2 MATERIAL ACCOUNTING POLICIES
(a) (i) Revenue Recognition
The Company recognizes revenue on
completion of its performance obligations
at the fixed transaction prices specified in
the underlying contracts or orders. There
are no variable price elements arising from
discounts or rebates. Where the contract or
order includes more than one performance
obligation, the transaction price is allocated
to each obligation based on their stand¬
alone selling prices. These are separately
listed as individual items within the contract
or order. The primary areas of judgement
for revenue recognition as principal versus
agent are set out under Critical estimates
and judgements section and described
further below for each revenue category.
Revenue is only recognized to the extent that
it is highly probable that significant reversal
will not occur. Transaction price excludes
taxes and duties collected on behalf of the
government. The Company generally does
not have any contracts where the period
between the transfer of the promised goods
or services to the customer and payment
by the customer exceeds one year. As a
consequence, the Company does not adjust
any of the transaction prices for the time
value of money.
Hardware
The Company’s activities under this revenue
stream comprise the sale of hardware
items consisting of servers, hardware
security modules and authentication keys.
For hardware sales, the Company acts as
principal, as it assumes primary responsibility
for fulfilling the promise to provide the goods
and for their acceptability, is exposed to
inventory risk during the delivery period and
has discretion in establishing the selling
price. Revenue is recognized at the gross
amount receivable from the customer for the
hardware provided and on a point-in-time
basis when delivered to the customer.
Software and Allied Support
The Company’s performance obligation is
to fulfil customers’ requirements through
the procurement of appropriate software
products from relevant vendors. The
Company invoices, and receives payment
from, the customer itself. Whilst the
transaction price is set by the Company at
the amount specified in its contract/order
with the customer, the software licensing
agreement is between the vendor and the
customer. The vendor is responsible for
issuing the licences and activation keys, for
the software’s functionality, and for fulfilling
the promise to provide the licences to the
customer. Therefore, the Company acts
as an agent and recognizes revenue on a
net basis. The Company recognizes such
software sales revenue on a point-in-time
basis once it has satisfied its performance
obligations.
Revenue from professional/technical
services and renewal of service packs
is recorded on a net basis as the level
of inventory risk, to which the Company
is exposed to, in these arrangements
is negligible. The Company recognizes
such services revenue on a point-in-time
basis once it has satisfied its performance
obligations."
(ii) Costs to fulfill contracts
The Company recognizes contract fulfilment
cost as an asset if those costs specifically
relate to a contract or to an anticipated
contract, the costs generate or enhance
resources that will be used in satisfying
performance obligations in future; and the
costs are expected to be recovered.
(b) Income tax
The income tax expense or credit for the year
is the tax payable on the current year’s taxable
income based on the applicable income tax
rate for each jurisdiction adjusted by changes in
deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted at the end of the reporting year in
the countries where the Company operate
and generate taxable income. Management
periodically evaluates positions taken in tax returns
with respect to situations in which applicable
tax regulation is subject to interpretation and
considers whether it is probable that a taxation
authority will accept an uncertain tax treatment.
The Company measures its tax balances either
based on the most likely amount or the expected
value, depending on which method provides
a better prediction of the resolution of the
uncertainty.
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 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.
Deferred tax liabilities are not recognized for
temporary differences between the carrying
amount and tax bases of investments in branches
where the Company is able to control the timing
of the reversal of the temporary differences and it
is probable that the differences will not reverse in
the foreseeable future.
Deferred tax assets are not recognized for
temporary differences between the carrying
amount and tax bases of investments in branches
where it is not probable that the differences will
reverse in the foreseeable future and taxable
profit will not be available against which the
temporary difference can be utilized.
Deferred tax assets and liabilities are offset where
there is a legally enforceable right to offset current
tax assets and liabilities and where 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 realize the asset and settle the liability
simultaneously.
