Note 2: Material Accounting Policies
a) Basis of Preparation of Financial Statements:
i) Compliance with Ind AS
The financial statements comply in all material aspects with
Indian Accounting Standards (IndAS) notified under Section
133 of the Companies Act, 2013 (the Act) [Companies (Indian
Accounting Standards) Rules, 2015] and other relevant
provisions of the Act.
The financial statements were approved by the Company's
Board of Directors and authorised for issue on May 15, 2025.
ii) Historical cost convention
The financial statements have been prepared on a historical
cost basis, except for the following:
• certain financial assets and liabilities (including
derivative instruments) which is measured at fair value;
• defined benefit plans - plan assets measured at fair
value
iii) Measurement of fair values
A number of Company's accounting policies and disclosures
require the measurement of fair values, for both financial
and non-financial assets and liabilities. The Company has
establish policies and procedure with respect to
measurement of fair values. Fair values are categorised into
different levels in a fair value hierarchy based on the inputs
used in the valuation techniques as follows:
Level 1: Level 1 hierarchy includes financial instruments
measured using quoted prices. This includes listed equity
instruments, mutual funds and forward contracts that have
quoted price. The fair value of all equity instruments
(including bonds) which are traded in the stock exchanges is
valued using the closing price as at the reporting period. The
mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not
traded in an active market (for example, traded bonds,
over-the counter derivatives) is determined using valuation
techniques which maximise the use of observable market
data and rely as little as possible on entity-specific
estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in
level 2.
Level 3: If one or more of the significant inputs is not based on
observable market data, the instrument is included in level 3.
This is the case for unlisted equity securities, contingent
consideration.
b) Use of Estimates
The preparation of financial statements in conformity with
the generally accepted accounting principles require
estimates and assumptions to be made that affect the
reported amounts of the assets and liabilities on the date of
financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences
between actual results and estimates are recognised in the
year in which the results are known / materialized.
c) Foreign currency translation
i) Functional and presentation currency
The financial statements are presented in Indian rupee (INR),
which is Company’s functional and presentation currency.
ii) Transactions and balances
Transactions in foreign currency are recorded at the rates of
exchange prevailing at the date of the transactions.
Monetary items denominated in foreign currencies at the
balance sheet date are translated at the exchange rates
prevailing at the balance sheet date. Non-monetary assets
and non-monetary liabilities denominated in a foreign
currency and measured at historical cost are translated at
the exchange rate prevalent at the date of transaction.
Any income or expense on account of exchange difference
either on settlement or on translation at the balance sheet
date is recognised in the Statement of Profit and Loss in the
year in which it arises.
d) Revenue recognition
Revenue from services is recognised based on time and
material and billed to the clients as per the terms of the
contract.
Revenue related to fixed price maintenance and support
services contracts where the Company is standing ready to
provide services is recognised based on time elapsed mode
and revenue is straight lined over the period of performance.
In respect of other fixed-price contracts, revenue is
recognised using percentage-of-completion method ('POC
method') of accounting with contract cost incurred
determining the degrees of completion of the performance
obligation.
Revenue is measured based on the transaction price, which
is the consideration, adjusted for volume discounts, service
level credits, performance bonuses, price concessions and
incentives, if any, as specified in the contract with the
customer.
Revenue from subsidiaries is recognised based on
transaction price of services which is at arm's length.
The billing schedules agreed with customers include
periodic performance-based billing and / or milestone
based progress billings. Revenues in excess of billing are
classified as unbilled revenue while billing in excess of
revenues are classified as contract liabilities (which we refer
to as "unearned revenues").
e) Income tax
Tax expense comprise of current and deferred tax. Current
income tax is measured at the amount expected to be paid
to the tax authorities in accordance with the Indian Income
Tax Act.
Current income taxes
The current tax expense include income tax expense
payable by the company. Advance taxes and provision for
current income taxes are presented in the balance sheet
after off-setting advance tax paid and income tax provision
arising in same tax jurisdictions.
