2.2 Material accounting policy information
(i) Property, plant and equipment
Recognition and measurement
Property, plant and equipment are measured
at cost less accumulated depreciation and
impairment losses, if any. Cost includes
expenditures directly attributable to the
acquisition of the asset. General and specific
borrowing costs directly attributable to
the construction of a qualifying asset are
capitalised as part of the cost. Capital work-
in-progress are measured at cost less
accumulated impairment losses, if any
Depreciation
Depreciation on tangible assets is provided
on straight line method and in the manner
prescribed in Schedule II to the Companies
Act, 2013, over its useful life specified in the
Act, or based on the useful life of the assets
as estimated by Management based on
technical evaluation and advice. The residual
value is 5% of the acquisition cost which is
considered to be the amount recoverable
at the end of the asset's useful life. The
residual values, useful lives and method of
depreciation of property, plant and equipment
is reviewed at each financial year end.
The Management's estimates of the useful
life of various categories of fixed assets
where estimates of useful life are lower than
the useful life specified in Part C of Schedule
II to the Companies Act, 2013 are as under:
When parts of an item of property, plant
and equipment have different useful lives,
they are accounted for as separate items
(major components) of property, plant and
equipment.
Subsequent expenditure relating to property,
plant and equipment is capitalised 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.
Deposits and advances paid towards the
acquisition of property, plant and equipment
outstanding as at each reporting date is
classified as capital advances under other
non-current assets and the cost of property,
plant and equipment not available for use
before such date are disclosed under capital
work-in-progress.
Assets costing less than Rs. 5,000 individually
have been fully depreciated in the year of
purchase.
The estimated useful life of the intangible
assets and the amortization period are
reviewed at the end of each financial year and
the amortization period is revised to reflect
the changed pattern, if any.
(ii) Goodwill
The excess of the cost of an acquisition
over the acquiree's identifiable assets and
liabilities is recognised as goodwill. If the
excess is negative, a bargain purchase gain
is recognised in equity as capital reserve.
Goodwill is measured at cost less accumulated
impairment (if any). Goodwill associated with
disposal of an operation that is part of cash-
generating unit is measured based on the
relative values of the operation disposed of
and the portion of the cash-generating unit
retained, unless some other method better
reflects the goodwill associated with the
operation disposed of.
(iii) Intangible assets
Intangible assets acquired separately are
measured at cost of acquisition. Intangible
assets acquired in a business combination
are measured at fair value as at the date of
acquisition. Following initial recognition,
intangible assets are carried at cost less
accumulated amortisation and impairment
losses, if any. The amortisation of an
intangible asset with a finite useful life reflects
the manner in which the economic benefit is
expected to be generated. The estimated
useful life of amortisable intangibles is
reviewed and where appropriate is adjusted,
annually. The estimated useful lives of the
amortisable intangible assets are as follows:
(iv) Leases
The Company as a lessee
The Company enters into an arrangement for
lease of land, buildings, plant and equipment
including computer equipment and vehicles.
Such arrangements are generally for a fixed
period but may have extension or termination
options. The Company assesses, whether
the contract is, or contains, a lease, at its
inception. A contract is, or contains, a lease if
the contract conveys the right to:
a) control use of an identified asset,
b) obtain substantially all the economic
benefits from use of the identified asset,
and
c) direct the use of the identified asset
The Company determines the lease term as
the noncancellable period of a lease, together
with periods covered by an option to extend
the lease, where the Company is reasonably
certain to exercise that option. The Company
at the commencement of the lease contract
recognises a Right of Use (“RoU") asset at cost
and corresponding lease liability, except for
leases with term of less than twelve months
(short-term leases) and low value assets. For
these short-term and low value leases, the
Company recognises the lease payments as
an operating expense on a straight-line basis
over the lease term. The cost of the RoU
assets comprises the amount of the initial
measurement of the lease liability, any lease
payments made at or before the inception date
of the lease, plus any initial direct costs, less
any lease incentives received. Subsequently,
the RoU assets are measured at cost less any
accumulated depreciation and accumulated
impairment losses, if any. The RoU assets are
depreciated using the straight-line method
from the commencement date over the shorter
of lease term or useful life of RoU assets.
The estimated useful lives of RoU assets are
determined on the same basis as those of
property, plant and equipment. The Company
applies Ind AS 36 to determine whether a
RoU asset is impaired and accounts for any
identified impairment loss as described in the
impairment of nonfinancial assets below.
For lease liabilities at the commencement
of the lease, the Company measures the
lease liability at the present value of the
lease payments that are not paid at that date.
