct costs are
capitalised until the assets are ready to be put to use.
Subsequent costs are included in the asset's carrying
amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the entity and the
cost of the item can be measured reliably. All other
expenses on existing assets, including day-to-day repair
and maintenance expenditure and cost of replacing
parts, which do not meet the definition of PPE as per Ind
AS 16 are charged to the statement of profit and loss for
the period during which such expenses are incurred.
Gains or losses arising from de-recognition of PPE are
measured as the difference between the net disposal
proceeds and the carrying amount of PPE and are
recognized in the statement of profit and loss when the
PPE is derecognized.
d) Depreciation:
Depreciation is provided on straight-line method as per
the rates specified in schedule II of the Companies Act,
2013 ("the Act"). Depreciation for the assets purchased/
sold during the year is proportionately charged. The
assets" residual values and useful lives are reviewed at
each financial year end or whenever there are indicators
for revision, and adjusted prospectively.
e) Investment Properties:
I nvestment property represents properties held for
rental yields and/or for capital appreciation or both
rather than for:
(a) use in the production or supply of services or for
administrative purposes; or
(b) sale in the ordinary course of business.
Investment property is stated at the cost of acquisition
less accumulated depreciation.
Subsequent costs are included in the asset's carrying
amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the entity and the
cost of the item can be measured reliably. All other
expenses on existing assets, including day-to-day repair
and maintenance expenditure and cost of replacing
parts, which do not meet the definition of Investment
Property as per Ind AS 40 are charged to the statement of
profit and loss for the period during which such expenses
are incurred.
f) Intangible Assets:
Intangible assets acquired separately are measured on
intial cost. Subsequently, carried at cost less accumulated
amortization and accumulated impariment losses, if any.
I ntangible assets comprising of computer software is
amortised on a over a period of three years as estimated
by the management.
Gains or losses arising from de-recognition of an
intangible asset are measured as a difference between
the net disposal proceeds and the carrying amount of
the asset and are recognised in the statement of profit
or loss when asset is derecognised.
g) Leases:
Where Company is a Lessee:
The Company's lease asset classes primarily consist of
leases for buildings. The Company assesses whether a
contract contains a lease, at inception of a contract. 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:
(i) the contact involves the use of an identified asset
(ii) the Company has substantially all of the economic
benefits from use of the asset through the
period of the lease
(iii) the Company has the right to direct the use of
the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements in
which it is a lessee, except for leases with a term of twelve
months or less (short-term leases) and low value leases.
For these short-term and low value leases, the Company
recognizes the lease payments as an operating expense
on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they will
be exercised.
The lease liability is initially measured at amortized cost at
the present value of the future lease payments. The lease
payments are discounted using the interest rate implicit
in the lease or, if not readily determinable, using the
incremental borrowing rates in the country of domicile
of these leases. Lease liabilities are remeasured with a
corresponding adjustment to the related right of use
asset if the Company changes its assessment if whether
it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments have
been classified as financing cash flows.
The borrowing rate applied to lease liabilities for
discouting is 12.55%
h) Employee Benefits:
(i) Short term employee benefits:
The employee benefits payable wholly within
twelve months of rendering the service are
classified as short term employee benefits. Benefits
such as salaries, leave travel allowance, short term
compensated absences etc. and the expected cost
of bonus are recognised in the period in which the
employee renders the related service.
(ii) Defined Benefit Plans:
Gratuity, which is a defined benefit plan, is accrued
based on an independent actuarial valuation, which
is done based on project unit credit method as at
the balance sheet date. The Company recognizes
the net obligation of a defined benefit plan in its
balance sheet as an asset or liability. Gains and
losses through re-measurements of the net defined
benefit liability/ (asset) are recognized in other
comprehensive income. In accordance with Ind
AS, re-measurement gains and losses on defined
benefit plans recognized in OCI are not to be
subsequently reclassified to statement of profit and
loss. As required under Ind AS compliant Schedule
III, the Company recognizes re-measurement gains
and losses on defined benefit plans (net of tax) to
retained earnings.
The Company doesn't have a policy for encashment
of leave
i) Revenue Recognition:
The Company derives revenues primarily from IT
related services. Effective April 1, 2018, the Company
has adopted Ind AS 115, "Revenue from Contracts with
Customers". Revenue is recognized upon transfer of
control of promised services to customers in an amount
that refelects the considereation we expect to receive in
for those services.
Revenue on time-and-material contracts are recognized
as the related services are performed and revenue from
the end of the last invoicing to the reporting date is
recognized as unbilled revenue. Revenue from fixed-
price, fixed-timeframe contracts, where the performance
obligations are satisfied over time and where there is
no uncertainty as to measurement or collectability of
consideration, is recognized as per the percentage-
of-completion method. When there is uncertainty as
to measurement or ultimate collectability, revenue
recognition is postponed until such uncertainty is
resolved. Efforts or costs expended have been used to
measure progress towards completion as there is a direct
relationship between input and productivity.
The Company recognised incentive from government in
respect of Service Exports from India Scheme based on
claim lodged by the Company.
j) Taxation:
I ncome 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.
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 with the tax laws in India, 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 in future years. Accordingly,
MAT is recognised as an asset in the balance sheet when
the asset can be measured reliably and it is probable that
the future economic benefit associated with the assets
will fructify.
Deferred income tax is recognized on temporary
differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts
for financial reporting purposes, 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 for all
deductible temporary differences, carry forward of
unused tax credits and unused tax losses, 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 balance sheet 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 income tax assets and liabilities are measured
at the tax rates that are expected to apply in the period
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 balance sheet date.
k) Inventories:
Cost is ascertained on a weighted average basis, is
defined as being all expenditure, which has been
incurred in bringing the product or service to its present
location and condition or net realizable values whichever
is lower. Net realizable value is the estimated selling price
in the ordinary course of business, less estimated costs
of completion and estimated costs necessary to make
the sale.
l) Foreign Currency Transactions:
Functional Currency:
The functional currency of the Company is the
Indian rupee.
Transactions and translations:
Foreign currency transactions are recorded at exchange
rates prevailing on the date of the transaction. Foreign
currency denominated monetary assets and liabilities
are restated into the functional currency using exchange
rates prevailing on the balance sheet date. Gains and
losses arising on settlement and restatement of foreign
currency denominated monetary assets and liabilities are
included in the statement of profit and loss.
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