Deferred tax
Deferred income taxes reflects the impact of current year
timing differences between taxable income and accounting
income for the year and reversal of timing differences of
earlier years. Deferred tax is measured based on the tax
rates and the tax laws enacted at the balance sheet date.
Deferred tax assets are recognized 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.
f) Leases
The Company evaluates if an arrangement qualifies to be a
lease as per the requirements of Ind AS 116. Identification of a
lease requires significant judgment. The Company uses
significant judgement in assessing the lease term (including
anticipated renewals) and the applicable discount rate. The
Company determines the lease term as the non¬
cancellable period of a lease, together with both periods
covered by an option to extend the lease if the company is
reasonably certain to exercise that option; and periods
covered by an option to terminate the lease if the Company
is reasonably certain not to exercise that option. In assessing
whether the Company is reasonably certain to exercise an
option to extend a lease, or not to exercise an option to
terminate a lease, it considers all relevant facts and
circumstances that create an economic incentive for the
Company to exercise the option to extend the lease, or not
to exercise the option to terminate the lease. The Company
revises the lease term if there is a change in the non¬
cancellable period of a lease. The discount rate is generally
based on the incremental borrowing rate specific to the
lease being evaluated or for a portfolio of leases with similar
characteristics.
g) Cash and cash equivalents
The Company considers all highly liquid financial
instruments, which are readily convertible into cash and
have original maturities of three months or less from date of
purchase to be cash equivalents.
h) Cash Flow Statement
Cash flows are reported using the indirect method, whereby
net profit before tax is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals
of past or future operating cash receipts or payments and
item of income or expenses associated with investing or
financing cash flows. The cash flows from operating,
investing and financing activities of the Company are
segregated.
i) Trade receivables
Trade receivables that do not contain a significant financing
component are measured at transaction price and trade
receivables that contain a significant financing component
are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest
method, less provision for impairment.
j) Investments and other financial assets
i) Classification
The company classifies its financial assets in the following
measurement categories:
• those to be measured subsequently at fair value (either
through other comprehensive income, or through profit or
loss), and
• those measured at amortised cost.
The classification depends on the entity’s business model for
managing the financial assets and the contractual terms of
the cash flows.
For assets measured at fair value, gains and losses will either
be recorded in profit or loss or other comprehensive income.
For investments in debt instruments, this will depend on the
business model in which the investment is held. For
investments in equity instruments, this will depend on
whether the company has made an irrevocable election at
the time of initial recognition to account for the equity
investment at fair value through other comprehensive
income.
The company reclassifies debt investments when and only
when its business model for managing those assets
changes.
ii) Measurement
At initial recognition, the company measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value
through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered
in their entirety when determining whether their cash flows
are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on
the company’s business model for managing the asset and
the cash flow characteristics of the asset. There are three
measurement categories into which the company classifies
its debt i nstruments:
• Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent
solely payments of principal and interest are measured
at amortised cost. A gain or loss on a debt investment
that is subsequently measured at amortised cost and is
not part of a hedging relationship is recognised in profit
or loss when the asset is derecognised or impaired.
Interest income from these financial assets is included in
finance i ncome using the effective interest rate method.
• Impairment of investment in subsidiary: The Company
reviews its carrying value of investments carried at
amortised cost annually, or more frequently, when there is
indication for impairment. If the recoverable amount is
less than carrying amount, the impairment loss is
accounted for.
• Fair value through other comprehensive income (FVOCI):
Assets that are held for collection of contractual cash
flows and for selling the financial assets, where the assets’
cash flows represent solely payments of principal and
interest, are measured at fair value through other
comprehensive income (FVOCI). Movements in the
carrying amount are taken through OCI, except for the
recognition of impairment gains or losses, interest
revenue and foreign exchange gains and losses which
are recognised in profit and loss. When the financial asset
is derecognised, the cumulative gain or loss previously
recognised in OCI is reclassified from equity to profit or
loss and recognised in other gains/(losses). Interest
income from these financial assets is included in other
income using the effective interest rate method.