The lease payments are discounted using
the interest rate implicit in the lease, if that
rate is readily determined, if that rate is not
readily determined, the lease payments are
discounted using the incremental borrowing
rate that the Company would have to pay to
borrow funds, including the consideration
of factors such as the nature of the asset
and location, collateral, market terms and
conditions, as applicable in a similar economic
environment. After the commencement date,
the amount of lease liabilities is increased to
reflect the accretion of interest and reduced
for the lease payments made. The Company
recognises the amount of the remeasurement
of lease liability as an adjustment to the RoU
assets. Where the carrying amount of the
RoU asset is reduced to zero and there is a
further reduction in the measurement of the
lease liability, the Company recognises any
remaining amount of the re-measurement in
statement of profit and loss.
Payment of Lease liabilities are classified
as cash used in financing activities in the
statement of cash flows.
The Company as a lessor
Leases under which the Company is a lessor
are classified as a finance or operating lease.
Lease contracts where all the risks and
rewards are substantially transferred to the
lessee are classified as a finance lease. All
other leases are classified as operating lease.
For leases under which the Company is an
intermediate lessor, the Company accounts
for the head-lease and the sub-lease as two
separate contracts. The sub-lease is further
classified either as a finance lease or an
operating lease by reference to the RoU asset
arising from the headlease.
(v) Financial Instrument
a) Non-derivative financial instruments:
Non derivative financial instruments
consist of:
financial assets, which include cash and
cash equivalents, trade receivables,
unbilled revenues, contract assets,
employee and other advances,
investments in equity, debt and mutual
fund securities and eligible current and
noncurrent assets.
Financial liabilities include long and
short term loans and borrowings,
bank overdrafts, trade payables, lease
liabilities, eligible current and non¬
current liabilities, . Non derivative
financial instruments are recognized
initially at fair value.
Financial assets are derecognized
when substantial risks and rewards
of ownership of the financial asset
have been transferred. In cases
where substantial risks and rewards of
ownership of the financial assets are
neither transferred nor retained, financial
assets are derecognized only when the
Company has not retained control over
the financial asset. Subsequent to initial
recognition, non-derivative financial
instruments are measured as described
below
"Financial instruments are recognised
when the Company becomes a party
to the contractual provisions of the
instrument. Initial recognition: at
fair value plus transaction costs.
Subsequent measurement: Financial
assets are classified as amortised cost,
FVTOCI, or FVTPL based on business
model. Financial liabilities are measured
at amortised cost, unless designated at
FVTPL. Derecognition: Financial assets
are derecognised when contractual
rights expire or are transferred. Liabilities
are derecognised on settlement or
cancellation.'^
A. Cash and cash equivalents
The Company's cash and cash equivalents
consist of cash on hand and in banks and
demand deposits with banks, which can be
withdrawn at any time, without prior notice
or penalty on the principal. For the purposes
of the cash flow statement, cash and cash
equivalents include cash on hand, in banks
and demand deposits with banks, net of
outstanding bank overdrafts that are repayable
on demand and are considered part of the
Company's cash management system. In the
balance sheet, bank overdrafts are presented
under borrowings within current liabilities.
B. Investments
Financial instruments measured at amortised
cost:
Debt instruments that meet the following
criteria are measured at amortized cost
(except for debt instruments that are
designated at fair value through Profit or Loss
(FVTPL) on initial recognition): • the asset is
held within a business model whose objective
is to hold assets in order to collect contractual
cash flows; and • the contractual terms of the
instrument give rise on specified dates to cash
flows that are solely payment of principal and
interest on the principal amount outstanding.
Financial instruments measured at fair
value through other comprehensive income
(FVOCI): Debt instruments that meet the
following criteria are measured at fair value
through other comprehensive income
(FVTOCI) (except) for debt instruments that
are designated at fair value through Profit
or Loss (FVTPL) on initial recognition) • the
asset is held within a business model whose
objective is achieved both by collecting
contractual cash flows and selling financial
asset; and • the contractual terms of the
instrument give rise on specified dates
to cash flows that are solely payment of
principal and interest on the principal amount
outstanding. Interest income is recognized
in statement of profit and loss for FVTOCI
debt instruments. Other changes in fair value
of FVTOCI financial assets are recognized
in other comprehensive income. When the
investment is disposed of, the cumulative gain
or loss previously accumulated in reserves is
transferred to statement of profit and loss.
Financial instruments measured at fair value
through profit or loss (FVTPL): Instruments
that do not meet the amortised cost or FVTOCI
criteria are measured at FVTPL. Financial
assets at FVTPL are measured at fair value
at the end of each reporting period, with any
gains or losses arising on re-measurement
recognized in statement of profit and loss.
