1. CORPORATE INFORMATION

Ramco Systems Limited (the “Company”) is a public limited company domiciled and headquartered in India and incorporated on February 19, 1997, under the provisions of Companies Act, 1956. Its shares are listed in BSE Limited and National Stock Exchange of India Limited. The registered office of the Company is located at No. 47 P.S.K Nagar, Rajapalayam 626108 and the corporate office and R&D center is located at 64, Sardar Patel Road, Taramani, Chennai 600113. The Company develops Enterprise Resource Planning (ERP) Software solutions for various verticals in various domains like, Core ERP, Human Resource & Payroll, Aviation Maintenance Repair & Overhaul, Logistics, Service Resource Planning and provides these with related solutions and services, including managed services. The Software is either delivered on-premise or hosted on cloud.

2. STATEMENT OF COMPLIANCE

The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (“the Act”) read with Companies (Indian Accounting Standards) Rules 2015, as amended from time to time, presentation requirements of Division II of Ind AS compliant Schedule III to the Act, and guidelines issued by the Securities and Exchange Board of India, wherever applicable.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

The financial statements of the Company for the year ended March 31,2026 were approved and adopted by the Board of Directors of the Company in its meeting held on May 21,2026.

3. PRESENTATION & ROUNDING NORMS

The financial statements are presented in Indian Rupees, which is the Company’s functional currency, rounded to the nearest million (“Mln.”) with two decimals, except when otherwise indicated.

Figures less than ten thousands are shown as nil/ hyphen (“-“).

Previous year figures have been re-grouped/restated wherever it may be appropriate.

4. BASIS OF PREPARATION

4.1 The financial statements have been prepared under the historical cost convention on accrual basis except certain instruments and defined benefit plan assets, share based payments that are measured at fair values or at amortized cost at the end of each reporting period. Based on the time involved between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has identified twelve months as the operating cycle for determining current and noncurrent classification of assets and liabilities in the Balance Sheet.

4.2 Foreign currency transactions

The functional currency of the Company is Indian Rupee.

Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transaction. The monetary items denominated in the foreign currency at the year-end are translated at the exchange rates prevailing on the date of the Balance Sheet. Nonmonetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency exchange differences are generally recognized in the Statement of Profit and Loss (“P&L”), except where the foreign currency exchange differences require recognition through Other Comprehensive Income (“OCI”).

4.3 Translation of financial statements of foreign branches

The functional currencies of foreign branches are the respective local currencies of their domicile. All income and expenditure transactions during the year are reported at a monthly moving average exchange rate for the respective periods. All assets and liabilities are translated at the rate prevailing on the Balance Sheet date. Net gain/ loss on foreign currency translation is recognized in OCI.

5. RECENT PRONOUNCEMENTS

5.1 Ministry of Corporate Affairs (“MCA’) notifies new standards or amendments to the existing standards under Companies Ind AS Rules as issued from time to time. MCA amended the Indian Accounting Standard Rules, 2015 (“Rules”) during the year as detailed below:

(a) New standards or amendments to the existing accounting standards issued and effective from April 01,2025 onwards

During the year, the Company has adopted the following amendments to Ind AS notified under the Companies (Indian Accounting Standards) Amendment Rules, 2025, which are effective for annual periods beginning on or after April 01,2025:

(i) Amendments to Ind AS 21 - The Effects of Changes in Foreign Exchange Rates

The amendment introduces guidance for assessing whether a currency is exchangeable into another currency and requires an entity to estimate the spot exchange rate when such exchangeability is lacking. It also prescribes enhanced disclosure requirements relating to the nature, financial impact and risks associated with non-exchangeable currencies. The Company does not have any transactions in non-exchangeable foreign currency.

(ii) Amendments to Ind AS 1 - Presentation of Financial Statements

The Company has adopted the amendments to Ind AS 1 which clarify the principles for classification of liabilities as current or non-current, particularly in relation to the entity’s right existing at the reporting date to defer settlement for at least twelve months after the reporting period and the definition of settlement. The adoption of these amendments did not have a material impact on the classification or measurement of liabilities in the financial statements.

