Note No. 1 : Significant Accounting Policies & Notes on Accounts A. SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Preparation
a) The financial statements of IKF Technologies Limited (the company) have been prepared under the historical cost convention on the accrual basis of accounting and comply with the mandatory Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 2013
b) As required by Schedule III, the Company has classified assets and liabilities into current and non - current based on the operating cycle. An operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. Since the normal operating cycle is not determinable, the operating cycle has been considered as 12 months and the Assets & Liabilities are segregated between Current & Non-Current on the basis of management’s decision.
2. Use of Estimates
The preparation of financial statements requires management to make assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Any revisions to accounting estimates are recognized prospectively in current and future periods.
3. Revenue Recognition
The company derives its revenues primarily from IT Enabled services, Telecom & Project, Business Process Outsourcing operations (BPO) and Bio Fuel division. Revenue from IT enabled services and project comprises income from time and material and fixed contracts. Revenue from time and material contracts is recognized on the basis of software development and billable in accordance with the terms of contracts with clients. Maintenance revenue is recognized ratably over the period of the underlying maintenance agreement. Revenue from business process outsourcing operations arises from both time based and unit priced client contracts. Such revenue is recognized on completion of the related services and is billable in accordance with the specific terms of the contracts with the clients. Rates & Taxes are accounted on Cash Basis
4. Fixed Assets
Fixed Assets are stated at cost of acquisition less accumulated depreciation thereon. Direct costs are capitalized until assets are ready to be put to use. Fixed assets purchased in foreign Currency are recorded at the actual rupee cost incurred. Building represents cost of construction carried on structures taken on rent. Lease under which the company assumes substantially all the risks and rewards of ownership are classified as “Finance Lease”. Lease Assets are capitalized at the fair value of the assets or the present value of the minimum lease payments at the inception of the lease, whichever is lower.
5. Depreciation
Depreciation on Fixed Assets is provided to the extent of depreciable amount on the Written down Value (WDV) Method. Depreciation is provided based on useful life of the assets as prescribed in schedule II to the Companies Act, 2013.
6. Investments
Investments in Indian / Foreign Subsidiary Company are stated at cost. Provisions for diminution in value of Investment are made only when such diminution is permanent in nature.
# On Receipt and Payment Basis
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transactions. Foreign Currency monetary assets and liabilities outstanding at the yearend are translated at the exchange rate prevailing as on Balance Sheet Date. Difference in Exchange Rate arising on account of conversion/transaction of such assets/liabilities has been recognized in the accounts.
8. Provisions & Contingencies
The company recognizes a provision when there is a present obligation as a result of an obligating event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure of contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.
9. Impairment of Assets
The company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to recoverable amount and the reduction is treated as an impairment loss.
10. Retirement Benefits & Other Employee Benefits Defined Contribution Plans
Company’s Contribution to Provident Fund & Employees State Insurance Corporation has been recognized as expenses of the year.
Defined Benefit Plans
No provision for defined benefit plans and other post-employment benefits is recognized in the books as no actuarial valuation has been done as on 31st March 2016.
11. Income Tax
(a) Provision for Current Income Tax is made on the basis of relevant provisions of the Income Tax Act, 1961 as applicable to the financial year.
(b) Deferred Tax on timing differences is measured based on the Tax Rates and the Tax laws enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Assets are recognized only to the extent that there is virtual certainty with convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized.
12. Cash Flow Statement
The Company adopts the Indirect Method in the preparation of Cash Flow Statement. For the purpose of Cash Flow Statement, Cash & Cash equivalents consist of Cash in hand, Bank Balances and Fixed Deposits with Bank.
13. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statement.
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