The gain or loss on disposal is recognized in
statement of profit and loss. Interest income
is recognized in statement of profit and loss
for FVTPL debt instruments. Dividend on
financial assets at FVTPL is recognized when
the Company's right to receive dividend is
established. Investments in equity instruments
designated to be classified as FVTOCI: The
Company carries certain equity instruments
which are not held for trading. The Company
has elected the FVTOCI irrevocable option for
these instruments. Movements in fair value
of these investments are recognized in other
comprehensive income and the gain or loss is
not reclassified to statement of profit and loss
on disposal of these investments. Dividends
from these investments are recognized
in statement of profit and loss when the
Company's right to receive dividends is
established.
Other financial assets: Other financial assets
are non-derivative financial assets with fixed
or determinable payments that are not quoted
in an active market. They are presented as
current assets, except for those maturing
later than 12 months after the reporting date
which are presented as non-current assets.
These are initially recognized at fair value
and subsequently measured at amortized
cost using the effective interest method, less
any impairment losses. These comprise trade
receivables, unbilled revenues, cash and
cash equivalents and other assets.
Trade and other payables Trade and other
payables are initially recognized at fair value,
and subsequently carried at amortized cost
using the effective interest method. For these
financial instruments, the carrying amounts
approximate fair value due to the short term
maturity of these instruments.
Derecognition of financial instruments The
Company derecognizes a financial asset
when the contractual rights to the cash flows
from the financial asset expires or it transfers
the financial asset and the transfer qualifies for
derecognition under IFRS 9. If the Company
retains substantially all the risks and rewards
of a transferred financial asset, the Company
continues to recognise the financial asset and
also recognizes a borrowing for the proceeds
received. A financial liability (or a part of a
financial liability) is derecognized from the
Company's balance sheet when the obligation
specified in the contract is discharged or
cancelled or expires.
Financial instruments measured at
amortised cost:
Debt instruments that meet the following
criteria are measured at amortized cost (except
for debt instruments that are designated at fair
value through Profit or Loss (FVTPL) on initial
recognition):
• the asset is held within a business model
whose objective is to hold assets in
order to collect contractual cash flows;
and
• the contractual terms of the instrument
give rise on specified dates to cash
flows that are solely payment of principal
and interest on the principal amount
outstanding.
Financial instruments measured at fair
value through other comprehensive income
(FVOCI):
Debt instruments that meet the following
criteria are measured at fair value through
other comprehensive income (FVTOCI)
(except) for debt instruments that are
designated at fair value through Profit or Loss
(FVTPL) on initial recognition)
• the asset is held within a business model
whose objective is achieved both by
collecting contractual cash flows and
selling financial asset; and
• the contractual terms of the instrument
give rise on specified dates to cash
flows that are solely payment of principal
and interest on the principal amount
outstanding.
Interest income is recognized in statement of
profit and loss for FVTOCI debt instruments.
Other changes in fair value of FVTOCI financial
assets are recognized in other comprehensive
income. When the investment is disposed
of, the cumulative gain or loss previously
accumulated in reserves is transferred to
statement of profit and loss.
Financial instruments measured at fair
value through profit or loss (FVTPL):
Instruments that do not meet the amortised
cost or FVTOCI criteria are measured at
FVTPL. Financial assets at FVTPL are
measured at fair value at the end of each
reporting period, with any gains or losses
arising on re-measurement recognized in
statement of profit and loss.
The gain or loss on disposal is recognized in
statement of profit and loss. Interest income
is recognized in statement of profit and loss
for FVTPL debt instruments. Dividend on
financial assets at FVTPL is recognized when
the Company's right to receive dividend is
established.
Investments in equity instruments
designated to be classified as FVTOCI:
The Company carries certain equity
instruments which are not held for trading. The
Company has elected the FVTOCI irrevocable
option for these instruments. Movements in
fair value of these investments are recognized
in other comprehensive income and the gain
or loss is not reclassified to statement of profit
and loss on disposal of these investments.
Dividends from these investments are
recognized in statement of profit and
loss when the Company's right to receive
dividends is established.
(vi) Other financial assets:
Other financial assets are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. They are presented as current
assets, except for those maturing later than
12 months after the reporting date which
are presented as non-current assets. These
are initially recognized at fair value and
subsequently measured at amortized cost
using the effective interest method, less any
impairment losses. These comprise trade
receivables, unbilled revenues, cash and
cash equivalents and other assets.