(iii) Amendments to Ind AS 7 and Ind AS 107 - Supplier Finance Arrangements

The Company has also adopted amendments to Ind AS 7 and Ind AS 107 which introduce additional disclosure requirements for supplier finance arrangements, including information about their impact on liabilities, cash flows and exposure to liquidity risk. The Company has been

voluntarily providing such disclosures over the past two years and has aligned its existing disclosures with the revised requirements. Accordingly, the adoption of these amendments did not have a material impact on the financial statements, other than enhancement of disclosures.

(b) New standards or amendments to the existing accounting standards issued but not effective

(i) Amendments to Ind AS 1 - Presentation of Financial Statements

Certain amendments to IndAS 1 relating to classification of liabilities as current or non-current, including detailed guidance on the impact of covenant conditions and timing of assessment, have been notified and are effective for annual periods beginning on or after April 01, 2026. These amendments also introduce enhanced disclosure requirements to enable users of financial statements to understand the risk of liabilities becoming repayable within twelve months. Based on a preliminary assessment, the Company does not have instances of covenant breaches as at the reporting date and, accordingly, does not expect a material impact on the classification of liabilities, other than additional disclosures, where applicable.

6. MATERIAL ACCOUNTING POLICIES

a. Revenue recognition

Revenue is measured based on the transaction price, which is the consideration, adjusted for finance components and volume discounts, service level credits, performance bonus, price concessions and incentives, if any, as specified in the contract with the customers. Revenue is recognized in the P&L upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those services or products and excluding taxes or duties. To recognize 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) recognize revenues when a performance obligation is satisfied.

At contract inception, the Company assesses its promise to transfer products or services to a customer to identify separate performance obligations.

The Company applies judgment 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 contract value to separately identifiable performance obligations based on their relative standalone selling price (mostly as reflected in the contracts) or residual method. Standalone selling prices are determined based ons sale prices for the components when it is regularly sold separately. In cases where the Company is unable to determine the standalone selling price, the Company uses expected cost-plus margin approach in estimating the standalone selling price.

For performance obligations where control is transferred over time, revenues are recognized 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 recognizing revenues depends on the nature of the products sold/services rendered:

(1) Revenue from Software Products

(a) Software Licensing

Software licensing revenues represent all fees earned from granting customers licenses to use the Company’s software, through initial licensing and or through the purchase of additional modules or user rights. For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized on

delivery of the software and when the customer obtains a right to use such licenses.

(b) Subscription for Software as a Service

Subscription fees for offering the hosted software as a service are recognized as revenue ratably on straight line basis, over the term of the subscription arrangement.

(c) Product Support Services

Fees for product support services, covering inter alia improvement and upgradation of the basic Software, whether sold separately (e.g., renewal period AMC) or as an element of a multiple-element arrangement, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.

(d) Application Maintenance Services

Fees for the application maintenance services, covering inter alia the support of the customized software, are recognized as revenue ratably on straight line basis, over the term of the support arrangement.

(e) Royalty income

Royalty income represents fees charged at arms-length basis on the revenue earned from external customers by the subsidiaries, by way of Software Licensing, Product Support Services, Subscription for Software as a Service and Application Maintenance Service, in respect of Company’s Software Products. Such royalty income is recognized at the point of time at which the subsidiaries recognize the said revenue.

(2) Revenue from Software Services

(a) Implementation/Professional Services Software Implementation/Professional Services contracts are either fixed price or time and material based. Revenues from fixed price contracts, where the performance obligations are satisfied over time, are recognized using the “percentage of completion” method.

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. The performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.

Where the Software is required to be substantially customized as part of the implementation service, the entire fee for licensing and implementation services is considered to be a single performance obligation and the revenue is recognized using the percentage of completion method as the implementation services are performed.

Revenues from implementation services in respect of hosting contracts are to be recognized as revenue ratably over the longer of the contract term or the estimated expected life of the customer relationship.

However, considering the existence of partners being available for rendering such implementation services, these services are considered to be a separate element and recognized in accordance with percentage of completion method.

