2. Summary of Significant Accounting
Policies
a. Property, Plant & Equipment:
i. Recognition and Measurement
Property, Plant & Equipment are stated at cost less
accumulated depreciation and impairment losses, if
any.
Costs include costs of acquisitions or constructions
including incidental expenses thereto, borrowing costs
and other attributable costs of bringing the asset to its
working condition for its intended use and are net of
available duty/tax credits.
Subsequent expenditure relating to Property, Plant &
Equipment is capitalized only when it is probable that
future economic benefits associated with these will
flow to the Company and the cost of the item can be
measured reliably. All other repair and maintenance
costs are recognised in Statement of Profit & Loss as
incurred.
Gains or losses arising from discard/sale of Property,
Plant & 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 & Loss when the asset is discarded/sold.
ii. Depreciation
The company depreciates property plant and
equipment on straight-line-method (SLM) as per the
useful life of assets, as estimated by the management/
independent professional, which are generally in line
with Schedule-II to the Companies Act, 2013.
b. Intangible Assets:
i. Recognition and Measurement
Ilntangible assets acquired separately are measured
on initial recognition at cost. Subsequent to initial
recognition, intangible assets are carried at cost less
any accumulated amortisation and accumulated
impairment losses. In case of internally generated
intangible asset arising from development activity
is recognised at cost only if it is probable that the
asset would generate future economic benefit and
the expenditure attributable to said assets during
its development can be measured reliably. Capital
expenditure on purchase and development of
identifiable on monetary assets without physical
substance is recognised as Intangible Assets when: It
is probable that the expected future economic benefits
that are attributable to the asset will flow to the entity
and the cost of the asset can be measure reliably.
ii. Depreciation
The company Amortises/Depreciates Intangible Assets
on the basis of estimated useful lives of Intangible
assets are as follows:
c. Impairment:
The carrying amount of Property, Plant & Equipment,
Intangible Assets, and Investment Property are
reviewed at each Balance Sheet date to assess
impairment, if any based on internal/external factors.
An asset is treated as impaired when the carrying cost
of asset exceeds its recoverable value. An impairment
loss is recognised as an expense in the Statement of
Profit & Loss in the year in which an asset is identified
as impaired. The impairment loss recognized in prior
accounting period is reversed if there has been an
improvement in recoverable amount.
d. Foreign Currency Transactions:
i. Functional and Presentation Currency:
Items included in the financial statements are
measured using the currency of the primary economic
environment in which the entity operates ("functional
Currency”). The financial Statements are presented in
Indian rupee (INR), which is the company's functional
and presentation currency.
ii. Transactions and Balances:
Transactions in foreign currencies are translated into
functional currency of the Company at rates prevailing
at the date of the transaction. Foreign exchange
gain or losses resulting from the settlement of such
transactions and from translation of monetary assets
and liabilities denominated in foreign currencies at the
year-end exchange rates are generally recognised in
Profit & Loss and reported with in Foreign exchange
gain/(losses), except when deferred in other
comprehensive income as qualifying cashflow hedges.
Non-monetary items that are measured in times of
historical cost in a foreign currency are translated using
the exchange rates at the dates of the transaction. Non¬
monetary items (other than investment in shares of
Subsidiaries, Joint Ventures, and Associates) carried at
Fair Value that are denominated in foreign currencies
are translated at the exchange rates prevailing at the
date when the Fair Value was determined. Exchange
component of the gain or loss arising on fair valuation
of non-monetary items is recognised in line with the
gain or loss of the item that gave rise to such exchange
difference.
e. Accounting Policy on FCCBs / Compound
Financial Instruments
i. Accounting Policy on FCCBs / Compound
Financial Instruments
FCCBs are usually treated as compound financial
instruments (if conversion is into a fixed number of
shares and meets equity definition) or separated into
liability and derivative components if not.
"The Company classifies FCCBs as compound financial
instruments consisting of a liability component and
an equity component. On initial recognition, the fair
value of the liability is determined and the residual
value is classified as equity. The liability component is
subsequently measured at amortised cost using the
effective interest rate method. The equity component
is not remeasured. Upon conversion, the liability is
derecognised and equity share capital and securities
premium are recognized accordingly.”
ii. Derecognition Policy
Include a brief policy on derecognition of financial
liabilities:
"A financial liability is derecognised when the
obligation under the liability is discharged, cancelled,
or expires. Upon conversion of FCCBs into equity
shares, the financial liability is derecognised and equity
instruments are recognised.”
f. Revenue Recognition:
The Company derives revenue primarily from software
development, maintenance of software/hardware and
allied services, sale of software licenses, subscriptions
for services and ecommerce.
