2.2 Summary of material accounting policies
a. Use of Estimates
The preparation of the financial statements in
conformity with the principles of Ind AS requires
the management to make judgements,
estimates and assumptions that effect the
reported amounts of revenues, expenses,
assets and liabilities and the disclosure of
contingent liabilities, at the end of the reporting
period. Although these estimates are based on
the management’s best knowledge of current
events and actions, uncertainty about these
assumptions and estimates could result in the
outcomes requiring a material adjustment to
the carrying amounts of assets or liabilities in
future periods.
The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in
the period in which the estimate is revised if
the revision affects only that period, or in the
period of the revision and future periods if the
revision affects both current and future periods.
In particular, information about the significant
areas of estimation, uncertainty and critical
judgements in applying accounting policies that
have the most significant effect on the amounts
recognised in the financial informations.
b. Current versus non-current classification
The Company presents assets and liabilities
in the balance sheet based on current/ non¬
current classification. An asset is treated as
current when it is:
- Expected to be realised or intended
to be sold or consumed in normal
operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve
months after the reporting period, or
- Cash or cash equivalent unless restricted
from being exchanged or used to settle a
liability for at least twelve months after the
reporting period
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal
operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months
after the reporting period, or
- There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
- The terms of the liability that could, at
the option of the counter party, results
in its settlement by the issue of equity
instruments do not affect its classification
The terms of the liability that could, at the option
of the counterparty, result in its settlement by
the issue of equity instruments do not affect its
classification.
The Company classifies all other liabilities
as non-current.
Deferred tax assets/liabilities are classified as
non-current assets and liabilities.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.
c. Fair value measurement
The Company measures financial instruments,
such as, derivatives at fair value at each
balance sheet date.
Fair value is the price that would be received
to sell an asset or paid to transfer a liability
in an orderly transaction between market
participants at the measurement date. The
fair value measurement is based on the
presumption that the transaction to sell the
asset or transfer the liability takes place either:
- In the principal market for the asset
or liability, or
- In the absence of a principal market, in
the most advantageous market for the
asset or liability
The principal or the most advantageous market
must be accessible by the Company.
The fair value of an asset or a liability is
measured using the assumptions that market
participants would use when pricing the asset
or liability, assuming that market participants
act in their economic best interest.
A fair value measurement of a non-financial
asset takes into account a market participant’s
ability to generate economic benefits by using
the asset in its highest and best use or by selling
it to another market participant that would use
the asset in its highest and best use.
The Company uses valuation techniques that
are appropriate in the circumstances and for
which sufficient data are available to measure
fair value, maximising the use of relevant
observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorised within the fair
value hierarchy, described as follows, based on
the lowest level input that is significant to the
fair value measurement as a whole:
- Level 1 — Quoted (unadjusted) market
prices in active markets for identical
assets or liabilities
- Level 2 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable
- Level 3 — Valuation techniques for which the
lowest level input that is significant to the
fair value measurement is unobservable
For assets and liabilities that are recognised in
the financial statements on a recurring basis,
the Company determines whether transfers
have occurred between levels in the hierarchy
by re-assessing categorisation (based on the
lowest level input that is significant to the fair
value measurement as a whole) at the end of
each reporting period.
At each reporting date, the CFO analyses
the movements in the values of assets and
liabilities which are required to be remeasured
or re-assessed as per the Company’s
accounting policies. For this analysis, the CFO
verifies the major inputs applied in the latest
valuation by agreeing the information in the
valuation computation to contracts and other
relevant documents.
The CFO also compares the change in the fair
value of each asset and liability with relevant
external sources to determine whether the
change is reasonable.
For the purpose of fair value disclosures, the
Company has determined classes of assets
and liabilities on the basis of the nature,
characteristics and risks of the asset or liability
and the level of the fair value hierarchy as
explained above.
This note summarises accounting policy for fair
value. Other fair value related disclosures are
given in the relevant notes.