When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the P&L in the period in which such losses become probable based on the current contract estimates as a contract provision.

In the case of time and material contracts, revenue is recognized based on billable time spent in the project, priced at the contractual rate.

Any change in scope or price is considered as a contract modification. The Company accounts for modifications

to existing contracts by assessing whether the services added are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively as a separate contract if the additional services are priced at the standalone selling price.

Non-refundable one-time upfront fees for enablement/application installation, consisting of standardization setup, initiation or activation or user login creation services in the case of hosting contracts, are recognized in accordance with percentage of completion method once the customer obtains a right to access and use the Software.

(b) Managed Services

Fees for managed services, which include business processing services, are recognized as revenue as the related services are performed.

(c) Contract balances

Contract assets primarily relate to unbilled amounts on implementation/ professional services contracts and are classified as non-financial asset as the contractual right to consideration is dependent on completion of contractual milestones (which we refer to as unbilled services revenue).

Unbilled revenues on software licensing are classified as a financial asset where the right to consideration is unconditional upon passage of time (which we refer to as unbilled licenses revenue). The unbilled royalty revenue is also grouped here. A contract liability is an entity’s obligation to transfer software products or software services to a customer for which the entity has received consideration (or the amount is due) from the customer(which we refer to as unearned revenue).

The Company assesses the timing of the transfer of software products or software services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, the Company does not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist.

(3) Revenue from Resale of Hardware & Software

Revenue from sale of traded hardware/ software is recognized on transfer of significant risks, rewards and control to the customer.

b. Finance income

Finance income Interest on bank deposits/ investments (short term other than equity) is recognized on accrual basis. Interest income from financial assets is recognized using effective interest rate method.

c. Employee benefits expense Short term employee benefits

Short-term employee benefits viz., salaries, wages, other benefits are recognized as an expense at the undiscounted amount in the P&L for the year in which the related service is rendered a liability is recognized for the amount expected to be paid under short-term cash bonus 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.

Share based payments

When the stock options are exercised, the Company issues fresh issue of Equity Shares, upon receipt of exercise price from the option grantees. The proceeds received are allocated to Share Capital up

to the face value of shares issued, with any excess being accounted as Securities Premium in the Balance Sheet. The cost of fair value determined at the grant date is expensed over the vesting period in the Profit and Loss.

Post-employment benefits Defined Contribution Plan

A defined contribution plan is a post-employment benefit plan where the Company’s legal or constructive obligation is limited to the amount that it contributes and are expensed as an employee benefits expense in the P&L in the period in which the related service is provided by the employee.

The Company contributes monthly to Employees’ Provident Fund & Employees’ Pension Fund administered by the Employees’ Provident Fund Organization, Government of India, at 12% of employee’s basic salary. The Company contributes to Superannuation Fund/National Pension System (NPS) at a sum equivalent to 15% (not exceeding rupees one lakh fifty thousand per annum) and 10% respectively, of the eligible employee’s basic salary, for those who have opted to participate based on the options exercised by them.

Contributions to Provident Fund, Superannuation Fund, and National Pension System (NPS) are recognized as an expense in the P&L for the year in which the employees have rendered services. There are no further obligations except for the above said contributions.

Defined Benefit Plan

The Company contributes to a defined benefit plan viz., an approved Gratuity Fund, for its employees including eligible employees in subsidiary companies. It is in the form of lump sum payments to vested employees on resignation, retirement, death while in employment or on termination of employment, for an amount equivalent to 15 days’ basic salary for each completed year of service. Vesting occurs upon completion of five years of continuous service. The Company makes annual contributions to the Gratuity scheme administered through the trust formed for the purpose. The liability for Gratuity is ascertained as at the end of the financial year, based on the actuarial valuation by an independent external

actuary as at the Balance Sheet date using the “projected unit credit method.

Remeasurement of net defined benefit asset/ liability comprising of actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are charged/ credited to OCI in the period in which they arise and immediately transferred to retained earnings. Other costs are accounted for in the P&L.