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold, and services rendered is net of variable
consideration on account of various discounts and
schemes offered by the Company as part of the
contract. The Company recognised revenue when
the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the
entity and specific criteria have been met for each of
the company's activities as described below.
The Company estimates its estimates on historical
results, taking into consideration the type of customer,
the type of transaction and the specifics of each
arrangement.
i. Time and Material Contracts
Revenues and costs relating to time and materials
contracts are recognized as the related services are
rendered.
ii. Fixed- price contracts:
Revenues from fixed-price contracts, including IT
Infrastructure development and integration contracts
are recognized using the "percentage of-completion”
method. Percentage of completion is determined based
on efforts or costs incurred to date as a percentage of
total estimated efforts or costs required to complete
the project. The efforts or cost expended are used to
measure progress towards completion as there is a
direct relationship between input and productivity.
If the Company does not have a sufficient basis to
measure the progress of completion or to estimate
the total contract revenues and costs, revenue is
recognized only to the extent of contract cost incurred
for which recoverability is probable.
When total cost estimates exceed revenues in an
arrangement, the estimated losses are recognized in
the statement of income in the period in which such
losses become probable based on the current contract
estimates.
Advance payments received from customers for which
no services have been rendered are presented as
'Advance from customers.
iii. Services contracts:
Revenue from services contracts is recognized ratably
over the period of the contract using the percentage
of completion method. When services are performed
through an indefinite number of repetitive acts over
a specified period of time, revenue is recognized on
a straight-line basis over the specified period unless
some other method better represents the stage of
completion. In certain projects, a fixed quantum of
service or output units is agreed at a fixed price for
a fixed term. In such contracts, revenue is recognized
with respect to the actual output achieved till date as
a percentage of total contractual output. Any residual
service unutilized by the customer is recognized as
revenue on completion of the term.
iv. Sale of licenses & Subscriptions
Revenue from sale of licenses and support are
recognized when the significant risks and rewards
of ownership have been transferred to the buyer,
continuing managerial involvement usually associated
with ownership and effective control have ceased,
the amount of revenue can be measured reliably, it is
probable that economic benefits associated with the
transaction will flow to the Company and the costs
incurred or to be incurred in respect of the transaction
can be measured reliably.
Revenues from Sale of Subscriptions shall be recognized
linear to the period of the contract.
v. Ecommerce/Retail
Revenue from Ecommerce transactions i.e., sale of
third-party products/applications/services shall be
recognized on realization of the merchandise.
vi. Other Income
Profit on Sale of investments is recorded on transfer
of title from the company and is determined as the
difference between the sale price and the carrying
amount of the investment.
Dividend income is recognized when the company's
right to receive dividends is established.
Interest income on time deposits is recognized using
time proportion basis taking into account the amount
outstanding and applicable interest rates.
g. Income Tax:
Income Tax comprises current and deferred tax.
Current tax is measured at the amount expected to
be paid to the tax authorities in accordance with the
Income Tax Act, 1961 enacted in India and tax laws,
prevailing in the respective tax, jurisdictions where the
Company operates. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted at the reporting date.
The company offsets current tax assets and current
tax liabilities, where it has legally enforceable right to
set off the recognised amounts and where it intends to
settle on net basis, or to realise the asset and liability
simultaneously.
Deferred tax is provided on temporary difference
arising between the tax bases of assets & liabilities and
their carrying amounts for financial reporting purposes
at the reporting date. Deferred tax is measured using
the tax rate that are expected to apply in the year
when the asset is realized, or the liability is settled
based on the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred
tax relating to items recognized directly in equity/
other comprehensive income (OCI) is recognised in
equity/ other comprehensive income (OCI) and not
in the statement of Profit & Loss. Deferred tax asset
is recognised to the extent that it is probable that
sufficient future taxable profit will be available against
which the deductible temporary differences and the
carry forward unused tax credits and unused tax losses
can be utilized. 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.
Minimum Alternate Tax (MAT) credit is recognised as
anasset only when and to the extent there is convincing
evidence that the Company will pay normal income tax
during the specified period.
|