"Other financial assets primarily include
unbilled revenue, security deposits, interest
accrued, and margin money deposits.
These are initially recognised at fair value
and subsequently measured at amortised
cost using the effective interest method in
accordance with Ind AS 109."
(vii) Trade and other payables
Trade and other payables are initially
recognized at fair value, and subsequently
carried at amortized cost using the
effective interest method. For these
financial instruments, the carrying amounts
approximate fair value due to the short term
maturity of these instruments.
"Trade and other payables are classified as
financial liabilities and are initially recognised
at fair value. They are subsequently
measured at amortised cost using the
effective interest method, in line with Ind AS
109. Given the short-term nature, the carrying
value approximates fair value."
b) Derecognition of financial instruments
The Company derecognizes a financial
asset when the contractual rights to
the cash flows from the financial asset
expires or it transfers the financial
asset and the transfer qualifies for
derecognition under IFRS 9. If the
Company retains substantially all the
risks and rewards of a transferred
financial asset, the Company continues
to recognise the financial asset and also
recognizes a borrowing for the proceeds
received. A financial liability (or a part of
a financial liability) is derecognized from
the Company's balance sheet when the
obligation specified in the contract is
discharged or cancelled or expires.
"Replace all 'IFRS 9' references with 'Ind
AS 109'. Split policy: Financial Asset:
Derecognised when contractual cash
flow rights expire or on transfer with
derecognition criteria met. Financial
Liability: Derecognised when obligation
is discharged, cancelled, or expired."_
(viii) Measurement of fair values
“This policy is framed in accordance with Ind
AS 113 - Fair Value Measurement."
The Company's accounting policies and
disclosures require the measurement of fair
values, for both financial and non-financial
assets and liabilities.
The Company has an established control
framework with respect to the measurement
of fair values. This includes a treasury team
that has overall responsibility for overseeing
all significant fair value measurements,
including Level 3 fair values, and reports
directly to the Chief Financial Officer.
The treasury team regularly reviews
significant unobservable inputs and valuation
adjustments. If third party information, such
as broker quotes or pricing services, is used
to measure fair values, then the valuation
team assesses the evidence obtained from
the third party to support the conclusion that
these valuations meet the requirements of
Ind AS, including the level in the fair value
hierarchy in which the valuations should be
classified.
Fair values are categorized into different
levels in a fair value hierarchy based on the
inputs used in the valuation techniques as
follows.
o Level 1: quoted prices (unadjusted) in
active markets for identical assets or
liabilities.
o Level 2: inputs other than quoted prices
included in Level 1 that are observable
for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived
from prices).
o Level 3: inputs for the asset or liability
that are not based on observable market
data (unobservable inputs).
When measuring the fair value of an asset
or a liability, the Company uses observable
market data as far as possible. If the inputs
used to measure the fair value of an asset or a
liability fall into different levels of the fair value
hierarchy, then the fair value measurement is
categorized in its entirety in the same level
of the fair value hierarchy as the lowest
level input that is significant to the entire
measurement.
The Company recognizes transfers between
levels of the fair value hierarchy at the end of
the reporting period during which the change
has occurred.
(ix) Inventories
Inventories are valued at the lower of the cost
and the net realizable value. Net realisable
value is the estimated selling price in the
ordinary course of business, less estimated
costs of completion and to make the sale.
Cost is determined on a First in First out basis.
A periodic review is made of slow-moving
stock and appropriate provisions are made for
anticipated losses, if any.
"Inventories are valued at the lower of cost
and net realisable value (NRV), in accordance
with Ind AS 2. Cost includes purchase cost,
conversion cost, and all costs incurred to
bring inventories to their present condition
and location."
(x) Impairment
Financial assets
The Company applies the expected credit
loss model for recognising impairment loss
on financial assets measured at amortised
cost, debt instruments classified as FVTOCI,
trade receivables, unbilled receivables,
contract assets, finance lease receivables
and other financial assets. Expected credit
loss is the difference between the contractual
cash flows and the cash flows that the
entity expects to receive discounted using
the effective interest rate. Loss allowances
for trade receivables, unbilled receivables,
contract assets and finance lease receivables
are measured at an amount equal to lifetime
expected credit loss. Lifetime expected credit
losses are the expected credit losses that
result from all possible default events over the
expected life of a financial instrument. Lifetime
expected credit loss is computed based on a
provision matrix which takes in to account,
risk profiling of customers and historical
credit loss experience adjusted for forward
looking information. For other financial
assets, expected credit loss is measured at
the amount equal to twelve months expected
credit loss unless there has been a significant
increase in credit risk from initial recognition,
in which case those are measured at lifetime
expected credit loss.