Other long term employee benefits

The Company provides for expenses towards compensated absences provided to its employees, while it is expected to be carried forward beyond twelve months as a long-term employee benefit, which is the amount of future benefit that employees have accumulated at the end of the year. The expense is recognized at the present value of the amount payable determined based on actuarial valuation by an independent external actuary as at the Balance Sheet date using the “projected unit credit method"

d. Income taxes

Current tax is the amount of tax payable or receivable on the taxable income or loss for the year as determined in accordance with the tax rates (and tax laws) that have been enacted at the reporting date.

Current tax assets and liabilities are offset, when the Company has legally enforceable right to set off the recognized amounts and intends to settle the asset and the liability on a net basis.

Deferred tax is recognized using the Balance Sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting at the reporting date.

The Company reviews the “MAT Credit Entitlement” at each Balance Sheet date and writes down the carrying amount of the same to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income tax during the specified period.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year where the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if

such items relate to taxes on income levied by same governing tax laws and the Company has legally enforceable right to set off current tax assets against current tax liabilities. Both current tax and deferred tax relating to items recognized outside the P&L is recognized in OCI.

e. Property, plant and equipments (PPE)

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use.

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. Depreciation in the books of the Company is charged on a pro-rata basis on the Straight Line Method as indicated under Schedule II of the Act, over the useful life of the assets.

The useful lives of various assets used by the Company are tabled below:

Any item of property, plant and equipment and any significant part initially recognized is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the P&L when the asset is de-recognized.

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.

f. Leases

Company as a lessee

The Company recognizes right-of-use assets and a lease liability at the commencement date, except short term leases and low value leases.

The Company’s lease asset classes primarily consist of leases for Land, Buildings and Office equipments. Right-of-use assets are depreciated on a straight line basis over the lease term.

They are subsequently measured at cost less accumulated depreciation and impairment losses. The lease liability measured at amortized cost using the effective interest method. In calculating the present value of lease payments, the Company uses its incremental borrowing rate. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if Company changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in the P&L if the carrying amount of the right-of-use asset has been reduced to zero.

The Company presents right-of-use assets that do not meet the definition of investment property in ‘Property, Plant and Equipment’ and Lease liabilities as a separate line item on face of the Balance Sheet. The Company has opted not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Company as a lessor

Operating lease receipts are recognized in the P&L on straight-line basis over the lease terms except where the payments are structured to increase in line with the general inflation to compensate for the expected inflationary cost increases.

g. Intangible assets

I ntangible assets acquired from third party and the patents granted, are measured on initial recognition at cost.

The cost of development of software are capitalized and recognized as an Intangible asset, when the expenditure can be measured

reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to and has sufficient resources to complete development and intends to use or commercially exploit. Subsequent expenditure is capitalized only when it increases the future economic benefits. Research costs and internally generated intangibles (excluding capitalized software development costs) are not capitalized and the related expenditure is reflected in the P&L in the period in which the expenditure is incurred.

The useful lives of intangible assets of the Company are assessed as finite.

I ntangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the P&L when the asset is de-recognized.

Costs incurred in the development of the product, together with repository of new business components, upon completion of the development phase, have been classified and grouped as ’’Product software” under intangible assets. Similarly, costs incurred in the development of technology platform framework, which would enable the Company to provide solutions - both standard and customized - in an efficient manner, have been classified and grouped as “Technology platform” under intangible assets. During the period of development and thereafter, the asset is tested for impairment annually.

The useful life of the above assets is estimated as under:

h. Financial Instruments

The Company initially determines the classification of financial assets and liabilities. After initial recognition, no re-classification is made for financial assets, which are categorized as equity instruments at FVTOCI, and financial assets/liabilities that are specifically designated as FVTPL. However, other financial assets are re-classifiable when there is a change in the business model of the Company.

Financial assets

Financial assets comprise of investments in equity and mutual funds, loans, trade receivables, cash and cash equivalents and other financial assets.

