MATERIAL ACCOUNTING POLICIES

a) Revenue Recognition:

Revenue is recognized upon transfer of
control of promised services to customers in
an amount that reflects the consideration the
Company expects to receive in exchange for
those products or services.

The significant accounting policies related to
revenue recognition are as under:

Software service income:

The Company has applied the guidance in Ind AS
115 “Revenue from Contracts with Customers”
by applying the revenue recognition criteria
for each distinct performance obligation. The
arrangements with customers generally meet
the criteria for considering software testing
services as distinct performance obligations.
The transaction price as allocated to each
distinct performance obligation is defined in
the contract with the customer. In case of fixed
bid contracts, the performance obligations
are satisfied as and when the services are
rendered since the customer generally obtains
control of the work as it progresses and the
entity’s performance creates an asset with
no alternative use to the entity and the entity
has an enforceable right to payment for
performance completed to date.

The amount of revenue recognised depends
on whether the Company acts as an agent or
principal. The Company acts as a principal when
the Company controls the specified good or
service prior to transfer. Where the Company
acts as a principal, the revenue recorded is
the gross amount billed. Where the Company
acts as an agent as the Company does not
control the relevant good or service before it is
transferred to customers, the revenue recorded
is the net amount retained.

In respect of contracts with customers who
provide a minimum assured mark up to costs
incurred, the Company records a true up
adjustment at the year end for the eligible
revenue based on such contracts after reducing
the amount already invoiced/recognized as
revenue up to the year end reporting date.

i. The Company derives revenue from
software services which involve primarily
delivering software validation and
verification services to the banking,
financial services and insurance industry
worldwide. Arrangements with customers
are on a fixed-bid or a time-and-material
basis.

ii. Revenue in respect of time-and-material
contracts is recognized based on time/

efforts spent and/ or billed to clients as per
the terms of specific contracts as there is
a direct relationship between input and
productivity.

iii. Revenue from fixed-bid contract, 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.

Revenues in excess of invoicing are
classified as contract assets (which the
Company refers to as Unbilled Revenue)
while invoicing in excess of revenues are
classified as contract liabilities (which the
Company refers to as Unearned Revenue).

The billing schedules agreed with
customers include periodic performance
based payments and / or milestone based
progress payments. Invoices are payable
within contractually agreed credit period.

iv. The Company accounts for volume
discounts and pricing incentives to
customers as a reduction of revenue based
on the rateable allocation of the discounts/
incentives to each of the underlying
performance obligation that corresponds
to the progress by the customer towards
earning the discount/ incentive. Also,
when the level of discount varies with
increases in levels of revenue transactions,
the company recognizes the liability
based on its estimate of the customer’s
future purchases. If it is probable that
the criteria for the discount will not be
met, or if the amount thereof cannot be
estimated reliably, then discount is not
recognized until the payment is probable
and the amount can be estimated reliably.
The Company recognizes changes in

the estimated amount of obligations
for discounts in the period in which the
change occurs.

v. Revenue includes reimbursement of
expenses, wherever billed, as per the terms
of the contracts.

vi. Deferred contract costs are incremental
costs of obtaining a contract which are
recognized as assets and amortized over
the term of the contract.

vii. The Company presents revenues excluding
indirect taxes in its Statement of Profit and
Loss.

viii. Provision for estimated losses, if any, on
uncompleted contracts are recorded in
the period in which such losses become
probable based on the current contract
estimates.

b) Property, Plant and Equipment:

Freehold land is carried at historical cost.
Property, plant and equipment are stated
at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the
purchase price and any attributable cost of
bringing the asset to its working condition for
its intended use. Borrowing Costs relating to
acquisition of qualifying assets which takes
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 be put to use.

Depreciation on assets is provided on the
straight line method on the basis of useful life
which is equal to or lower than the useful life
prescribed in Schedule II of the Companies
Act, 2013 for all the assets. The useful life is
determined on the management’s technical
evaluation.

In the view of the management, property,
plant and equipment individually costing Rs.
5,000/- or less are depreciated in full in the year
of acquisition.

Depreciation methods, useful lives and residual
values are reviewed periodically, including at
each financial year end.

