2. SIGNIFICANT ACCOUNTING POLICIES
a) Statement of compliance
These financial statements have been prepared in accordance with Ind AS as notified under
the Companies (Indian Accounting Standards)Rules, 2015 read with Section 133 of the
Companies Act, 2013 read with rule 3 of companies (Indian accounting
standards)Rules,2015("fre rules")(as amended from time to time).
b) Basis of preparation
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.
c) Use of estimates and judgements
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, is in respect of impairment of investments, useful lives of property, plant and
equipment, valuation of deferred tax assets, provisions and contingent liabilities.
Impairment of investments
The Company reviews its carrying value of investments carried at amortized cost annually,
or more frequently when there is indication for impairment. If the recoverable amount is
less than its carrying amount, the impairment loss is accounted for.
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.
Valuation of deferred tax assets
The Company reviews the carrying amount of deferred tax assets at the end of each
reporting period.
Contingencies
Management judgement is required for estimating the possible inflow/ outflow of resources,
if any, in respect of contingencies/ claims/litigations against the Company/by the
Company as it is not possible to predict the outcome of pending matters with accuracy.
Defined Benefit Plans
The present value of the gratuity obligation is determined using actuarial valuation. An
actuarial valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount rate, rate of
increment in salaries and mortality rates. Due to complexities involved in the valuation and
its long-term nature, a defined benefit obligation is highly sensitive to changes in these
assumptions. All the assumptions are reviewed at each reporting date.
Fair Value measurement of financial instruments
When the fair values of financial assets and financial liabilities on reporting date cannot be
measured based on quoted prices in active markets, their fair value is measured using
valuation techniques i.e., the DCF model. The inputs to these models are taken from
observable markets.
Intangibles
Internal technical or user team assess the useful lives of Intangible assets. Management
believes that assigned useful lives are reasonable.
d) Current Vs Non-current classifications
The Company presents assets and liabilities in the balance sheet based on current / non¬
current classification.
An asset is treated as current when it satisfies the below mentioned criteria:
i. Expected to be realised or intended to be sold or consumed in normal operating cycle;
ii. Held primarily for the purpose of trading;
iii. Expected to be realised 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 assets.
A liability is classified as current when it satisfies the below mentioned criteria:
i. Expected to settle the liability in normal operating cycle;
ii. Held primarily for the purpose of trading;
iii. Due to be settled within twelve months after the reporting period, or
iv. 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 noncurrent. Deferred tax assets and liabilities are
classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their
realisation in cash and cash equivalents.
e) Dividends
Annual dividend distribution to the shareholders is recognized as a liability in the
period in which the dividend is approved by the shareholders. Any interim dividend
paid is recognized on approval by Board of Directors. Dividend payable and
corresponding tax on dividend distribution is recognized directly in equity.
f) Revenue recognition
1) Digital Marketing Services:
i) The Contracts between the Company and its Customers are either time or material
contracts or fixed price contracts.
ii) Revenue from fixed price contracts is recognized according to the milestones achieved as
specified in the contracts on the proportionate-completion method based on the work
completed. Any anticipated losses expected upon the contract completion are
recognized immediately. Changes in job performance, conditions and estimated
profitability may result in revisions and corresponding revenues and costs are
recognized in the period in which such changes are identified. Deferred revenue
represents amounts billed in excess of revenue earned for which related services are
expected to be performed in the next operating cycle.
iii) In respect of time and material contract, revenue is recognized in the period in which the
services are provided and related costs are incurred.
iv) Revenue from product sale and licensing arrangements are recognized on delivery and
installation.
v) Revenue is reported net of discounts, indirect and service taxes.
2) Software Development:
i) Income from software development is accounted for on the basis of Software developed
and billed to clients on acceptance and/ or on the basis of man days/man hours as per the
terms of contract.
ii) Revenue from professional services consist primarily of revenue earned from services
performed on a 'time and material' basis. The related revenue is recognized as and when
the services are performed and related costs are incurred.
iii) Revenue from software development services includes revenue from time and material
and fixed price contracts are recognized as related services are performed.
iv) Revenue from fixed price contracts is recognized according to the milestones
achieved as specified in the contracts on the proportionate-completion method based
on the work completed. Any anticipated losses expected upon the contract
completion are recognized immediately. Changes in job performance, conditions and
estimated profitability may result in revisions and corresponding revenues and costs
are recognized in the period in which such changes are identified. Deferred revenue
represents amounts billed in excess of revenue earned for which related services are
expected to be performed in the next operating cycle.
v) Revenue is not recognized on the grounds of prudence, until realized in respect of
liquidated damages, delayed payments as recovery of the amounts are not certain.
vi) Revenue is reported net of discounts, indirect and service taxes.
g) Dividend income is recorded when the right to receive payment is established.