• Disclosures for valuation methods,
significant estimates and assumptions
(note 30, 31, 32, 33, 36)
• Quantitative disclosures of fair value
measurement hierarchy (note 30, 31)
• Financial instruments (including those
carried at amortised cost) (note
5, 30, 31 & 33)
d. Revenue from contracts with customers
Revenue from contracts with customers is
recognised when control of the goods or
services are transferred to the customer at an
amount that reflects the consideration to which
the Company expects to be entitled in exchange
for those goods or services. The Company has
concluded that it is the principal in its revenue
arrangements, because it typically controls
the goods or services before transferring
them to the customer when the payment is
being made. The specific recognition criteria
described below must also be met before
revenue is recognized :
Revenue from Software as a Service Income
(SaaS Income)
Revenues from SaaS Income comprises
of followings :
i) Fixed income per transaction unit and is
recognised when related transactions
are performed with customers. Each
transaction unit is defined as single
shipment and return shipment as
performed by customers. Revenue from
services are deferred till it is received
by the customers and is disclosed as
deferred revenue.
ii) Revenue from Other support fee is
recognised when the company carries
out certain customizations/modifications
or other changes depending on the
client’s requirement.
iii) Revenue from professional fee is
recognised upon rendering of professional
services on a monthly basis.
iv) Discounts provided to customers are
netted off from the revenue from contracts
with customers.
Revenue for shipping services
The Company provide shipping platform to its
customer for shipping of their product through
various courier providers. Revenue has been
recognised when control over the services
transfers to the customer.
Interest income
Interest income is recognized on a time
proportion basis taking into account the amount
outstanding and the applicable interest rate.
Interest income is included under the head ""other
income”” in the Statement of Profit and Loss.
Contract Balances
The Policy for Contract balances i.e. contract
assets, trade receivables and contract
liabilities is as follows:
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). Refer to accounting policies of financial
assets in financial instruments - initial
recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to deliver
services to a customer for which the Company
has received consideration or part thereof (or
an amount of consideration is due) from the
customer. If a customer pays consideration
before the Company deliver services to the
customer, a contract liability is recognised
when the payment is made or the payment is
due (whichever is earlier). Contract liabilities
are recognised as revenue when the Company
performs under the contract. Contract liabilities
are primarily from deferred revenue and
customer advance for which services are yet to
be rendered on the reporting date either in full
or in parts. Contract liabilities are recognized
evenly over the period, being performance
obligation of the Company.
e. Taxes
Current income tax
Current income tax assets and liabilities are
measured at the amount expected to be
recovered from or paid to the taxation 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.
Current income tax relating to items recognised
outside profit or loss is recognised outside profit
or loss (either in other comprehensive income
or in equity). Current tax items are recognised in
correlation to the underlying transaction either in
OCI or directly in equity. Management periodically
evaluates positions taken in the tax returns
with respect to situations in which applicable
tax regulations are subject to interpretation
and considers whether it is probable that a
taxation authority will accept an uncertain tax
treatment. The Company shall reflect the effect
of uncertainty for each uncertain tax treatment
by using either most likely method or expected
value method, depending on which method
predicts better resolution of the treatment.
Deferred tax
Deferred tax is provided using the liability
method on temporary differences between
the tax bases of assets and liabilities and
their carrying amounts for financial reporting
purposes at the reporting date.
Deferred tax liabilities are recognised for all
taxable temporary differences, except:
- When the deferred tax liability arises from
the initial recognition of goodwill or an
asset or liability in a transaction that is
not a business combination and, at the
time of the transaction, affects neither the
accounting profit nor taxable profit or loss
and does not give rise to equal taxable
and deductible temporary differences.
- In respect of taxable temporary differences
associated with investments in subsidiaries,
associates and interests in joint ventures,
when the timing of the reversal of the
temporary differences can be controlled and
it is probable that the temporary differences
will not reverse in the foreseeable future.
Deferred tax assets are recognised for all
deductible temporary differences, the carry
forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to
the extent that 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, except:
- When the deferred tax asset relating
to the deductible temporary difference
arises from the initial recognition of an
asset or liability in a transaction that is
not a business combination and, at the
time of the transaction, affects neither the
accounting profit nor taxable profit or loss
and does not give rise to equal taxable
and deductible temporary differences.
- In respect of deductible temporary
differences associated with investments
in subsidiaries, associates and interests
in joint ventures, deferred tax assets are
recognised only to the extent that it is
probable that the temporary differences
will reverse in the foreseeable future and
taxable profit will be available against which
the temporary differences can be utilised.