“Provision matrix is used for trade receivables
as permitted under Ind AS 109, simplified
approach."
Non-financial assets
The Company assesses long-lived assets
such as property, plant and equipment, RoU
assets and acquired intangible assets for
impairment whenever events or changes
in circumstances indicate that the carrying
amount of an asset or group of assets may not
be recoverable. If any such indication exists,
the Company estimates the recoverable
amount of the asset or group of assets.
Goodwill is tested for impairment at least
annually at the same time and when events
occur or changes in circumstances indicate
that the recoverable amount of the cash
generating unit is less than its carrying value.
The goodwill impairment test is performed at
the level of cash generating unit or groups of
cash generating units which represents the
lowest level at which goodwill is monitored
for internal management purposes. The
recoverable amount of an asset or cash
generating unit is the higher of its fair value
less cost of disposal (“FVLCD") and its
value-in-use (“VIU"). The VIU of longlived
assets is calculated using projected future
cash flows. FVLCD of a cash generating unit
is computed using turnover and earnings
multiples. If the recoverable amount of the
asset or the recoverable amount of the cash
generating unit to which the asset belongs
is less than its carrying amount, the carrying
amount is reduced to its recoverable amount.
The reduction is treated as an impairment
loss and is recognised in the statement of
profit and loss. If at the reporting date, there
is an indication that a previously assessed
impairment loss no longer exists, the
recoverable amount is reassessed and the
impairment losses previously recognised are
reversed such that the asset is recognised
at its recoverable amount but not exceeding
written down value which would have been
reported if the impairment losses had not
been recognised initially. An impairment in
respect of goodwill is not reversed.
"Impairment of non-financial assets is
assessed as per Ind AS 36. Recoverable
amount is higher of fair value less cost of
disposal and value in use. Impairment is
reversed only if indicators reverse and only
for non-goodwill assets."
(xi) Foreign Currency transactions
Reporting and presentation currency
The standalone finance statements are
presented in Millions of Indian Rupees,
which is also the functional currency of the
Company.
Foreign currency transactions and
balances
Transactions in foreign currency are translated
intothefunctional currency using the exchange
rates prevailing at the date of the transaction.
Foreign exchange gains and losses resulting
from the settlement of such transactions
and from translation at the exchange rates
prevailing at the reporting date of monetary
assets and liabilities denominated in foreign
currencies are recognized in the statement
of profit and loss and reported within foreign
exchange gains/(losses), net within results of
operating activities except when deferred in
other comprehensive income as qualifying
cash flow hedges. Gains/(losses) relating
to translation or settlement of borrowings
denominated in foreign currency are reported
within finance expense. Nonmonetary assets
and liabilities denominated in foreign currency
and measured at historical cost are translated
at the exchange rate prevalent at the date of
transaction. Translation differences on non¬
monetary financial assets measured at fair
value at the reporting date, such as equities
classified as FVTOCI are included in other
comprehensive income, net of taxes.
The exchange differences arising from the
translation of standalone finance statements
of foreign branch, differences arising
from translation of long-term inter-branch
receivables or payables relating to foreign
operations settlement of which is neither
planned nor likely in the foreseeable future,
are recognized in other comprehensive
income, net of taxes and presented within
equity as FCTR
(xii) Revenue Recognition
The Company derives revenue primarily
from sale of IT and related other products,
maintenance of software/hardware and
related services.
Revenues from customer contracts are
considered for recognition and measurement
when the contract has been approved by the
parties to the contract, the parties to contract
are committed to perform their respective
obligations under the contract, and the
contract is legally enforceable. Revenue
is recognised upon transfer of control of
promised products or services to customers
in an amount that reflects the consideration
the Company expects to receive in exchange
for those products or services. To recognise
revenues, the Company applies the following
five step approach: (1) identify the contract
with a customer, (2) identify the performance
obligations in the contract, (3) determine the
transaction price, (4) allocate the transaction
price to the performance obligations in the
contract, and (5) recognise revenues when
a performance obligation is satisfied. When
there is uncertainty as to collectability,
revenue recognition is postponed until such
uncertainty is resolved.
