2. Significant Accounting
Policies
A) Basis of Preparation These standalone financial statements are prepared in accordance
of Standalone Financial with Indian Generally Accepted Accounting Principles (Indian GAAP)
Statement under the historical cost convention on the accrual basis. Indian
GAAP comprises mandatory accounting standards as prescribed
under Section 133 of the Companies Act, 2013 ('the Act') read together
with rules made thereunder. In accordance with proviso to the Rule
4(a) of the Companies (Accounts) Rules, 2014, the term used in these
standalone financial statements are in accordance with the definition
and other requirements specified in applicable accounting standards.
The accounting policies adopted in the preparation of standalone
financial statements have been consistently applied.
All assets and liabilities have been classified as current or non-current
as per the company's normal operating cycle and other criteria
set out in the Schedule III to the Companies Act, 2013. Based on the
nature of operations and time difference between the provision of
services and realization of cash and cash equivalents, the company
has ascertained its operating cycle as 12 months for the purpose of
current and non-current classification of assets and liabilities.
The Company follows the mercantile system of accounting, recognizing
income and expenditure on accrual basis. The accounts are prepared
on historical cost basis and as a going concern. Accounting policies
not referred to specifically otherwise, are consistent with the generally
accepted accounting principles.
Amounts in the financial statements are rounded off to nearest lakhs.
B) Use of Estimates The preparation of standalone financial statements is in conformity
with Indian GAAP requires judgements, estimates and assumptions
to be made that affect the reported amount of assets and liabilities,
disclosure of contingent liabilities on the date of the financial
statements and the reported amount of revenues and expenses
during 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.
C) Accounting Convention The following significant accounting policies are adopted in
the preparation and presentation of these standalone financial
statements:
i. Revenue Recognition Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Revenue from sale of services is recognized when invoices are raised
after the contract conditions are satisfied and as per the terms of
agreement with the customers and the milestones achieved under
the agreement. The company collects Goods and Service Tax (GST)
and other taxes on behalf of the government and, therefore, these
are not economic benefits flowing to the company. Hence, they are
excluded from revenue.
Revenues from maintenance contracts are recognized pro-rata over
the period of the contract as and when services are rendered. The
company collects GST on behalf of the government and, therefore,
it is not an economic benefit flowing to the company. Hence, it is
excluded from revenue.
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.
Dividends from investments in subsidiaries will be recognized as
income in the income statement when the right to receive payment
is established.
Interest on income tax refund is recognised as other income in the
year in which such interest is received.
Accounts Written Back: Liabilities or provisions no longer required are
written back and recognised in the Statement of Profit and Loss under
'Other Income'. Such reversals are recognised only when there is
certainty that the obligation no longer exists or that the risk requiring
provision has ceased to exist.
Profit or loss arising from the sale of mutual fund units is recognised
as capital gain or capital loss in the Statement of Profit and Loss under
'Other Income' or 'Other Expenses', as applicable. The capital gain is
determined as the difference between the net sale proceeds and the
carrying amount of the investment at the time of sale.
ii. Property, Plant & Equipments and
Intangible Assets
I. Property, Plant & a) Property, Plant and Equipments are stated as per Cost Model i.e., at
Equipments cost less accumulated depreciation and impairment, if any;
b) The cost comprises purchase price, borrowing costs if capitalization
criteria are met, directly attributable cost of bringing the asset
to its working condition for the intended use and initial estimate
of decommissioning, restoring and similar liabilities. Any trade
discounts and rebates are deducted in arriving at the purchase
price.
c) Subsequent expenditures relating to Property, Plant and Equipments
are capitalized only when it is probable that future economic
benefits associated with these will flow to the Company and the
cost of the item can be measured reliably. Repairs & maintenance
costs are recognized in the Statement of profit & Loss as and when
incurred;
d) The cost and related accumulated depreciation are eliminated
from the standalone financial statements upon sale or retirement
of the asset and the resultant gains or losses are recognized in the
Statement of Profit or Loss. Assets to be disposed of are reported
at the lower of the carrying value or the fair value less cost to sell;
e) Depreciation on Property, Plant and Equipments is provided to
the extent of depreciable amount on Written Down Value (WDV)
Method in such a manner so that the cost of asset (Net of realizable
value) will be amortized over their estimated remaining useful life
on SLM basis as per the useful life prescribed under Schedule II to
the Companies Act 2013.