Initial recognition and measurement

All financial assets are recognized initially at fair value plus or minus, in the case of financial assets not recorded at fair value through P&L (FVTPL), transaction costs that are directly attributable to the acquisition or issue of the financial asset. However, Trade receivables that do not contain a significant financing component are initially measured at transaction price.

Where the fair value of a financial asset at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the P&L at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input).

In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the P&L only to the extent that such gain or loss arises due to a change in factor that market participants take into account when pricing the financial asset.

Subsequent measurement

For subsequent measurement, the Company classifies a financial asset in accordance with the below criteria:

(a) The Company’s business model for managing the financial asset and,

Financial liabilities

Financial liabilities comprise of Borrowings, Trade payables, Derivative financial instruments, Financial guarantee obligations, Lease liabilities and Other financial liabilities.

Initial recognition and measurement

All financial liabilities are recognized initially at fair value minus, in the case of financial liabilities not recorded at fair value through P&L (FVTPL), transaction costs that are attributable to the acquisition of the financial liability.

Where the fair value of a financial liability at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the P&L at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input). In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the

difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the P&L only to the extent that such gain or loss arises due to a change in factor that market participants take into account when pricing the financial liability.

Subsequent measurement

All financial liabilities of the Company are subsequently measured at amortized cost using the effective interest method except for certain items like foreign exchange forward contracts that do not qualify for hedge accounting are measured at fair through P&L (FVTPL).

Transaction cost of financial guarantee contracts that are directly attributable to the issuance of the guarantee are recognized initially as a liability at fair value. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.

Fair value measurement

The fair value of an asset or a liability is measured using the assumptions that the market participants would use when pricing the asset or liability, assuming that the market participants act in the economic best interest.

All assets and liabilities for which fair value is measured and disclosed in the financial statements are categorized within fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described as below:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level inputs that are significant to the fair value measurement is directly or indirectly observable.

Level 3: Valuation techniques for which the lowest level inputs that are significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the Balance Sheet on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization at the end of each reporting period (i.e.) based on the lowest level input that is significant to the fair value measurement as a whole.

For the purpose of fair value disclosures, the Company has determined the classes of assets and liabilities based on the nature, characteristics and risks of the assets or liabilities and the level of the fair value hierarchy as explained above.

i. Impairment of non-financial assets

The carrying amount of assets i.e., property, plant and equipment including right-of-use asset, investment properties, cash generating units and intangible assets other than inventories & deferred tax assets, are reviewed for impairment at each reporting date, if there is any indication of impairment based on internal and external factors.

Non-financial assets are treated as impaired when the carrying amount of such asset exceeds its recoverable value.

The Company impairs the Unbilled services revenue using the simplified approach wherein Expected Credit Loss model (ECL) is applied.

The ECL over lifetime of the assets are estimated by using a provision matrix which is based on historical loss rates reflecting current conditions and forecasts of future economic conditions which are grouped on the basis of similar credit characteristics such as nature of industry, customer segment, past due status and other factors that are relevant to estimate the expected cash loss from these assets.

j. 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 embodying economic benefits in respect of which a reliable estimate can be made.

Provisions are discounted if the effect of the time value of money is material, using pre-tax rates that reflects the risks specific to the liability. When discounting is used, an increase in the provisions due to the passage of time is recognized as finance cost. Insurance claims are accounted on the basis of claims admitted or expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is

reasonable to expect ultimate collection. Any subsequent change in the recoverability is provided for.

A provision for onerous & other contractual obligations are measured at the present value of the lower of the expected cost of terminating the contract and expected net cost of continuing with the contract considering the incremental cost of fulfilling the obligations.

Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. The Company does not recognize such liability and only discloses the same in the financial statements.

Contingent asset is not recognized in the financial statements as it may result in the recognition of income that may never be realized. Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date.

k. Segment reporting

The Company’s business operation comprises of single operating segment viz., Software and related solutions. The operating segment has been identified on the basis of nature of products and reported in a manner consistent with the internal reporting provided to Chief Operating Decision Maker.