At contract inception, the Company assesses
its promise to transfer products or services to
a customer to identify separate performance
obligations. The Company applies judgement
to determine whether each product or service
promised to a customer is capable of being
distinct, and are distinct in the context of the
contract, if not, the promised products or
services are combined and accounted as a
single performance obligation. The Company
allocates the arrangement consideration to
separatelyidentifiableperformanceobligations
based on their relative selling price or residual
method. selling prices are determined based
on sale prices for the components when it is
regularly sold separately, in cases where the
Company is unable to determine the selling
price the Company uses third-party prices
for similar deliverables or the Company
uses expected cost-plus margin approach in
estimating the selling price. For performance
obligations where control is transferred
over time, revenues are recognised by
measuring progress towards completion of
the performance obligation. The selection
of the method to measure progress towards
completion requires judgment and is based
on the nature of the promised products or
services to be provided. The method for
recognising revenues and costs depends on
the nature of the services rendered:
Time and materials contracts
Revenues and costs relating to time and
materials contracts are recognised as the
related services are rendered.
Fixed-price development contracts
Revenues from fixed-price development
contracts, including software development,
and integration contracts, where the
performance obligations are satisfied over
time, are recognised using the “percentage-
of-completion" method. The performance
obligations are satisfied as and when the
services are rendered since the customer
generally obtains control of the work as it
progresses. Percentage of completion is
determined based on project costs incurred
to date as a percentage of total estimated
project costs required to complete the project.
The cost expended (or input) method has
been used to measure progress towards
completion as there is a direct relationship
between input and productivity. If the
Company is not able to reasonably measure
the progress of completion, revenue is
recognised only to the extent of costs
incurred for which recoverability is probable.
When total cost estimates exceed revenues
in an arrangement, the estimated losses are
recognised in the statement of profit and loss
in the period in which such losses become
probable based on the current contract
estimates as an onerous contract provision.
A contract asset is a right to consideration
that is conditional upon factors other than the
passage of time. Contract assets primarily
relate to unbilled amounts on fixed-price
development contracts and are classified as
non-financial asset as the contractual right
to consideration is dependent on completion
of contractual milestones. A contract liability
is an entity's obligation to transfer goods or
services to a customer for which the entity has
received consideration (or the amount is due)
from the customer. Unbilled receivables on
other than fixed price development contracts
are classified as a financial asset where the
right to consideration is unconditional and
only the passage of time is required before
the payment is due.
Maintenance contracts
Revenues related to fixed-price maintenance
contracts are recognised on a straight¬
line basis when services are performed
through an indefinite number of repetitive
acts over a specified period or ratably using
percentage of completion method when
the pattern of benefits from the services
rendered to the customers and the cost to
fulfil the contract is not even through the
period of contract because the services are
generally discrete in nature and not repetitive.
Revenue for contracts in which the invoicing
is representative of the value being delivered
is recognised based on our right to invoice.
If our invoicing is not consistent with value
delivered, revenues are recognised as the
service is performed using the percentage of
completion method.
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
recognised with respect to the actual output
achieved till date as a percentage of total
contractual output. Any residual service
unutilised by the customer is recognised as
revenue on completion of the term
Element or Volume based contracts
Revenues and costs are recognised as the
related services are rendered
Products
Revenue on product sales are recognised
when the customer obtains control of the
specified product.
Rendering of Services
Revenue is recognized from rendering of
services when the performance obligation
is satisfied, and the services are rendered in
accordance with the terms and conditions of
customer contracts. Revenue is measured
based on the transaction price, which is the
consideration, as specified in the contract
with the customer. Revenue also excludes
taxes collected from customers.
Revenue from time and material and job
contracts is recognized on an output
basis measured by units delivered, efforts
expended, number of transactions processed,
etc.
The Company accounts for variable
considerations like, volume discounts,
rebates, pricing incentives to customers
and penalties as reduction of revenue on a
systematic and rational basis over the period
of the contract. The Company estimates
an amount of such variable consideration
using expected value method or the single
most likely amount in a range of possible
consideration depending on which method
better predicts the amount of consideration
to which the Company may be entitled and
when it is probable that a significant reversal
of cumulative revenue recognised will not
occur when the uncertainty associated
with the variable consideration is resolved.
- Revenues are shown net of allowances/
returns, sales tax, value added tax, goods and
services tax and applicable discounts and
allowances.
The Company accrues the estimated cost of
warranties at the time when the revenue is
recognised. The accruals are based on the
Company's historical experience of material
usage and service delivery costs.
Incremental costs that relate directly to a
contract and incurred in securing a contract
with a customer are recognised as an asset
when the Company expects to recover these
costs and amortised over the contract term.
The Company recognises 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. The asset
so recognised is amortised on a systematic
basis consistent with the transfer of goods
or services to customer to which the asset
relates.
Estimates of transaction price and total costs
or efforts are continuously monitored over
the term of the contract and are recognised in
net profit in the period when these estimates
change or when the estimates are revised.