Current and deferred tax is recognized in profit
or loss, except to the extent that it relates to
items recognized in other comprehensive income
or directly in equity. In this case, the tax is also
recognized in other comprehensive income or
directly in equity, respectively.
(c) Leases (As a Lessee)
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 of the
Company, the lessee’s incremental borrowing rate
is used, being the rate that the individual lessee
would have to pay to borrow the funds 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.
If a readily observable amortizing loan rate is
available to the individual lessee (through recent
financing or market data) which has a similar
payment profile to the lease, then the Company
use that rate as a starting point to determine the
incremental borrowing rate.
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 measured at cost
comprising the following:
• the amount of the initial measurement of
lease liability
• any lease payments made at or before
the commencement date less any lease
incentives received
• any initial direct costs
• restoration costs.
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. If the Company
is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over
the underlying asset’s useful life.
Payment associated with short-term leases and
all leases of low-value assets are recognized on a
straight-line basis as an expense in profits or loss.
Short-term leases are leases with a lease term of
12 months or less.
(d) Impairment of non financial assets:
Property, plant and equipment and intangible
assets with finite life are tested for impairment
whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable. An impairment loss is recognized
for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s
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 the cash inflows from
other assets or groups of assets (cash-generating
units). Non-financial assets other than goodwill
that suffered an impairment are reviewed for
possible reversal of the impairment at the end of
each reporting year.
(e) Cash and cash equivalents
For the purpose of presentation in the statement
of cash flows, cash and cash equivalents
includes cash on hand, deposits held at call with
financial institutions, other short-term, highly
liquid investments with original maturities of three
months or less that are readily convertible to
known amounts of cash and which are subject to
an insignificant risk of changes in value.
(f) Trade receivables
Trade receivables are amounts due from
customers for goods sold or services performed
in the ordinary course of business. Trade
receivables are recognized initially at the
transaction price. The Company holds the trade
receivables with the objective of collecting the
contractual cash flows and therefore measures
them subsequently at amortized cost using the
effective interest method, less loss allowance.
As a practical expedient, the Company has not
adjusted the promised amount of consideration for
the effects of a significant financing component as
the Company expects, at contract inception, that
the period between when the Company transfers
the promised good or service to a customer and
when the customer pays for that good or service
will be one year or less pursuant to paragraph
63 of Ind AS 115 "Revenue from Contract with
customer".
(g) Inventories
Traded goods are stated at the lower of cost
and net realisable value. Cost of traded goods
comprises cost of purchases. Cost of inventories
also include all other costs incurred in bringing
the inventories to their present location and
condition. Costs are assigned to individual items
of inventory on specific identification basis. Costs
are determined after deducting rebates and
discounts. Net realisable value is the estimated
selling price in the ordinary course of business
less the estimated costs of completion and the
estimated costs necessary to make the sale
(h) Investments (Other than Investments in
Subsidiaries) 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)
• those to be measured at amortized
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 equity instruments that are not
held for trading, 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 FVOCI.
The Company reclassifies debt investments
when and only when its business model for
managing those assets changes.
(ii) Recognition
Regular way purchases and sales of financial
assets are recognized on trade-date, being
the date on which the Company commits to
purchase or sale the financial asset.
(iii) 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.
(iii) (a) 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 two measurement
categories into which the Company
classifies its debt instruments:
• Amortized 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 amortized cost.
Interest income from these
financial assets is included in
Other Income using the effective
interest rate method. Any gain or
loss arising on derecognition is
recognized directly in profit or loss
and presented in Other Income/
(Other Expenses). Impairment
losses are presented as separate
line item in the statement of profit
and loss.
• Fair value through profit or loss:
Assets that do not meet the
criteria for amortized 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
is recognized in profit or loss
and presented net within other
Income/(other expenses) in the
period in which it arises. Interest
income from these financial assets
is included in other income.
(iii) (b) Equity instruments
The Company subsequently measures
all equity investments at fair value.
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 following the derecognition of
the investment. Dividends from such
investments are recognized 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 recognized in Other Income/
(Other Expenses) 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.
