2. Material Accounting Policies
2.1. Basis of preparation of standalone financial statements
a) Statement of Compliance with Ind AS
The Company's standalone financial statements
have been prepared in accordance with Indian
Accounting Standards (hereinafter referred to as
Ind-AS) notified under section 133 of Companies
Act, 2013, read with Companies (Indian Accounting
Standards) Rules, 2015 and Companies (Indian
Accounting Standards) Amendment Rules, 2016.
Accounting policies have been 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.
The Company's standalone financial statements
are presented in Indian Rupees ('), which is also
its functional currency.
b) Basis of Measurement
The standalone financial statements have been
prepared on a historical cost convention on accrual
basis, except for the following material items that
have been measured at fair value as required by
relevant Ind AS: -
i) Certain financial assets and liabilities
measured at fair value (refer accounting policy
on financial instruments)
ii) Share based payment transactions
iii) Net Defined Benefit obligations
All assets and liabilities have been classified as
current or non-current as per the Company's
normal operating cycle and other criteria set out
in Schedule III to the Companies Act, 2013. Based
on the nature of services and the time between the
rendering of service and their realization in cash and
cash equivalents, the Company has ascertained its
operating cycle as twelve months for the purpose of
current and noncurrent classification of assets and
liabilities.
c) Use of Estimates and Judgments:
The preparation of the standalone financial
statements in conformity with Ind AS requires
management to make estimates, judgments and
assumptions. These estimates, judgments and
assumptions affect the application of accounting
policies and the reported amounts of assets and
liabilities, the disclosures of contingent assets and
liabilities at the date of the standalone financial
statements and reported amounts of revenues and
expenses during the period. Accounting estimates
could change from period to period. Actual results
could differ from those estimates. Appropriate
changes in estimates are made as management
becomes aware of changes in circumstances
surrounding the estimates. Changes in estimates
are reflected in the standalone financial statements
in the period in which changes are made and, if
material, their effects are disclosed in the notes to
the standalone financial statements.
Critical estimates and judgments
The preparation of standalone financial statements
requires management to make judgments, estimates
and assumptions in the application of accounting
policies that affect the reported amounts of assets,
liabilities, income and expenses. Actual results may
differ from these estimates. Continuous evaluation
is done on the estimation and judgments based on
historical experience and other factors, including
expectations of future events that are believed to
be reasonable. Revisions to accounting estimates
are recognized prospectively. Information about
critical judgments in applying accounting policies,
as well as estimates and assumptions that have the
most significant effect to the carrying amounts of
assets and liabilities within the next financial year,
are included in the following notes:
a) Revenue recognition
b) Estimation of Defined benefit obligation
c) Estimation of current tax expenses and
Payable
d) Useful lives of property, plant and equipment
e) Employee stock option compensation
expenses and payable
f) Impairment of Financial and Non-Financial
Assets
g) Fair Value measurement of Financial Assets
2.2. Revenue recognition
The company earns revenue primarily from Geographical
Information Services comprising of photogrammetry,
remote sensing, cartography, data conversion, state of
the art terrestrial and 3D geo-content including location
and other computer based related services.
Revenue is recognized upon transfer of control of
promised services or products to customers in an
amount that reflects the consideration which the
Company expects to receive in exchange for those
services or products.
• Revenue from time and material and job contracts
is recognized on output basis measured by units
delivered, efforts expended, number of transactions
processed, etc.
• Revenue related to fixed price maintenance and
support services contracts where Company is
standing ready to provide services is recognized
based on time elapsed mode and revenue is
straight lined over the period of performance.
• In respect of other fixed-price contracts, revenue
is recognized using the percentage-of-completion
method ('POC method') of accounting with contract
costs incurred determining the degree of completion
of the performance obligation. The contract costs
used in computing the revenues include the cost of
fulfilling warranty obligations.
• Revenue from the sale of distinct third-party
hardware and / or software is recognized at the
point in time when control is transferred to the
customer.
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 also excludes
taxes collected from customers.
Contract assets are recognized when there is excess
of revenue earned over billings on contracts. Contract
assets are classified as unbilled revenue when there is
unconditional right to receive cash, and only passage of
time is required, as per contractual terms.