Revenues and the estimated total costs or
efforts are subject to revision as the contract
progresses.
Contract Assets
Trade Receivables
A receivable represents the Company's
right to an amount of consideration that is
unconditional (i.e., only the passage of time is
required before payment of the consideration
is due).
Contract liabilities
A contract liability is the obligation to transfer
goods to a customer for which the Company
has received consideration (or an amount
of consideration is due) from the customer.
If a customer pays consideration before the
Company transfers goods or services to the
customer, a contract liability is recognized
when the payment is made, or the payment
is due (whichever is earlier). Contract
liabilities are recognized as revenue when the
Company performs under the contract.
Finance and other income
Finance and other income comprise interest
income on deposits, dividend income, gains/
(losses) on disposal of investments and net
gain on translation or settlement of foreign
currency borrowings. Interest income is
recognised using the effective interest
method. Dividend income is recognised when
the right to receive payment is established.
Other Income
• Profit on sale of investments is
determined as the difference between
the sales price and the carrying value
of the investment upon disposal of
investments.
• Dividend income is recognized in
profit or loss on the date on which the
Company's right to receive payment is
established.
• Interest income or expense is recognized
using the effective interest method.
The 'effective interest rate' is the rate that
exactly discounts estimated future cash
payments or receipts through the expected
life of the financial instrument to:
the gross carrying amount of the financial
asset;
or
the amortized cost of the financial liability
In calculating interest income and expense,
the effective interest rate is applied to the
gross carrying amount of the asset (when
the asset is not credit-impaired) or to the
amortized cost of the liability. However, for
financial assets that have become credit-
impaired after initial recognition, interest
income is calculated by applying the effective
interest rate to the amortized cost of the
financial asset. If the asset is no longer credit-
impaired, then the calculation of interest
income reverts to the gross basis.
• Insurance claims are accounted for
based on claims admitted / expected to
be admitted and to the extent that the
amount recoverable can be measured
reliably and it is reasonable to expect
ultimate collection.
• Interest on Refund from Income Tax
Department are accounted for on receipt
basis.
(xiii) Finance Cost
Finance costs comprise interest cost on
borrowings, lease liabilities and net defined
benefit liability, gains or losses arising on re¬
measurement of financial assets measured at
FVTPL, net loss on translation or settlement
of foreign currency borrowings and changes
in fair value and gains/(losses) on settlement
of related derivative instruments. Borrowing
costs that are not directly attributable to
a qualifying asset are recognised in the
statement of profit and loss using the effective
interest method.
(xiv) Expenditure Recognition
Expenses are accounted on an accrual basis
and on crystallization of such expenses. And
provisions for all known losses and liabilities
are made. Provisions are made for future
unforeseeable factors, which may affect
the ultimate profit on fixed price software
development contracts. Expenses on
software development on time-and-material
basis are accounted for in the year in which
it is expended. Expenses incurred for future
software projects are carried forward and will
be adjusted against revenue, based on the
completion method. In case of new products,
which are clearly defined, and the costs are
attributable to the products, such costs are
deferred and amortized equally over a period
of three to five years based on Management's
evaluation of expected sales volumes and
duration of the product life cycle.
(xv) Employee Benefits
Post-employment benefit plans
The Company participates in various
employee benefit plans. Pensions and other
post-employment benefits are classified as
either defined contribution plans or defined
benefit plans. Under a defined contribution
plan, the Company's sole obligation is to
pay a fixed amount with no obligation to pay
further contributions if the fund does not hold
sufficient assets to pay all employee benefits.
The related actuarial and investment risks
are borne by the employee. The expenditure
for defined contribution plans is recognised
as an expense during the period when the
employee provides service. Under a defined
benefit plan, it is the Company's obligation to
provide agreed benefits to the employees.
The related actuarial and investment risks are
borne by the Company. The present value of
the defined benefit obligations is calculated by
an independent actuary using the projected
unit credit method. Remeasurements of the
defined benefit plans, comprising actuarial
gains or losses, and the return on plan
assets (excluding interest) are immediately
recognised in other comprehensive income,
net of taxes and not reclassified to profit
or loss in subsequent period. Net interest
recognised in profit or loss is calculated by
applying the discount rate used to measure
the defined benefit obligation to the net
defined benefit liability or asset. The actual
return on the plan assets above or below
the discount rate is recognised as part of re¬
measurements of the defined benefit plans
through other comprehensive income, net of
taxes.
The Company has the following employee
benefit plans:
Provident fund
Eligible employees receive benefits under
the provident fund plan in which both the
employer and employees make periodic
contributions to the approved provident fund
trust managed by the Company. A portion
of the employer's contribution is made to
the government administered pension fund.