(iv) Impairment of financial assets
The Company assesses on a forward looking
basis the expected credit losses associated
with its assets carried at amortized cost and
FVOCI debt instruments. The impairment
methodology applied depends on whether
there has been a significant increase in
credit risk.
For trade receivables, the Company applies
the simplified approach permitted by Ind AS
109 Financial Instruments, which requires
expected lifetime losses to be recognized
from initial recognition of the receivables.
(v) Derecognition of financial assets
A financial asset is derecognized 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 Company 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
derecognized. Where the Company has
not transferred substantially all risks and
rewards of ownership of the financial asset,
the financial asset is not derecognized.
Where the Company has neither transferred
a financial asset nor retains substantially all
risks and rewards of ownership of the financial
asset, the financial asset is derecognized 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 recognized to the extent of
continuing involvement in the financial asset.
(vi) Interest income on bank deposits
and unwinding of interest on security
deposits paid
Interest income is accrued on a time
proportion basis, by reference to the principal
outstanding and recorded using the effective
interest rate (EIR). EIR is the rate that
exactly discounts the estimated future cash
receipts over the expected life of financial
instrument, where appropriate, to the gross
carrying amount of the financial asset. When
calculating EIR the Company estimates the
expected cash flows by considering all the
contractual terms of the financial instrument
but does not consider expected credit losses.
(i) Derivative Instruments
Derivatives are only used for economic hedging
purposes and not as speculative investments.
Derivatives do not meet the hedge accounting
criteria and hence they are classified as ‘held
for trading’ for accounting purposes and are
accounted for at FVPL. They are presented as
current assets or liabilities to the extent they are
expected to be settled within 12 months after the
end of the reporting period. Derivatives are initially
recognized 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.
(j) Property, Plant and Equipment
Freehold land is carried at historical cost. All other
items of property, plant and equipment are stated
at historical cost less depreciation. Historical cost
includes expenditure that is directly attributable to
the acquisition of the items.
Subsequent costs are included in the asset’s
carrying amount or recognized 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 derecognized when replaced.
All other repairs and maintenance are charged to
profit or loss during the reporting period in which
they are incurred.
Depreciation methods, estimated useful lives
and residual value
Depreciation is calculated using the straight-line
method to allocate the cost of the assets, net of
their residual values, over their estimated useful
lives. The assets’ residual values and useful
lives are reviewed, and adjusted if appropriate,
at the end of each reporting period. An asset’s
carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
are included in profit or loss within other income/
(other expenses). Estimated useful life of assets
used for depreciation is as follows:
Nature of asset
Computers - 3 years
Office equipment- 5 years
Furniture and fixtures -10 years
Vehicles- 5 years
Networks and Servers - 5 years
Demo equipment's - 4 years
The Company based on the technical assessment
made by the technical expert/ management
estimate, depreciate certain items of Network and
servers, Demo Equipment and Vehicles over the
estimated useful lives which are different from
the useful life prescribed in Schedule II to the
Companies Act, 2013. The management believes
that these estimated useful lives are realistic and
reflect fair approximation of the period over which
the assets are likely to be used.
(k) Trade and other payables
These amounts represent liabilities for goods
and services provided to the Company prior to
the end of the 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 recognized initially at
their transaction value which represents their fair
value and subsequently measured at amortized
cost using the effective interest method.
(l) Vendor programs
Funds received from vendors for product rebates
and marketing/promotion programs are recorded
as adjustments to product costs, according to the
nature of the program. The Company accrues
rebates or other vendor incentives as earned
based on purchase of qualifying products or as
services are provided in accordance with the
terms of the related program.
(m) Borrowings
Borrowings are initially recognized at fair value,
net of transaction costs incurred. Borrowings are
subsequently measured at amortized cost.
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 recognized in profit or loss
as other Income/(Expenses).
Borrowings are classified as current liabilities
unless, at the end of the reporting period, the
Company has a 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.
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