The billing schedules agreed with customers include
periodic performance-based payments and / or
milestone-based progress payments. Invoices are
payable within a contractually agreed credit period.
In accordance with Ind AS 37, the company recognizes
an onerous contract provision when the unavoidable
costs of meeting the obligations under a contract
exceed the economic benefits to be received.
Contracts are subject to modification to account for
changes in contract specification and requirements.
Company reviews modification to contract in conjunction
with the original contract, basis which the transaction
price could be allocated to a new performance
obligation, or transaction price of an existing obligation
could undergo a change. In the event transaction price is
revised for existing obligation, a cumulative adjustment
is accounted for.
Company disaggregates revenue from contracts with
customers by geography.
The Company uses the following critical accounting
estimates in Revenue recognition:
The company's contract with Customers could include
promises to transfer multiple products and services
to a customer. The Company assesses the products /
services promised in the contract and identifies distinct
performance obligations in the contract. Identification
of distinct performance obligation involves judgment to
determine the deliverables and the ability of the customer
to benefit independently from such deliverables.
Judgments are also required to determine the
transaction price for the contract and to ascribe the
transaction price to each distinct performance obligation.
The transaction price could be either a fixed amount
of customer consideration or variable consideration
with elements such as volume discounts, service level
credits, performance bonuses, price concessions and
incentives. The transaction price is also adjusted for the
effects of the time value of money if the contract includes
a significant financing component. Any consideration
payable to the customer is adjusted to the transaction
price, unless it is a payment for a distinct product or
service from the customer. The estimated amount of
variable consideration is adjusted in the transaction
price only to the extent that it is highly probable that
a significant reversal in the amount of cumulative
revenue recognized will not occur and is reassessed
at the end of each reporting period. The Company
allocates the elements of variable considerations to all
the performance obligations of the contract unless there
is observable evidence that they pertain to one or more
distinct performance obligations.
The company exercises judgments in determining
whether the performance obligation is satisfied at a
point in time or over a period of time. The Company
considers indicators such as how customer consumes
benefits as services are rendered or who controls the
asset as it is being created or existence of enforceable
right to payment for performance to date and alternate
use of such product or service, transfer of significant risk
and rewards to the customer, acceptance of delivery by
the customer, etc.
Revenue for fixed price contract is recognized using
percentage-of completion method. The Company uses
judgment to estimate the future cost-to-completion of
the contracts, which is used to determine the degree of
completion of the performance obligation.
Interest Income:
Interest income is recognized on a time proportion
basis taking into account the amount outstanding and
the rate applicable. For all debt instruments measured
either at amortized cost or at fair value through other
comprehensive income, interest income is recorded
using the effective interest rate (EIR).
Dividend Income:
Dividend income is accounted for when the right to
receive the same is established, which is generally
when shareholders approve the dividend.
Other Income:
Other income is accounted for on an accrual basis
except where the receipt of income is uncertain in which
case it is accounted for on receipt basis.
2.3 Common Control Business combination
Business combinations involving entities that are
controlled by the company or ultimately controlled by the
same party or parties both before and after the business
combination, and where control is not transitory, are
accounted for using the pooling of interests method as
follows:
- The assets and liabilities of the transferred division/
Company are reflected at their carrying amounts
immediately prior to the transfer
- No adjustments are made to reflect fair values, or
recognise any new assets or liabilities. Adjustments
are only made to harmonise accounting policies
- The financial information of the transferred division/
Company in respect of prior periods is restated as
if the business combination had occurred from the
beginning of the preceding period in the financial
statements, irrespective of the actual date of
the combination, however, where the business
combination had occurred after that date, the
prior period information is restated only from that
date. The difference, if any, between consideration
paid in the form of issue of share capital or cash
or other assets and the amount of share capital (if
any) of the transferor shall be transferred to capital
reserve and should be presented separately from
other capital reserves. Share capital issued will be
recorded at nominal value.
2.4 Property, Plant and equipment
Property, plant and equipment's (PPE) are stated at cost
less accumulated depreciation and impairment losses,
if any. Cost of acquisition includes directly attributable
costs for bringing the assets to its present location and
use.
The cost of an item of PPE comprises its purchase
price net of any trade discounts and rebates, any import
duties and other taxes (other than those subsequently
recoverable from the tax authorities), any directly
attributable expenditure on making the asset ready for
its intended use, other incidental expenses and interest
on borrowings attributable to acquisition of qualifying
assets up to the date the asset is ready for its intended
use.
