2. Material accounting policies
2.1 Basis of preparation
i. Compliance with Ind AS
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified
under section 133 of the Companies Act., 2013 (the Act), read with Rule 7 of the Companies (Indian Accounting Standards)
Rules, 2015, as amended and other relevant provisions of the Act.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except the following:
- certain financial assets and liabilities are measured at fair value
- defined benefit plans - plan assets are measured at fair value.
2.2 Summary of significant accounting policies
(a) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after
the reporting period
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
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. The Company has identified twelve months as its operating cycle.
(b) Foreign currency translation
The financial statements are presented in Indian rupees lakhs, which is the functional currency of the Company and the currency
of the primary economic environment in which the Company operates.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the date of the transaction.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary
assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss.
A monetary item for which settlement is neither planned nor likely to occur in foreseeable future is considered as part of the
entity's net investment in that foreign operation.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of profit and loss,
within finance costs. All other foreign exchange gains and losses are presented in the Statement of Profit and Loss on a net
basis within other gains/ (losses).
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates
at the date of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items
measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e.
translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or
profit or loss, respectively.)
(c) Fair value 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 the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by 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, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised 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 recognised in the financial statements on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(d) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue
can be reliably measured at the fair value of the consideration received or receivable, taking into account contractually defined
terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is
the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing
latitude and is also exposed to credit risks.
The specific recognition criteria described below must also be met before revenue is recognised.
Manpower and consultancy services:
Income from Manpower and Consultency services is recognised as per the terms of the agreement on the basis of services
rendedred.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest
income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash
payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross
carrying amount of the financial asset or to the amortised cost of a financial liability. 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. Interest income is
included in other income in the statement of profit and loss
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.
Guarantee commission
Revenue is recognised on a straight line basis taking into account the present value of the guarantee amount and the commission
rate applicable.
(e) Income tax
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the
reporting date in the countries where the Company operates and generates taxable income.
Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management
periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject
to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is not recognized if they arise
from the 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. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the end of the reporting period 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 recognized 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.
The carrying amount of deferred 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 tax asset to be utilized. Unrecognized
deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that
future taxable profits will allow the deferred tax asset to be recovered.
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 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 recognised in the profit or 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.
(f) Property, plant and equipment
Capital work in progress, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment
losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term
construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be
replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major
inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the
recognition criteria are satisfied . All other repair and maintenance costs are recognised in profit or loss as incurred. The present
value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the
recognition criteria for a provision are met.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the
future benefits from the existing asset beyond its previously assessed standard of performance or extends its estimated useful
life. All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and
cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Furniture and fittings - 10 years
Office equipment - 5 years
Vehicles - 8 years
Data processing equipment - 3 years
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. 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 included in the Statement of Profit
and Loss when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial
year end and adjusted prospectively, if appropriate.
(g) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the
inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly
specified in an arrangement.
Company as a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in
line with expected general inflation to compensate for the lessor's expected inflationary cost increases.
Effective from April 1,2019:
As a lessee:
From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased
asset is available for use by the company. Assets and liabilities arising from a lease are initially measured on a present value
basis. Lease liabilities include the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement
date
• amounts expected to be payable by the company under residual value guarantees
• the exercise price of a purchase option if the company is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the company exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which
is generally the case for leases in the company, the lessee's incremental borrowing rate is used, being the rate that the individual
lessee would have to pay to borrow the necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-
of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
(h) 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.
(i) Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an assets fair value less costs of disposal and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of cash inflows from other assets or group of assets (cash generating units). Non financial assets that
suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
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