• Fair value through profit or loss: Assets that do not meet
the criteria for amortised cost or FVOCI are measured at
fair value through profit or loss. A gain or loss on a debt
investment that is subsequently measured at fair value
through profit or loss and is not part of a hedging
relationship is recognised in profit or loss and presented
net in the statement of profit and loss within other
gains/(losses) in the period in which it arises. Interest
income from these financial assets is included in other
income.
Equity instruments
The company subsequently measures all equity investments
at fair value (except investment in subsidiaries and joint
venture which are at amortised cost). Where the company’s
management has elected to present fair value gains and
losses on equity investments in other comprehensive
income, there is no subsequent reclassification of fair value
gains and losses to profit or loss. Dividends from such
investments are recognised in profit or loss as other income
when the company’s right to receive payments is
established.
Changes in the fair value of financial assets at fair value
through profit or loss are recognised in other gain/(losses) in
the statement of profit and loss. Impairment losses (and
reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other
changes in fair value.
iii) Impairment of financial assets
The company assesses on a forward looking basis the
expected credit losses associated with its assets carried at
amortised cost and FVOCI debt instruments. The
impairment methodology applied depends on whether
there has been a significant increase in credit risk. Note 36
details how the company determines whether there has
been a significant increase in credit risk.
For trade receivables only, the company applies the
simplified approach permitted by Ind AS 109 Financial
Instruments, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
iv) Derecognition of financial assets
A financial asset is derecognised only when
• The company has transferred the rights to receive cash
flows from the financial asset or
• Retains the contractual rights to receive the cash flows of
the financial asset, but assumes a contractual obligation
to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the company
evaluates whether it has transferred substantially all risks
and rewards of ownership of the financial asset. In such
cases, the financial asset is derecognised. Where the entity
has not transferred substantially all risks and rewards of
ownership of the financial asset, the financial asset is not
derecognised.
Where the entity has neither transferred a financial asset nor
retains substantially all risks and rewards of ownership of the
financial asset, the financial asset is derecognised if the
company has not retained control of the financial asset.
Where the company retains control of the financial asset,
the asset is continued to be recognised to the extent of
continuing involvement in the financial asset.
v) Income recognition
Interest income
Interest income from debt instruments is recognised using
the effective interest rate method. The effective interest rate
is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to
the gross carrying amount of a financial asset. When
calculating the effective interest rate, the company
estimates the expected cash flows by considering all the
contractual terms of the financial instrument (for example,
prepayment, extension, call and similar options) but does
not consider the expected credit losses.
Dividends
Dividends are recognised in profit or loss only when the right
to receive payment is established, it is probable that the
economic benefits associated with the dividend will flow to
the company, and the amount of the dividend can be
measured reliably.
k) Derivatives and hedging activities
The Company uses foreign currency forward contracts to
hedge it's risks associated with foreign currency fluctuations
relating to certain firm commitments and forecasted
transactions. Such forward contracts are utilised against the
inflow of funds under firm commitments. The Company does
not use the forward contract for speculative purposes. The
Company designates these hedging instruments as cash
flow hedge. The use of hedging instruments is governed by
the Company's policies approved by the Board of Directors,
which provide written principles on the use of such financial
derivatives consistent with the Company's risk management
strategy.
Hedging instruments are initially measured at fair value and
are remeasured at subsequent reporting dates. Changes in
the fair value of these derivatives that are designated and
effective as hedges of future cash flows are recognised in
other comprehensive income and the ineffective portion is
recognised immediately in the Statement of Profit and Loss.
Changes in the fair value of derivative financial instruments
that do not qualify for hedge accounting are recognised in
the Statement of Profit and Loss as they arise.
The fair value of derivative financial instruments is
determined based on observable market inputs including
currency spot and forward rates, yield curves, currency
volatility etc.