Subsequent expenditure is capitalized only if it is
probable that the future economic benefits associated
with the expenditure will flow to the company.
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'.
Gains or losses arising from derecognition of a property,
plant and equipment 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 assets derecognized.
Depreciation:
Depreciation on PPE is provided as per straight line
method as per the useful life prescribed in Schedule II
of the Companies Act, 2013 except in case of following
category of PPE in whose case the life of the items of
PPE has been assessed as under based on technical
estimate, taking into account the nature of the asset, the
estimated usage of the asset, the operating condition
of the asset, past history of replacement, anticipated
technological changes, manufacturer's warranties and
maintenance support etc.
Assets costing individually ' 5,000/- or less are fully
depreciated in the year of purchase / installation.
Residual value is considered as Nil for all the assets.
Depreciation methods, useful lives, and residual values
are reviewed at the end of each financial year and
adjusted prospectively, if necessary.
2.5 Intangible Assets
Intangibles are stated at the acquisition price including
directly attributable costs for bringing the asset into use,
less accumulated amortization and impairment. Direct
expenditure, if any, incurred for internally developed
intangibles from which future economic benefits are
expected to flow over a period of time is treated as
intangible asset as per the Indian Accounting Standard
on Intangible Assets.
Amortisation:
Amortization of Intangible assets is provided on straight
line method as per the useful life prescribed in Schedule
II of the Companies Act, 2013 except in case of following
category of Intangible assets in which case the life of
the items of Intangible assets has been assessed as
under based on technical estimate, taking into account
the nature of the asset, the estimated usage of the
asset, the operating condition of the asset, past history
of replacement, anticipated technological changes etc.
Amortization is charged on a pro-rata basis on assets
purchased/ sold during the year, with reference to date
of installation/ disposal.
Assets costing individually ' 5,000/- or less are fully
amortised in the year of purchase / installation.
Residual value is considered as Nil for all the assets.
2.6 Intangible Assets Under Development
Internal development costs for core technology are
recognized as an intangible asset if, and only if, all of
the following have been demonstrated:
• The technical feasibility to complete the project.
• The intention to complete the intangible asset and
use or sell it.
• The ability to use or sell intangible assets.
• How the intangible asset will generate probable
future economic benefits.
• The availability of adequate resources to complete
the project.
• The cost of developing the asset can be measured
reliably.
Internally generated databases are capitalized until
a certain level of map quality is reached and ongoing
activities focus on maintenance. Internal software costs
relating to development of non-core software with an
estimated average useful life of less than one year and
engineering costs relating to the detailed manufacturing
design of new products are expensed in the period in
which they are incurred.
The amount initially recognized for internally generated
intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets
the recognition criteria listed above. All expenditures
on research activities are expensed in the income
statement as incurred.
2.7 Borrowing Costs
Borrowing costs, if any, directly attributable to the
acquisition of the qualifying asset are capitalized
for the period until the asset is ready for its intended
use. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for intended use.
Other borrowing costs are recognized as expense in
the period in which they are incurred.
2.8. 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.
a) Initial measurement
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 the 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, which are not at fair value through profit
or loss, are added to or deducted from the fair value
on initial recognition.
b) Subsequent measurement (Non derivative
financial instruments)
1. Financial assets carried at amortized cost
A financial asset 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 for payments of principal and interest
on the principal amount outstanding. Interest
income from these financial assets is included
in finance income using the effective interest
rate method (EIR).
2. Financial assets at fair value through other
comprehensive income
A financial asset 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 for payments of principal and
interest on the principal amount outstanding.
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 recognized in the Statement of
Profit and Loss. When the financial asset is
derecognized, the cumulative gain or loss
previously recognized in OCI is reclassified
from equity to Statement of Profit and Loss and
recognized in other gains/ (losses). Interest
income from these financial assets is included
in other income using the effective interest rate
method. Interest income from these financial
assets is included in other income using the
effective interest rate method.
Equity instruments: All equity investments in
scope of Ind AS 109 are measured at fair value.
Equity instruments which are held for trading
and contingent consideration recognized by an
acquirer in a business combination to which
Ind AS103 applies are classified as at FVTPL.