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 utilised.
Unrecognised deferred tax assets are re¬
assessed at each reporting date and are
recognised to the extent that it has become
probable that future taxable profits will allow
the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in the
year when the asset is realised 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 relating to items recognised
outside profit or loss is recognised outside profit
or loss (either in other comprehensive income
or in equity). Deferred tax items are recognised
in correlation to the underlying transaction
either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities
are offset if a legally enforceable right exists
to set off current tax assets against current
tax liabilities and the deferred taxes relate
to the same taxable entity and the same
taxation authority.
f. Property, plant and equipment
Property, plant and equipment are stated
at cost, net of accumulated depreciation
and accumulated impairment losses, if any.
Such cost includes the cost of replacing part
of the property, plant and equipment and
borrowing costs if the recognition criteria are
met. When significant parts of property, plant
and equipment are required to be replaced
at intervals, the Company depreciates them
separately based on their specific useful lives.
Likewise, when a major inspection is performed,
its cost is recognised in the carrying amount
of the property, plant and equipment as a
replacement if the recognition criteria are
satisfied. All other repair and maintenance
costs are recognised in profit or loss as incurred.
Depreciation is calculated on a straight-line
basis over the estimated useful life of the
assets as follow:-
An item of property, plant and equipment
and any significant part initially recognised
is derecognised upon disposal or when no
future economic benefits are expected from
its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the
difference between the net disposal proceeds
and the carrying amount of the asset) is
included in the income statement when the
asset is derecognised.
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.
g. Intangible assets
Intangible assets acquired separately are
measured on initial recognition at cost. The
cost of intangible assets acquired in a business
combination is their fair value at the date
of acquisition. Following initial recognition,
intangible assets are carried at cost less any
accumulated amortisation and accumulated
impairment losses. Internally generated
intangibles, excluding capitalised development
costs, are not capitalised and the related
expenditure is reflected in profit or loss in the
period in which the expenditure is incurred.
The useful lives of intangible assets are
assessed as either finite or indefinite.
Intangible assets with finite lives are amortised
over the useful economic life and assessed for
impairment whenever there is an indication
that the intangible asset may be impaired.
The amortisation period and the amortisation
method for an intangible asset with a finite
useful life are reviewed at least at the end
of each reporting period. Changes in the
expected useful life or the expected pattern
of consumption of future economic benefits
embodied in the asset are considered to
modify the amortisation period or method,
as appropriate, and are treated as changes
in accounting estimates. The amortisation
expense on intangible assets with finite lives is
recognised in the statement of profit and loss
unless such expenditure forms part of carrying
value of another asset.
Intangible assets are amortised over a period
of 3 to 8 years basis their estimated useful life
on a straight line basis.
Research and development costs
Research costs are expensed as incurred.
Development expenditures on an individual
project are recognised as an intangible asset
when the Company can demonstrate:
- The technical feasibility of completing the
intangible asset so that the asset will be
available for use or sale
- Its intention to complete and its ability and
intention to use or sell the asset
- How the asset will generate future
economic benefits
- The availability of resources to
complete the asset
- The ability to measure reliably the
expenditure during development
Following initial recognition of the development
expenditure as an asset, the asset is carried at
cost less any accumulated amortisation and
accumulated impairment losses. Amortisation
of the asset begins when development is
complete, and the asset is available for use. It
is amortised over the period of expected future
benefit. Amortisation expense is recognised in
the statement of profit and loss unless such
expenditure forms part of carrying value of
another asset. During the period of development,
the asset is tested for impairment annually.
Intangible assets with indefinite useful lives are
not amortised, but are tested for impairment
annually, either individually or at the cash¬
generating unit level. The assessment of
indefinite life is reviewed annually to determine
whether the indefinite life continues to be
supportable. If not, the change in useful
life from indefinite to finite is made on a
prospective basis.
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
recognised in the statement of profit or loss
when the asset is derecognised.
The company carries out the impairment
assessment of the intangible assets available
at end of each year.
h. Leases
The Company assesses at contract inception
whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control
the use of an identified asset for a period of
time in exchange for consideration.