Advances paid towards the acquisition of
property, plant and equipment outstanding at
each Balance Sheet date is classified as capital
advances under other non-current assets and
the cost of assets not put to use before such date
are disclosed under ‘Capital work-in-progress’.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the Company and the
cost of the item can be measured reliably. The
carrying amount of any component accounted
for as a separate asset is derecognised when
replaced. All other repairs and maintenance are
charged to profit or loss during the reporting
period in which they are incurred.

The cost and related accumulated depreciation
are eliminated from the financial statements
upon sale or retirement of the asset and the
resultant gains or losses are recognized in
the Statement of Profit and Loss. Assets to be
disposed off are reported at the lower of the
carrying value or the fair value less cost to sell.

:) Intangible Assets:

Intangible Assets are stated at costs less
accumulated amortization and impairment
losses if any. Intangible Assets are amortized
over their respective individual estimated

useful lives on a straight line basis, from the
date they are available for use. The estimated
useful life of an identifiable intangible asset
is based on a number of factors including the
effects of obsolescence, demand, competition
and other economic factors (such as stability
of the industry, and known technological
advances), and the level of maintenance
expenditures required to obtain the expected
future cash flows from the asset. Amortization
methods and useful lives are reviewed
periodically including at each financial year
end. If the estimated useful life of the asset is
significantly different from previous estimates,
the amortization period is changed accordingly.
The costs which can be capitalized include the
cost of material, direct labour, overhead costs
that are directly attributable to preparing the
asset for its intended use.

Gain 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.

Amortization rates currently applied are as
follows:

In the view of the management, intangible
assets individually costing Rs. 5,000/- or less
have a useful life of one year and are hence
fully amortised in the year of acquisition.

Intangible assets not ready for the intended use
on the date of the Balance Sheet are disclosed
as “Intangible assets under development”.

d) Employee Benefits:

i) Short term employee benefits:

Short term employee benefits are expensed
as the related service is provided. A liability
is recognised for the amount expected to be
paid if the Company has a present legal or
constructive obligation to pay this amount as a
result of past service provided by the employee
and the obligation can be estimated reliably.

Leave Encashment:

The Company pays leave encashment on short
term basis for Onsite employees for the period
of leave they are entitled to during their onsite
stay.

ii) Post Employment obligations:

(a) Defined contribution plan:

Employee benefits in the form of Provident
Fund/ Social Security payments are defined
contribution schemes and contributions
made are charged to the Statement of
Profit and Loss for the year. The Company
has no further obligations under these
plans beyond it’s periodic contributions.
Obligations for contributions to defined
contribution plans are expensed as the
related service is provided.

The Company pays provident fund
contributions to provident funds as per
local regulations. The Company has
no further payment obligations once
the contributions have been paid. The
contributions are accounted for as defined
contribution plans and the contributions
are recognised as employee benefit
expense when they are due. Prepaid
contributions are recognised as an asset to
the extent that a cash refund or a reduction
in the future payments is available.

(b) Defined benefit plan:

Gratuity:

The Company provides for gratuity, a
defined benefit retirement plan (‘the
Gratuity Plan’) covering all its eligible

employees. The Gratuity Plan provides a
lump-sum payment to vested employees
at retirement, death, incapacitation or
termination of employment, of an amount
based on the respective employee’s salary
and the tenure of employment with the
Company.

Liability with regard to the gratuity plan
are determined by actuarial valuation,
performed by an independent actuary,
at each Balance Sheet date using the
projected unit credit method. The
Company recognizes the net obligation of
a defined benefit plan in its Balance Sheet
as an asset or liability.

The net interest cost is calculated by
applying the discount rate to the net
balance of the defined benefit obligation
and the fair value of plan assets. This cost
is included in employee benefit expense in
the statement of profit and loss.