For all other equity instruments, the Company
may make an irrevocable election to present
in other comprehensive income subsequent
changes in the fair value. The Company makes
such election on an instrument- by-instrument
basis. The classification is made on initial
recognition and is irrevocable.
If the Company decides to classify an
equity instrument as at FVTOCI, then all fair
value changes on the instrument, excluding
dividends, are recognized in the OCI. There
is no recycling of the amounts from OCI to
P&L, even on sale of investment. However, the
Company may transfer the cumulative gain or
loss within equity.
3. Financial assets at fair value through profit
or loss
A financial asset which is not classified in any
of the above categories are subsequently fair
valued through profit or loss. Interest income
from these financial assets is included in the
other income.
4. Investment in Subsidiaries and Associates:
Investment in subsidiaries and Associates are
measured at cost less impairment.
5. 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.
6. Loans and borrowings
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortized cost using the EIR method. Gains
and losses are recognized in the Statement
of Profit and Loss when the liabilities are
derecognized as well as through the EIR
amortization process. Amortized cost is
calculated by taking into account any discount
or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR
amortization is included as finance costs in the
Statement of Profit and Loss.
c) Share Capital - Ordinary Shares
An equity instrument is a contract that evidences
residual interest in the assets of the company
after deducting all its liabilities. Equity instruments
recognized by the company are recognized at the
proceeds received net of direct issue cost.
d) De-recognition of financial instruments
A financial asset is derecognized only when
a) the rights to receive cash flows from the
financial asset is transferred or
b) 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 financial asset is transferred then in
that case the financial asset is derecognized only
if substantially all risks and rewards of ownership
of the financial asset is transferred. Where the
entity has not transferred substantially all risks and
rewards of ownership of the financial asset, the
financial asset is not derecognized.
A financial liability is derecognized when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the terms
of an existing liability are substantially modified,
such an exchange or modification is treated as
the derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognized in the
Statement of Profit and Loss as finance costs.
e) 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
recognized amounts and there is an intention to
settle on a net basis or realize 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.
2.9. Fair Value measurement of Financial Instruments
Fair value is the price that would be received on sale
of 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 the asset or liability, or
• In the absence of a principal market, in the most
advantageous market which can be accessed by
the Company for the asset or liability
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.
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 standalone 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:
• Level 1 Quoted (unadjusted) market prices in active
markets for identical assets or liabilities.
• Level 2 Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is directly or indirectly observable.
• Level 3 Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognized in the
standalone financial statements on a recurring basis,
the Company determines whether transfers have
occurred between levels in the hierarchy by reassessing
categorization (based on the lowest level input that is
significant to the fair value measurement as a whole) at
the end of each reporting period.
2.10. Impairment of assets
a) Financial Assets
The Company recognizes loss allowances using
the expected credit loss (ECL) model for financial
assets which are not fair valued through profit or
loss. Loss allowance for trade receivables with
no significant financing component is measured
at an amount equal to lifetime ECL. The amount
of expected credit losses (or reversal) that
is required to adjust the loss allowance at the
reporting date to the amount that is required to
be recognized is recognized as an impairment
gain or loss in the Statement of Profit and Loss.
b) Non-Financial Assets
The Company assesses at each year end
whether there is any objective evidence that a
non-financial asset or a group of non-financial
assets is impaired. If any such indication exists,
the Company estimates the asset's recoverable
amount and the amount of impairment loss.
An impairment loss is calculated as the
difference between an asset's carrying amount
and recoverable amount. Losses are recognized
in the Statement of Profit and Loss and reflected
in an allowance account. When the Company
considers that there are no realistic prospects
of recovery of the asset, the relevant amounts
are written off. If the amount of impairment loss
subsequently decreases and the decrease can
be related objectively to an event occurring
after the impairment was recognised, then
the previously recognised impairment loss is
reversed through the Statement of Profit and
Loss.
The recoverable amount of an asset or cash¬
generating unit (as defined below) is the greater
of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated
future cash flows are discounted to their present
value using a pre-tax discount rate that reflects
current market assessments of the time value
of money and the risks specific to the asset.