7 SIGNIFICANT ESTIMATES AND JUDGMENTS

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, and the disclosure of contingent liabilities. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to estimates are recognized prospectively. Information about judgments made in applying accounting policies that have the material effects on the amounts recognized in the financial statements is included in the following notes:

Revenue recognition

The Company exercises judgments in determining whether the performance obligation is satisfied at a point in time or over a period of time.

The Company applies the percentage of completion method using the input (cost expended) method to measure progress towards completion in respect of fixed price contracts, which are performed over a period of time. The Company exercises judgment to estimate the future cost-to-completion of the contracts which is used to determine the degree of completion of the performance obligation.

The Company’s contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products/ services promised in the contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgment to determine the deliverables and the ability of the customer to benefit independently from such deliverables. Judgment is also required to determine the transaction price for the contract.

The Company uses judgment to determine an appropriate standalone selling price for a performance obligation.

The Company allocates the transaction price to each performance obligation on the basis of the relative standalone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, the Company uses the expected cost-plus margin approach to allocate the transaction price to each distinct performance obligation. Provision for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date.

Defined benefit plans and other long term benefits

The cost of the defined benefit plan and other longterm benefits, and the present value of such obligation are determined by the independent actuarial valuer. An actuarial valuation involves making various assumptions that may differ from actual developments in future. Management believes that the assumptions used by the actuary in determination of the discount rate, future salary increases, mortality rates and attrition rates are reasonable. Due to the complexities involved in the valuation and its long-term nature, this obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Current taxes

Calculations of income taxes for the current period are done based on applicable tax laws and management’s judgment by evaluating positions taken in tax returns and interpretations of relevant provisions of law and applicable judicial precedents.

Deferred tax asset

Significant management judgment is exercised by reviewing the deferred tax assets, including MAT credit entitlement, at each reporting date to determine the amount of deferred tax assets that can be retained/ recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Property, plant and equipment (PPE) and intangible assets

The residual values and estimated useful life of PPEs and intangible assets are assessed by the technical team at each reporting date by taking into account the nature of asset, the estimated usage of the asset, the operating condition of asset and past history. Upon review, the management accepts the assigned useful life and residual value for computation of depreciation/ amortization/impairment.

Determination of lease term of contracts as noncancellable term

Significant management judgment is exercised in determining the lease term as non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised, by considering all relevant factors that create an economic incentive for it to exercise either the renewal or termination.

Intangible asset

Significant management judgment is exercised in identifying an intangible asset and estimating its useful life, which is based on a number of factors including the effects of obsolescence, demand, competition and other economic factors and the level of maintenance expenditures required to obtain the expected future cash flows from such asset. Amortization methods

and useful lives are reviewed at each financial year end.

Impairment Impairment of assets

Significant management judgment is exercised in determining whether the investment in subsidiaries are impaired or not is on the basis of its nature of longterm strategic investments and business projections. The impairment for trade receivables/unbilled licenses/unbilled services/loans and other receivables are done based on assumptions about risk of default and expected loss rates. The assumptions, selection of inputs for calculation of impairment are based on management judgment considering the past history, market conditions and forward-looking estimates at the end of each reporting date.

The impairment of non-financial assets is determined based on estimation of recoverable amount of such assets. The assumptions used in computing the recoverable amount are based on management judgment considering the timing of future cash flows, discount rates and the risks specific to the asset.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities could not be measured based on quoted prices in active markets, management uses valuation techniques including the Discounted Cash Flow (DCF) model, to determine its fair value. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is exercised in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility.

Provisions

The timing of recognition requires application of judgment to existing facts and circumstances that may be subject to change. The litigations and claims to which the Company is exposed are assessed by the management and in certain cases with the support of external experts. The amounts are determined by discounting the expected future cash flows at a pretax rate that reflects the current market assessments

of the time value of money and the risks specific to the liability.

Contingent liabilities

Management judgment is exercised for estimating the possible outflow of resources, if any, in respect of contingencies/claims/litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.

Share based payments

The Company initially measures the stock options granted to the employees, using a fair value model. This requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including volatility, dividend yield and making assumptions.