The contributions to the trust managed by
the Company is accounted for as a defined
benefit plan as the Company is liable for
any shortfall in the fund assets based on
the government specified minimum rates of
return. Certain employees receive benefits
under the provident fund plan in which both
the employer and employees make periodic
contributions to the government administered
provident fund. A portion of the employer's
contribution is made to the government
administered pension fund. This is accounted
as a defined contribution plan as the obligation
of the Company is limited to the contributions
made to the fund.
Defined Benefit plan
Define benefits plan includes gratuity
payments in accordance with the Payment of
Gratuity Act, 1972. The gratuity is not funded.
For defined benefit schemes, the cost of
providing benefits is determined using
Projected Unit Credit method, with actuarial
valuations being carried out at each balance
sheet date. Actuarial gains/losses are
recognized in the period of occurrence under
Other Comprehensive Income (OCI). Past
service cost is recognized to the extent the
benefits are already vested, and otherwise
is amortized on a Straight-Line method over
the average period until the benefits become
vested. The retirement benefit obligation
recognized in the balance sheet represents
the present value of the defined benefit
obligations as adjusted for unrecognized past
service cost.
Compensated absences
The employees of the Company are entitled
to compensated absences. The employees
can carry forward a portion of the unutilised
accumulating compensated absences and
utilise it in future periods or receive cash at
retirement or termination of employment.
The Company records an obligation for
compensated absences in the period in
which the employee renders the services
that increases this entitlement. The Company
measures the expected cost of compensated
absences as the additional amount that the
Company expects to pay as a result of the
unused entitlement that has accumulated at
the end of the reporting period. The Company
recognises accumulated compensated
absences based on actuarial valuation
using the projected unit credit method.
Non-accumulating compensated absences
are recognised in the period in which the
absences occur.
Short-term employee benefits
Short-term employee benefit obligations
such as cash bonus, management incentive
plans or profit sharing plans are measured on
an undiscounted basis and are recorded as
expense as the related service is provided. A
liability is recognised for the amount expected
to be paid under short-term cash bonus,
management incentive plans or profit-sharing
plans, if the Company has a present legal or
constructive obligation to pay this amount
as a result of past service provided by the
employee and the obligation can be estimated
reliably.
(xvi) Income Tax
Tax expense recognized in the statement of
profit or loss comprises the sum of deferred
tax and current tax not recognized in other
comprehensive income or directly in equity.
Calculation of current tax is based on tax
rates in accordance with tax laws that have
been enacted or substantively enacted by the
end of the reporting period. Deferred income
taxes are calculated using the liability method
on temporary differences between tax bases
of assets and liabilities and their carrying
amounts for financial reporting purposes at
reporting date. Deferred taxes pertaining to
items recognized in other comprehensive
income are also disclosed under the same
head. Deferred tax assets are recognized to
the extent that it is probable that the underlying
tax loss or deductible temporary difference
will be utilized against future taxable income.
This is assessed based on the respective
entity's forecast of future operating results,
adjusted for significant non-taxable income
and expenses and specific limits on the use
of any unused tax loss or credit. Deferred
tax is not provided on the initial recognition
of goodwill, or on the initial recognition of an
asset or liability unless the related transaction
is a business combination or affects tax or
accounting profit.
The company recognizes income earned by
its foreign branch as part of its total income for
income tax purposes. Foreign tax credits are
utilized under the relief provided by Section
90 of the Income Tax Act
Deferred income tax
Deferred income tax is recognised using the
balance sheet approach. Deferred income
tax assets and liabilities are recognised for
deductible and taxable temporary differences
arising between the tax base of assets and
liabilities and their carrying amount in the
standalone finance statements, except when
the deferred income tax arises from the
initial recognition of goodwill or an asset or
liability in a transaction that is not a business
combination and affects neither accounting
nor taxable profits or loss at the time of the
transaction. Deferred income tax assets are
recognised to the extent it is probable that
taxable profit will be available against which
the deductible temporary differences and
the carry forward of unused tax credits and
unused tax losses can be utilised. Deferred
income tax liabilities are recognised for all
taxable temporary differences except in
respect of taxable temporary differences
that is expected to reverse within the tax
holiday period, taxable temporary differences
associated with investments in subsidiaries,
associates and foreign branches where
the timing of the reversal of the temporary
difference can be controlled and it is probable
that the temporary difference will not reverse
in the foreseeable future. The carrying amount
of deferred income 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 income tax asset to be
utilised.
|