For the purpose of impairment testing, assets
are grouped together into the smallest group
of assets that generates cash inflows from
continuing use that are largely independent of
the cash inflows of other assets or groups of
assets (the “cash-generating unit”).
2.11. Leases
Company as a lessee
The Company's leases mainly comprise buildings and
plant and equipment. The Company leases premises
for office use and staff accommodation facilities.
The Company also has leases for equipment. 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 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 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 include the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities include
these options when it is reasonably certain that they
will be exercised.
The right-of use 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.
Right-of-use 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. Right of use assets 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.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate.
Generally, the Group uses its incremental borrowing
rate as the discount rate.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
2.12. Foreign Currency Transactions
a. Functional and presentation currency
Items included in the standalone financial
statements are measured using the currency
of the primary economic environment in which
the entity and its foreign branches operates ('the
functional currency'). The Standalone Financial
Statements are presented in Indian rupee (INR),
which is the functional and presentation currency
of the Company and its foreign branches.
b. Transactions and balances
On initial recognition, all foreign currency
transactions are recorded by applying to the
foreign currency amount the exchange rate
between the functional currency and the foreign
currency at the date of the transaction. Gains/
Losses arising out of fluctuation in the foreign
exchange rate between the transaction date and
settlement date are recognised in the Statement
of Profit and Loss.
All monetary assets and liabilities in foreign
currencies are restated at the year end at the
exchange rate prevailing at the year end and
the exchange differences are recognised in the
Statement of Profit and Loss.
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.
2.13. Employee Benefits
a. Short-term obligations -
Liabilities for wages and salaries, including
non-monetary benefits that are expected to be
settled wholly within 12 months after the end
of the year in which the employees render the
related service are recognized in respect of
employees' services up to the end of the year
and are measured at the amounts expected
to be paid when the liabilities are settled. The
liabilities are presented as current employee
benefit obligations in the balance sheet.
b. Other long term employee benefit obligations:
i. Defined contribution plans
Provident fund: Contributions to the
provident fund is defined contribution plan
and is recognized as an expense in the
Statement of Profit and Loss in the period
in which the contribution is due. Both
the employee and the Company make
monthly contributions to the provident fund
scheme equal to the specified percentage
of the covered employees' basic salary.
Employee's State Insurance Scheme:
Contribution towards employees' state
insurance scheme is made to the
regulatory authorities, where the Company
has no further obligations. Such benefits
are classified as Defined Contribution
Schemes as the Company does not carry
any further obligations, apart from the
contributions made on a monthly basis
which are charged to the Statement of
Profit and Loss.
ii. Defined benefit plans
Gratuity: The employees' gratuity scheme
is a defined benefit plan. In accordance
with the Payment of Gratuity Act, 1972, the
Company provides for gratuity for 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. The present value of
the obligation under such defined benefit
plan is determined at each Balance Sheet
date based on an actuarial valuation
using projected unit credit method. The
discount rate is based on the prevailing
market yields of Indian government
securities. Gains and Losses through re¬
measurement of the net defined benefit
liability / (asset) are recognized in Other
Comprehensive Income.
Compensated Absences: Accumulated
compensated absences, which are
expected to be availed or encashed
within 12 months from the end of the
year are treated as short term employee
benefits. The obligation towards the same
is measured at the expected cost of
accumulating compensated absences as
the additional amount expected to be paid
as a result of the unused entitlement as at
the year end.
Accumulated compensated absences,
which are expected to be availed or
encashed beyond 12 months from the end
of the year end are treated as other long
term employee benefits. The Company's
liability is actuarially determined (using the
Projected Unit Credit method) at the end
of each year. Actuarial losses/gains are
recognized in the statement of profit and
loss in the year in which they arise.
Leaves under defined benefit plans can
be encashed only on discontinuation of
service by employee.
c. Share based payments
The fair value of the options granted under the
scheme of the “Company Employee Option
Plan'', is recognized as employee benefits
expense with the corresponding increase in
equity. The total amount to be expensed is
determined by the reference to the fair value of
the options granted:
- including any market conditions (e.g., the
entity's share price)
- excluding the impact of any service
and non- market performance vesting
conditions (profitability, sales growth
targets and remaining an employee of the
entity over the specified period), and
- including the impact of any non-vesting
conditions (e.g., the requirement for the
employee to save or holding shares for the
specific period of time)
The total expense is recognized over the vesting
period, which is the period over which all the
specified vesting conditions are to be satisfied.