Re-measurement of the net defined
benefit liability, which comprise
actuarial gains and losses are recognised
immediately in other comprehensive
income. Net interest expense/(income)
on the net defined liability/(assets) is
computed by applying the discount rate,
used to measure the net defined liability/
(asset). Net interest expense and other
expenses related to defined benefit plans
are recognised in the Statement of Profit
and Loss. Changes in the present value of
the defined benefit obligation resulting
from plan amendments or curtailments
are recognised immediately in profit or
loss as past service cost.

iii) Long Term Employee Benefits:

The Company’s net obligation in respect of
long term employee benefits for offshore
employees, being long term compensated
absences, is the amount of future benefits
that employee have earned in return
for the service in the current and prior
periods. The liability is determined by an
independent actuary, using Projected Unit

Credit Method. Actuarial gains and losses
are recognised immediately as income or
expense in the Statement of Profit and
Loss. Obligation is measured at the present
value of estimated future cash flows
using a discount rate that is determined
by reference to the market yields at the
Balance Sheet date on Government Bonds
where the currency and terms of the
Government Bonds are consistent with
the currency and estimated terms of the
defined benefit obligation.

OTHER ACCOUNTING POLICIES

a) Interest Income:

Interest Income is recognised using the
effective interest rate method.

b) Dividend Income:

Dividend income is recognized when the right
to receive payment is established.

c) Other Income:

Other Income is recognized when the right to
receive is established.

d) Government Grants:

Grants from the government are recognised
when there is reasonable assurance that:

(i) the Company will comply with the
conditions attached to them; and

(ii) the grant will be received.

e) Capital work-in-progress

Projects under which tangible assets are not
yet ready for their intended use are carried at
cost comprising direct cost, related incidental
expenses and attributable borrowing costs.
Depreciation is not provided on capital work-
in-progress until construction / installation are
complete and the asset is ready for its intended
use.

f) Inventories

Inventories are valued at lower of cost and net
realisable value, including necessary provision
for obsolescence. Cost is determined using the
weighted average method.

g) Financial Instruments:

i) Initial Recognition:

The Company recognizes financial assets
and financial liabilities when it becomes
a party to the contractual provisions of
the instrument. All financial assets and
liabilities are recognized at fair value
on initial recognition, except for trade
receivables which are initially measured
at transaction price. Transaction costs that
are directly attributable to the acquisition
or issue of financial assets and financial
liabilities that are not at fair value through
profit or loss, are added to the fair value on
initial recognition. Regular way purchase
and sale of financial assets are accounted
for at trade date.

ii) Subsequent Measurement:

a) Non-derivative financial instruments:

(i) Financial instruments measured at
amortized cost:

A financial instrument is subsequently
measured at amortized cost if it is
held within a business model whose
objective is to hold the asset in order
to collect contractual cash flows, and
the contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
outstanding.

The computation of amortized cost
is done using the effective interest
rate (EIR) method. Amortized cost is
calculated by taking into account any
discount or premium and fees or costs
that are an integral part of the EIR. The
EIR amortization is included in interest
income in the Statement of Profit and
Loss.

(ii) Financial Assets at fair value
through other comprehensive
income:

A financial instrument is subsequently
measured at fair value through other

comprehensive income if it is held
within a business model whose
objective is achieved by both collecting
contractual cash flows and selling
financial assets and the contractual
terms of the financial asset give rise
on specified dates to cash flows that
are solely payments of principal and
interest on the principal amount
outstanding. Further, in cases where
the Company has made an irrevocable
election based on it's business model,
for it's investments which are classified
as equity instruments, the subsequent
changes in fair value are recognized in
Other Comprehensive Income.

(iii) Financial Assets at fair value
through profit and loss:

A financial asset which is not classified
in any of the above categories is
subsequently fair valued through profit
or loss.

(iv) Financial Liabilities:

Financial Liabilities are subsequently
carried at amortized cost using the
effective interest rate method. For trade
and other payables maturing within
one year from the Balance Sheet date,
the carrying amounts approximate fair
value due to the short maturity of these
instruments.

(v) Investment in subsidiaries:

Investment in subsidiaries is carried
at cost in the separate financial
statements.

b) Share Capital:

Ordinary shares are classified as equity.
Incremental costs directly attributable to
the issuance of ordinary equity shares are
recognized as a deduction from equity, net
of any tax effects.

c) Derivatives:

Derivatives include foreign currency
forward contracts. It is measured at fair
value. Fair value of foreign currency forward

contracts are determined using the fair
value reports provided by the respective
banks.