Company as a lessee
The company applies a single recognition
and measurement approach for all leases,
except for short-term leases and leases of low-
value assets. The company recognises lease
liabilities to make lease payments and right-
of-use assets representing the right to use the
underlying assets.
i) Right-of-use assets
The Company recognises right-of-use
assets at the commencement date of the
lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are
measured at cost, less any accumulated
depreciation and impairment losses, and
adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets
includes the amount of lease liabilities
recognised, initial direct costs incurred,
and lease payments made at or before
the commencement date less any lease
incentives received. Right-of-use assets
are depreciated on a straight-line basis
over the shorter of the lease term and the
estimated useful lives of the assets is 36
months to 60 months.
If ownership of the leased asset transfers
to the company at the end of the lease
term or the cost reflects the exercise
of a purchase option, depreciation is
calculated using the estimated useful
life of the asset.
The right-of-use assets are also subject
to impairment. Refer to the accounting
policies in section (i) Impairment of non¬
financial assets.
ii) Lease Liabilities
At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease
term. The lease payments include fixed
payments (including in substance fixed
payments) less any lease incentives
receivable, variable lease payments that
depend on an index or a rate, and amounts
expected to be paid under residual value
guarantees. The lease payments also
include the exercise price of a purchase
option reasonably certain to be exercised
by the Company and payments of penalties
for terminating the lease, if the lease term
reflects the Company exercising the option
to terminate. Variable lease payments
that do not depend on an index or a rate
are recognised as expenses (unless they
are incurred to produce inventories) in the
period in which the event or condition that
triggers the payment occurs.
In calculating the present value of
lease payments, the Company uses its
incremental borrowing rate at the lease
commencement date because the interest
rate implicit in the lease is not readily
determinable. After the commencement
date, the amount of lease liabilities is
increased to reflect the accretion of interest
and reduced for the lease payments
made. In addition, the carrying amount of
lease liabilities is remeasured if there is a
modification, a change in the lease term,
a change in the lease payments (e.g.,
changes to future payments resulting
from a change in an index or rate used
to determine such lease payments) or a
change in the assessment of an option to
purchase the underlying asset.
iii) Short-term leases and leases of low-
value assets
The Company applies the short-term
lease recognition exemption to its short¬
term leases (i.e., those leases that have
a lease term of 12 months or less from
the commencement date and do not
contain a purchase option). It also applies
the lease of low-value assets recognition
exemption to leases of office equipment
that are considered to be low value. Lease
payments on short-term leases and
leases of low-value assets are recognised
as expense on a straight-line basis over
the lease term.
As at the balance sheet date, the
Company has only short term leases for
which exemption has been availed.
i. Impairment of non-financial assets
The Company assesses, at each reporting
date, whether there is an indication that an
asset may be impaired. If any indication exists,
or when annual impairment testing for an asset
is required, the Company estimates the asset’s
recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or cash¬
generating unit’s (CGU) fair value less costs
of disposal and its value in use. Recoverable
amount is determined for an individual asset,
unless the asset does not generate cash
inflows that are largely independent of those
from other assets or Company’s of assets.
When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is
considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future
cash flows are discounted to their present
value using a pre-tax discount rate that
reflects current market assessments of the
time value of money and the risks specific to
the asset. In determining fair value less costs of
disposal, recent market transactions are taken
into account. If no such transactions can be
identified, an appropriate valuation model is
used. These calculations are corroborated by
valuation multiples, quoted share prices for
publicly traded companies or other available
fair value indicators.
The Company bases its impairment calculation
on detailed budgets and forecast calculations,
which are prepared separately for each of the
Company’s CGUs to which the individual assets
are allocated. These budgets and forecast
calculations generally cover a period of five
years. For longer periods, a long-term growth
rate is calculated and applied to project future
cash flows after the fifth year. To estimate cash
flow projections beyond periods covered by the
most recent budgets/forecasts, the Company
extrapolates cash flow projections in the
budget using a steady or declining growth rate
for subsequent years, unless an increasing rate
can be justified. In any case, this growth rate
does not exceed the long-term average growth
rate for the products, industries, or country or
countries in which the entity operates, or for the
market in which the asset is used.
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