All Property, Plant and Equipments assets individually costing
Rs. 5,000/- or less are fully depreciated in the year of installation/
purchase.
f) Depreciation methods, useful lives, and residual values are reviewed
periodically at each financial year end.
II. Intangible Assets Intangible assets are identifiable non-monetary assets without
physical substance, controlled by the company, and from which
future economic benefits are expected to flow. This policy is prepared
in accordance with the AS-26 'Intangible Assets' as notified under
section 133 of the Companies Act, 2013 and will be consistently applied
throughout the organization.
a) Recognition: Intangible Assets are recognized based on the below
mentioned policies:
A. I nternally Generated Intangible assets will be recognized on the
balance sheet when all of the following criteria are met:
i) I dentifiability: The intangible asset is capable of being separated
or divided from the company and sold, transferred, licensed,
rented, or exchanged, either individually or together with a
related contract, asset, or liability.
ii) Control: The company has the power to obtain future economic
benefits from the intangible asset, either through its use or by
granting others the right to use it.
iii) Probable Future Economic Benefits: It is probable that the future
economic benefits associated with the intangible asset will
flow to the company.
iv) Reliable Measurement: The cost or fair value of the intangible
asset can be measured reliably.
B. I ntangible assets acquired separately from other assets will be
initially measured at cost, which includes the purchase price,
directly attributable acquisition costs, and any other costs
necessary to bring the asset to its intended use.
Intangible assets acquired through a business combination
will be measured at cost less accumulated amortization and
impairment value, if any on the acquisition date. Fair value reflects
the price that would be received to sell the asset in an orderly
transaction between market participants at the acquisition date.
b) Subsequent Measurement: After initial recognition, intangible
assets will be carried at cost less accumulated amortization
and accumulated impairment losses i.e cost Model. Subsequent
expenditures relating to Intangible assets are capitalized only
when it is probable that future economic benefits associated with
these will flow to the Company and the cost of the item can be
measured reliably.
c) Amortization: Amortization is the systematic allocation of the cost
of an intangible asset with a finite useful life over its expected
useful life. The amortization method used will reflect the pattern
in which the asset's economic benefits are consumed or utilized.
Intangible assets with an indefinite useful life, such as certain
brands or trademarks, will not be amortized but will be subject to an
annual impairment review. If there has been a significant change
in the expected pattern of economic benefits from the asset, the
amortization method is changed to reflect the changed pattern.
Such changes are accounted for in accordance with AS 5 Net Profit
or Loss for the Period, Prior Period Items and Changes in Accounting
Policies.
d) Derecognition: Intangible assets will be derecognized from the
balance sheet when they are disposed of, or when no future
economic benefits are expected from their use or disposal. Any
gain or loss arising from the derecognition of an intangible asset
will be recognized in the income statement.
iii. Impairment of Assets The Management periodically assesses, using external and internal
sources, whether there is an indication that an asset may be impaired.
An impairment loss is recognized wherever the carrying value of an
asset exceeds its recoverable amount. An impairment loss is charged
to the Statement of Profit and Loss in the year in which an asset is
identified as impaired. The recoverable amount is higher of the
asset's net selling price and value in use, which means the present
value of future cash flows expected to arise from the continuing use
of the asset and its eventual disposal. An impairment loss for an asset
is reversed if, and only if, the reversal can be related objectively to
an event occurring after the impairment loss was recognized. The
carrying amount of an asset is increased to its revised recoverable
amount, provided that this amount does not exceed the carrying
amount that would have been determined had no impairment loss
been recognized for the asset in prior years.
iv. Investments Classification of Investments:
Current Investments: Investments that are held with the intention of
being disposed of within twelve months from the date of acquisition.