Derivatives are initially recognised at fair
value on the date a derivative contract
is entered into and are subsequently re¬
measured to their fair value at the end of
each reporting period. The accounting for
subsequent changes in fair value depends
on whether the derivative is designated as
a hedging instrument, and if so, the nature
of the item being hedged.

iii) Derecognition of financial instruments:

The Company derecognizes a financial
asset when the contractual rights to the
cash flows from the financial asset expires
or it transfers the financial assets and the
transfer qualifies for derecognition under
Ind AS 109. A financial liability (or a part of
a financial liability) is derecognized from
the Company’s Balance Sheet when the
obligation specified in the contract is
discharged or cancelled or expires.

iv) Offsetting of financial instruments:

Financial assets and financial liabilities
are offset and the net amount is
reported in the balance sheet if there
is a currently enforceable legal right to
offset the recognised amounts and there
is an intention to settle on a net basis, to
realize the assets and settle the liabilities
simultaneously.

h) Impairment:

i) Financial Assets:

The Company assesses at each date of balance
sheet, whether a financial asset or a group of
financial assets is impaired. Ind AS 109 requires
expected credit losses to be measured through
a loss allowance. The Company recognises
lifetime expected losses for all contract assets
and / or all trade receivables that do not
constitute a financing transaction. For all other
financial assets, expected credit losses are
measured at an amount equal to the twelve¬
month expected credit losses or at an amount

equal to the life time expected credit losses
if the credit risk on the financial asset has
increased significantly, since initial recognition.

ii) Non-financial assets:

Intangible assets and property, plant and
equipment:

I ntangible assets and property, plant and
equipment are evaluated for recoverability
whenever events or changes in
circumstances indicate that their carrying
amounts may not be recoverable. For
the purpose of impairment testing, the
recoverable amount (i.e. the higher of the
fair value less cost to sell and the value-in¬
use) is determined on an individual asset
basis unless the asset does not generate
cash flows that are largely independent of
those from other assets. In such cases, the
recoverable amount is determined for the
Cash Generating Unit (CGU) to which the
asset belongs.

If such assets are required to be impaired,
the impairment to be recognized in
the Statement of Profit and Loss is
measured by the amount by which the
carrying value of the assets exceeds the
estimated recoverable amount of the
asset. An impairment loss is reversed in
the Statement of Profit and Loss if there
has been a change in the estimates used
to determine the recoverable amount. The
carrying amount of the asset is increased
to its revised recoverable amount, provided
that this amount does not exceed the
carrying amount that would have been
determined (net of any accumulated
amortization or depreciation) had no
impairment loss been recognized for the
asset in prior years.

After impairment, depreciation is provided
on the revised carrying amount of the asset
over its remaining useful life.

I) Fair value of financial instruments:

The Company’s accounting policies and
disclosures require the measurement of fair
values for financial instruments.

The Company has an established control
framework with respect to the measurement of
fair values. The management regularly reviews
significant unobservable inputs and valuation
adjustments. If third party information is used
to measure fair values, then the management
assesses the evidence obtained from the third
parties to support the conclusion that such
valuations meet the requirements of Ind AS,
including the level in the fair value hierarchy in
which such valuations should be classified.

When measuring the fair value of a financial
asset or a financial liability, the Company uses
observable market data as far as possible. 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: quoted prices in active markets for
identical assets or liabilities.

Level 2: inputs other than quoted prices
included in Level 1 that are observable
for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived
from prices).

Level 3: inputs for the asset or liability that are
not based on observable market data.

If the inputs used to measure the fair value of
an asset or a liability fall into different levels
of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in
the same level of the fair value hierarchy as
the lowest level input that is significant to the
entire measurement.

The Company recognises transfers between
levels of the fair value hierarchy at the end of
the reporting period during which the change
has occurred. All methods of assessing fair
value result in general approximation of value,
and such value may never actually be realized.

Refer to Note 36 in the Financial Statements
for the disclosure on carrying value and fair
value of financial assets and liabilities. For
financial assets and liabilities maturing within
one year from the Balance Sheet date and
which are not carried at fair value, the carrying