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated or exercised or no
longer qualifies for hedge accounting. At that time for
forecasted transactions, any cumulative gain or loss on the
hedging instrument recognised in Other comprehensive
income is retained until the forecasted transaction occurs. If
a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognised in other
comprehensive income is transferred to the Statement of
Profit and Loss for the year.
l) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
is reported in the balance sheet where there is a legally
enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis or realise the
asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events
and must be enforceable in the normal course of business
and in the event of default, insolvency or bankruptcy of the
company or the counterparty.
m) Property, Plant and Equipment
Property, Plant and Equipment are valued at cost, except for
certain Property, Plant and Equipment which have been
stated at revalued amounts as determined by approved
independent valuer, after reducing accumulated
depreciation until the date of the balance sheet. Direct
costs are capitalised until the assets are ready to use and
include financing costs relating to any specific borrowing
attributable to the acquisition of fixed assets. Capital work-
in-progress includes assets not put to use before the year
end.
Depreciation methods, estimated useful lives and residual
value
Depreciation on property, plant and equipment is provided
on the Straight Line Method except for leasehold land,
leasehold premises and freehold land as per the useful life
and in the manner prescribed in Schedule II to Companies
Act, 2013. Leasehold Premises is amortized on the Straight
Line Method over the period of 30 years and Leasehold Land
is amortized on the Straight Line Method over the period of
75 years.
n) Intangible assets
i) Goodwill
Goodwill on merger of subsidiaries is included in intangible
assets. Goodwill is not amortised but it is tested for
impairment annually, or more frequently if events or changes
in circumstances indicate that it might be impaired, and is
carried at cost less accumulated impairment losses.
Goodwill is allocated to cash-generating units for the
purpose of impairment testing. The allocation is made to
those cash-generating units or groups of cash-generating
units that are expected to benefit from the business
combination in which the goodwill arose. The units or groups
of units are identified at the lowest level at which goodwill is
monitored for internal management purposes, which in our
case are the operating segments.
ii) Trademarks, copyrights and other rights
Separately acquired Trademarks and copyrights are shown
at historical cost. Trademarks, copyrights and non-compete
acquired in a business combination are recognised at fair
value at the acquisition date. They have a finite useful life
and are subsequently carried at cost less accumulated
amortisation and impairment losses.
iii) Computer software
The intangible assets are recorded at cost and are carried
at cost less accumulated amortization and accumulated
impairment losses, if any.
Directly attributable costs that are capitalised as part of the
software include employee costs and an appropriate
portion of relevant overheads.
Capitalised development costs are recorded as intangible
assets and amortised from the point at which the asset is
available for use.
iv) Other intangible assets
Other intangible assets that do not meet the criteria in (i) to
(iii) above are recognised as an expense as incurred.
Development costs previously recognised as an expense
are not recognised as an asset in a subsequent period.
v) Amortisation methods and periods
The company amortises intangible assets with a finite useful
life using the straight-line method as following :
o) Trade and other payables
These amounts represent liabilities for goods and services
provided to the company prior to the end of financial year
which are unpaid. The amounts are unsecured. Trade and
other payables are presented as current liabilities unless
payment is not due within 12 months after the reporting
period. They are recognised initially at their fair value and
subsequently measured at amortised cost using the
effective interest method.
p) Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the
borrowings using the effective interest method. Fees paid on
the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw down occurs. To the
extent there is no evidence that it is probable that some or
all of the facility will be drawn down, the fee is capitalised as
a prepayment for liquidity services and amortised over the
period of the facility to which it relates.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled
or expired. 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 gains/(losses).
Where the terms of a financial liability are renegotiated and
the entity issues equity instruments to a creditor to
extinguish all or part of the liability (debt for equity swap), a
gain or loss is recognised in profit or loss, which is measured
as the difference between the carrying amount of the
financial liability and the fair value of the equity instruments
issued.
Borrowings are classified as current liabilities unless the
company has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting period.
Where there is a breach of a material provision of a long¬
term loan arrangement on or before the end of the reporting
period with the effect that the liability becomes payable on
demand on the reporting date, the entity does not classify
the liability as current, if the lender agreed, after the
reporting period and before the approval of the financial
statements for issue, not to demand payment as a
consequence of the breach.
q) Borrowing costs
Borrowing costs, which are directly attributable to the
acquisition, construction or production of a qualifying assets
are capitalised as a part of the cost of the assets. Other
borrowing costs are recognised as expenses in the year in
which they are incurred.
|