These investments will be measured at the lower of cost and fair value.
Changes in fair value will be recognized in the income statement
Non-Current Investments: Investments that are not classified as
current investments. Non-current investments will be measured at
cost and will be subject to impairment testing. Any impairment loss
will be recognized in the income statement.
Measurement of Investments:
a) Initial Measurement: Investments in shares will be initially
recognized at cost, which includes the acquisition cost, transaction
fees, and directly attributable acquisition costs.
b) Subsequent Measurement:
i. Current Investments: Current investments will be measured
at the lower of cost and fair value at each reporting date. Any
changes in fair value will be recognized in the income statement
as gains or losses.
ii. Non-Current Investments: Non-current investments will be
measured at cost less any impairment loss recognized in the
income statement.
c) Investments will be derecognized from the balance sheet when
they are sold or when their ownership interest is relinquished.
v. Retirement & Other Employee benefits include various forms of compensation and
employee benefits benefits provided to employees, and proper accounting is essential
to accurately report the financial position and performance of the
company. This policy will be consistently applied throughout the
organization.
(a) Short-term Employees Benefits:
Short-term employee benefits, such as salaries, wages, bonuses,
and short-term compensated absences, will be recognized
as an expense in the income statement in the period in which
the related service is provided by the employees. The amounts
recognized will be based on the undiscounted amount expected
to be paid or provided.
(b) Post-Employment Benefits:
i. Defined Contribution Plans: Contributions to defined contribution
plans, such as Provident Fund as per Employee Provident Fund
Law and Employee State Insurance (ESI), will be recognized as
an expense in the income statement when employees render
the related service. The company's obligations are limited to
the amount of contributions made, and there are no further
obligations once the contributions are paid.
ii. Defined Benefit Plans: For defined benefit plans, such as gratuity
and pensions, the cost of providing benefits will be determined
using the projected unit credit method. The present value of the
defined benefit obligation will be measured, taking into account
actuarial assumptions regarding employee turnover, mortality,
and future salary increases. Any actuarial gains or losses and
past service costs will be recognized immediately in the income
statement.
(c) Other Long-Term Employee Benefits:
Other long-term employee benefits, such as compensated
absences will be recognized as an expense in the income
statement when employees render the related service and
become entitled to receive the benefits.
(d) Termination Benefits:
Termination benefits will be recognized as an expense when the
company is demonstrably committed to either terminating the
employment of an employee before the normal retirement date
or providing benefits as a result of an offer made to encourage
voluntary redundancy.
(e) Share-Based Payment:
For share-based payment transactions, such as stock options
or equity-settled stock appreciation rights (SARs) granted to
employees, the fair value of the equity instruments granted will
be recognized as an expense in the income statement over the
vesting period. The fair value of the equity instruments will be
measured at the grant date.
(f) Other Employee Benefits:
Other employee benefits, not covered by the above categories, will
be recognized as an expense in the income statement when the
company has a present legal or constructive obligation to make
the payments as a result of past events, and a reliable estimate
of the obligation can be made.
vi. Foreign exchange Transactions arising in foreign currencies during the year are converted
transactions at the rates closely approximating the rates ruling on the transaction
dates. Foreign-currency denominated monetary assets and liabilities
outstanding as on year end, if any are translated at exchange rates
in effect at the Balance Sheet date. Foreign currency denominated
non-monetary assets and liabilities measured at historical cost are
translated at the exchange rate prevalent at the date of transaction.