Interest income is recorded using the effective interest method.
h) Leases
The Company's lease asset classes primarily consist of leases for land and 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 contract 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 and (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 (ROU) asset and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for
leases with a term of 12 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 ROU assets are initially recognized
at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently measured at cost less accumulated
depreciation and impairment losses. ROU assets are depreciated from the
commencement date on a straight-line basis over the shorter of the lease term and useful
life of the underlying asset.
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 re-measured with a
corresponding adjustment to the related ROU asset if the Company changes its
assessment of whether it will exercise an extension or a termination option
i) Cost recognition
Costs and expenses are recognized as and when incurred and have been classified according
to their nature.
The costs of the Company are broadly categorized in employee benefit expenses,
depreciation and amortization and other operating expenses. Employee benefit expenses
include employee compensation, allowances paid, contribution to various funds and staff
welfare expenses. Other operating expenses mainly include fees to external consultants, cost
of running its facilities, travel expenses, cost of equipment and software licenses,
communication costs, allowances for delinquent receivables and advances and other
expenses. Other expenses are an aggregation of costs which are individually not material
such as commission and brokerage, recruitment and training, entertainment etc.
j) Foreign currency transactions
i. Functional and Presentation Currency:
The Company's functional and presentation currency is Indian National Rupee.
ii. Initial Recognition:
Foreign currency transactions are recorded in the presentation currency, by applying to the
foreign currency amounts the exchange rate between the Presentation currency and the
foreign currency at the date of the transaction.
iii. Conversion on reporting date:
Foreign currency monetary items are reported using the closing rate. Non-monetary items
that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions.
iv. Exchange Differences:
Exchange difference arising on the settlement of monetary items or on Presenting monetary
items of Company at rates different from those at which they were initially recorded during
the year or presented in previous financial statements are recognized as income or as
expenses in the year in which they arise.
k) Income taxes
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 and 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 taxes
The current income tax expense includes income taxes payable by the Company, its
branches in India and overseas. The current tax payable by the Company in India is Indian
income tax payable on worldwide income.
The 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 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.
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.
Deferred tax assets include 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 realised.
l) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and
a financial liability or equity instrument of another entity.
1. Financial Assets.
i) Initial recognition and measurement:
All financial assets are recognized initially at fair value plus, in the case of financial
assets not recorded at fair value through profit or loss, transaction costs that are
attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in statement of profit
or loss. Purchases or sales of financial assets that require delivery of assets within a
time frame established by regulation or convention in the market place (regular way
trades) are recognized on the trade date, i.e., the date that the Company commits to
purchase or sell the asset.
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 to collect contractual cash
flows and the contractual terms of the financial assets 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 on specified dates that are solely payments of principal and
interest on the principal amount outstanding and selling financial assets.
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.
iii. Derecognition:
A financial asset or where applicable, a part of a financial asset is primarily derecognised
when: a. The rights to receive cash flows from the asset have expired, or b. The
Company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third
party under a 'pass-through' arrangement; and either (a) the Company has transferred
substantially all the risks and rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, it evaluates if and to what extent it has
retained the risks and rewards of ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of the asset, nor transferred control of
the asset, the Company continues to recognise the transferred asset to the extent of the
Company's continuing involvement.
iv. Impairment of financial assets:
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model
for measurement and recognition of impairment loss on the debt instruments, that are
measured at amortised cost e.g., loans, debt securities, deposits and trade receivables.
Expected credit loss is the difference between all contractual cash flows that are due to
the Company in accordance with the contract and all the cash flows that the entity
expects to receive.
The management uses a provision matrix to determine the impairment loss on the
portfolio of trade and other receivables. Provision matrix is based on its historically
observed expected credit loss rates over the expected life of the trade receivables and is
adjusted for forward looking estimates.
Expected credit loss allowance or reversal recognised during the period is recognised as
income or expense, as the case may be, in the statement of profit and loss. In case of
balance sheet, it is shown as reduction from the specific financial asset.
2.Financial liabilities
Financial liabilities are measured at amortised cost using the effective interest method.