At the end of each period, the entity revises
its estimate of the number of options that are
expected to vest based on the non-market
vesting and service conditions. It recognizes
the impact of the revision to original estimates,
if any, in profit and loss, with the corresponding
adjustments to equity.
2.14. Taxation
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 the 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.
a) Current Income Tax
Current income tax for the current and prior
periods are measured at the amount expected
to be recovered from or paid to the taxation
authorities based on the taxable income for
that period. The tax rates and tax laws used to
compute the amount are those that are enacted
or substantively enacted by the Balance Sheet
date.
Current tax assets and liabilities are offset only
if, the Company:
• Has a legally enforceable right to set off
the recognized amounts; and
• Intends either to settle on a net basis, or
to realize the asset and settle the liability
simultaneously.
b) Deferred Income Tax
Deferred income tax is provided in full, using
the balance sheet approach, on temporary
differences arising between the tax bases of
assets and liabilities and their carrying amounts
in standalone financial statements. Deferred
income tax is also not accounted for if it arises
from initial recognition of an asset or liability in a
transaction other than a business combination
that at the time of the transaction affects neither
accounting profit nor taxable profit (tax loss).
Deferred income tax is determined using tax
rates (and laws) that have been enacted or
substantially enacted by the end of the year and
are expected to apply when the related deferred
income tax asset is realized, or the deferred
income tax liability is settled.
Deferred tax assets are recognised for all
deductible temporary differences and unused
tax losses only if it is probable that future
taxable amounts will be available to utilize those
temporary differences and losses.
Management periodically evaluates positions
taken in tax returns with respect to situations
in which applicable tax regulation is subject to
interpretation. It establishes provisions where
appropriate on the basis of amounts expected to
be paid to the tax authorities
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
offset current tax assets and liabilities and when
the deferred tax balances relate to the same
taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally
enforceable right to offset and intends either to
settle on a net basis, or to realise the asset and
settle the liability simultaneously.
Current and deferred tax is recognized in the
Statement of Profit and Loss, except to the
extent that it relates to items recognised in other
comprehensive income or directly in equity. In
this case, the tax is also recognised in other
comprehensive income or directly in equity,
respectively.
Minimum alternate tax (MAT) paid in a year is
charged to the Statement of Profit and Loss
as current tax. The Company recognizes MAT
credit available as an asset only to the extent that
there is convincing evidence that the Company
will pay normal income tax during the specified
period, i.e., the period for which MAT credit is
allowed to be carried forward. In the year in
which the company recognizes MAT credit as
an asset in accordance with the Guidance Note
on Accounting for Credit Available in respect
of Minimum Alternative Tax under the Income-
tax Act, 1961, the said asset is created by way
of credit to the Statement of Profit and Loss
and shown as “MAT Credit Entitlement.” The
Company reviews the “MAT credit entitlement”
asset at each reporting date and writes down the
asset to the extent the company does not have
convincing evidence that it will pay normal tax
during the specified period.
2.15. Earnings per Share (EPS)
Basic earnings per share is computed by dividing the
net profit after tax by the weighted average number of
equity shares outstanding during the period. Diluted
earnings per share is computed by dividing the profit
after tax by the weighted average number of equity
shares considered for deriving basic earnings per
share and also the weighted average number of equity
shares that could have been issued upon conversion
of all dilutive potential equity shares. The diluted
potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at
fair value which is the average market value of the
outstanding shares. Dilutive potential equity shares
are deemed converted as of the beginning of the
period, unless issued at a later date. Dilutive potential
equity shares are determined independently for each
period presented.
2.16. Cash and Cash Equivalents
Cash and Cash equivalents comprise cash and calls
on deposit with banks and corporations. The Company
considers all highly liquid financial instruments, which
are readily convertible into cash and have original
maturities of three months or less from the date of
purchase, to be cash equivalent.
2.16. Cash Flow Statement
Cash flows are reported using the indirect method,
whereby 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 items 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.
2.17 Dividends
Final dividends on shares are recorded as a liability on
the date of approval by the shareholders and interim
dividends are recorded as a liability on the date of
declaration by the Company's Board of Directors.
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