The gains or losses resulting from conversion in terms of the above
are included in the Statement of Profit and Loss. Revenue, expense and
cash-flow items denominated in foreign currencies are translated
using the exchange rate in effect on the date of the transaction.
vii. Cash Flow Statement Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and item of income or expenses associated
with investing or financing cash flows. The cash flows from operating,
investing and financing activities are segregated.
viii. Borrowings and Borrowings are recognised at the amount received from lenders.
finance cost These include term loans, cash credit, overdraft facilities, and other
credit arrangements obtained from banks and financial institutions
and related parties.
Borrowings are classified as:
Current liabilities, if repayable within 12 months from the reporting
date; and
Non-current liabilities, if the repayment is due after 12 months.
Repayments due within 12 months under long-term borrowing
arrangements are presented as the current portion of long-term
borrowings.
Borrowings are measured at their outstanding principal amount as
on the balance sheet date. Accrued but unpaid interest is shown
separately under other liabilities.
Finance costs comprise interest and other costs incurred in connection
with the borrowing of funds.
These includes generally Interest on term loans and overdrafts, bank
charges, processing fees or other financing-related charges.Finance
costs are recognised as an expense in the Statement of Profit and
Loss in the period in which they are incurred, using the accrual basis
of accounting.
ix. Trade Receivables & Trade receivables are stated at their carrying value after deducting
Payable provision for doubtful debts, if any. The carrying value represents
amounts receivable in the ordinary course of business, which are
expected to be realised within a normal operating cycle and are
classified as current assets.
Provision for doubtful receivables is made based on a review
of outstanding amounts at the year-end and is charged to the
Statement of Profit and Loss. Receivables are written off when there is
no reasonable expectation of recovery.
Trade payables represent liabilities for goods and services provided
to the Company prior to the end of the financial year and which
remain unpaid as on the reporting date. These are recognised at the
contractual amounts and are settled as per agreed credit terms with
vendors.
Trade payables are classified as current liabilities. The Company
classifies its trade payables into:
- Dues to Micro, Small and Medium Enterprises (MSMEs), and
- Dues to other than MSMEs, based on information available with the
management and disclosures required under the Micro, Small and
Medium Enterprises Development Act, 2006 ("MSMED Act").
Identification of MSME status is based on confirmation from vendors
and information available with the Company. Interest payable, if any,
under the provisions of the MSMED Act for delayed payments beyond
the stipulated date, is recognised in the books only when such liability
is ascertained and accepted by the Company.
x. Taxation The accounting treatment for the Income Tax is based on the
Accounting Standard on 'Accounting for Taxes on Income' (AS-22).
The provision made for Income Tax in Accounts comprises both,
the current tax and deferred tax. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively
enacted, at the reporting date.
Provision for Current Tax is made on the assessable Income Tax rate
applicable to the relevant assessment year after considering various
deductions available under the Income Tax Act, 1961.
Deferred income taxes reflect the impact of timing differences
between taxable income and accounting income originating during
the current year and reversal of timing differences for the earlier years.
Deferred tax is measured using the tax rates and the tax laws enacted
or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences.
Deferred tax assets are recognized for deductible timing differences
only to the extent that there is reasonable certainty that sufficient
future taxable income will be available against which such deferred
tax assets can be realized. In situations where the company has
unabsorbed depreciation or carry forward tax losses, all deferred tax
assets are recognized only if there is virtual certainty supported by
convincing evidence that they can be realized against future taxable
profits. The carrying amount of deferred tax asset/liability is reviewed
at each Balance Sheet date and consequential adjustments are
carried out.
xi. Earnings per share Basic earnings per share is computed by dividing the net profit after
tax by the weighted average number of equity shares outstanding
during the period, in accordance with AS-20. Diluted earnings per
share is computed by dividing the profit after tax by the weighted
average number of equity shares considered for deriving basic
earnings per share and also the weighted average number of equity
shares that could have been issued upon conversion of all dilutive
potential equity shares.
The diluted potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value which is
the average market value of the outstanding shares. Dilutive potential
equity shares are deemed converted as of the beginning of the
period, unless issued at a later date. Dilutive potential equity shares
are determined independently for each period presented.
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