Equity instruments
An equity instrument is a contract that evidences residual interest in the assets of the
company after deducting all of its liabilities. Equity instruments recognised by the
Company are recognised at the proceeds received net off direct issue cost.
i) Initial recognition and measurement:
At initial recognition, all financial liabilities are recognised at fair value and in the case
of loans, borrowings and payables, net of directly attributable transaction costs.
ii) Subsequent measurement:
a. Financial liabilities at fair value through profit or loss:
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value
through profit or loss. Gain or losses on liabilities held for trading are recognised in the
profit or loss.
b. Financial liabilities at amortised cost:
Amortised cost, in case of financial liabilities with maturity more than one year, is
calculated by discounting the future cash flows with effective interest rate.
The effective interest rate amortisation is included as finance costs in the Statement
of Profit and Loss.
Financial liability with maturity of less than one year is shown at transaction value.
iii. Derecognition:
A financial liability is derecognised when the obligation under the liability is discharged
or cancelled or expires. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss as other income or finance costs.
m) Cash and cash equivalents
The Company 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. Cash and cash equivalents consist of balances with
banks which are unrestricted for withdrawal and usage.
n) Financial Guarantee Contracts:
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to
make payment when due in accordance with original or modified terms of a debt
instrument.
The Company measures any financial guarantee on initial recognition at their fair value.
Subsequently these contracts are measured at the higher of:
a. the amount of the loss allowance determined as per impairment requirements of Ind
AS 109, and
b. the amount initially recognised, less where appropriate, cumulative amount of
income recognized in accordance with the principles of Ind AS 18.
o) Fair V alue Measurement:
The Company measures financial instruments at fair value at each balance sheet date.
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 such asset or liability,
or in the absence of a principal market, in the most advantageous market which is
accessible to 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 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:
a. Level 1 - Quoted (unadjusted market prices) in active markets for identical assets or
liabilities.
b. Level 2 - Valuation techniques for which the lowest level input that is significant to
the fair value measurements is directly or indirectly observable.
c. Level 3 - Valuation techniques for which the lowest level input that is significant to
the fair value measurement is unobservable.
p) Investment in subsidiaries
Investment in subsidiaries are measured at cost less impairment.
q) Property, plant and equipment
Property, plant and equipment are stated at cost net of input tax credits, less
accumulated depreciation and accumulated impairment losses, if any. Cost comprises
the purchase price and all attributable cost, to bring the asset to its working condition for
its intended use. Borrowing costs relating to acquisition of property, plant and
equipment which take substantial period of time to get ready for its intended use are
also included to the extent they relate to the period till such assets are ready to put to
use.
The Company adopted cost model as its accounting policy, in recognition of the
property, plant and equipment and recognises transaction value as the cost.
An item of Property, Plant and Equipment is derecognised upon disposal or when no
future economic benefits are expected from its use. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is recognised in the Statement of Profit
and Loss. Property, Plant and Equipment which are found to be not usable or retired
from active use or when no further benefits are expected from their use are removed
from property, plant and equipment and the carrying amount net of scrap value, if any
is charged to Statement of Profit and Loss.
The improvements/modifications carried on the lease hold land/property are
recognised as lease hold improvements and are written off over the primary lease period
or the life of such improvement whichever is lower.
r) Intangible assets
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 consist of rights under licensing agreement and software licences
which are amortised over license period which equates the useful life ranging between
5-6 years on a straight line basis.
s) Impairment of Non-financial assets
i. The carrying amounts of assets are reviewed at each balance sheet date if there is
any indication of impairment based on internal/ external factors. An impairment
loss is recognized wherever the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is the greater of the asset's net
selling price and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average cost of
capital. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
ii. Reversal of impairment losses recognised in prior years is recorded when there is
an indication that the impairment losses recognised for the asset are no longer
existing or have decreased.
t) Employee benefits
i. Defined benefit plans
For defined benefit plans, 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 other
comprehensive income for 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 benefit 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 deductions in future
contributions to the scheme.
ii. Defined contribution plans
Employer's contribution to provident fund/ employee state insurance which is
in the nature of defined contribution scheme is expensed off when the
contributions to the respective funds are due. There are no other obligations
other than the contribution payable to the fund.
iii. Compensated absences
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 an actuarially determined liability at the present value of the
defined benefit obligation at the Balance sheet date.
u) Earnings per share
Basic earnings per share are 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.
v) Borrowing Costs:
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 capitalised as part of the cost of the asset.
All other borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity incurs in
connection with the borrowing of funds. Borrowing cost also includes exchange
differences to the extent regarded as an adjustment to the borrowing costs.
w) Segment Reporting:
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief operating decision maker ("CODM").
The board of directors of the company has identified the Chairman and
Managing Director as the CODM.
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