3 MATERIAL ACCOUNTING POLICIES
a) 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:
i) Expected to be realised or intended to be
sold or consumed in normal operating
cycle:
ii) Held primarily for the purpose of trading:
iii) Expected to be realised within twelve
months after the reporting period, or
iv) 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:
i) It is expected to be settled in normal
operating cycle:
ii) It is held primarily for the purpose of
trading:
iii) It is due to be settled within twelve months
after the reporting period, or
iv) There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
All other liabilities are classified as non-current.
Deferred tax assets and 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 12 months as its
operating cycle.
b) Revenue recognition
i) Operating revenue:
Revenue is recognised on accrual basis
and when no significant uncertainty exists
as to its realisation or collection. Revenue
is recognized and measured at the
transaction price.
Revenue from sale of services are
recognised based on satisfaction of
performance obligations as below:
i) Revenue from cross charge of common
expenses and Studio expenses: Income
from recovery of common expenses &
studio expenses is recognised on cost
plus basis, considering the net eligible
costs incurred/identified towards such
revenue contracts.
ii) Royalty Income : The Company receives
royalty income from its subsidiaries in
connection with the use of the name of
the Company and the brand 'Veranda'
and is recognised at a point in time.
iii) Revenue from Technical Know-how:
The Company derives revenues
primarily from management and
knowledge services rendered to its
subsidiaries in accordance with the
terms of the agreements with them
and is recognised over the period of
rendering such services.
iv) Revenue from courses are recognised
based on actual classes conducted
by the educators. The Company does
not assume any post-performance
obligation after completion of the
classes. Revenue received from
classes to be conducted subsequent
to the year-end is considered as
deferred Revenue which is included in
other current liabilities.
v) Revenue from sale of license (source
code) to educational institutions is
recognised in accordance with the
agreements with those customers.
vi) Revenue from tech implementation
services : Income from implementation
of technology for educational
organisations is recognised in
accordance with the agreements
with the customers as the underlying
are rendered and implementation is
completed.
Note: The Company recognises the
above revenues towards satisfaction of
a performance obligation is measured at
the amount of transaction price (net of
variable consideration) allocated to that
performance obligation. The transaction
price of goods sold and services rendered
is net of variable consideration on account
of various discounts and schemes offered
by the Company as part of the contract.
ii) Guarantee commission income:
Guarantee commission revenue is
recognised on an accrual basis in
accordance with the substance of the
relevant agreement, provided that it is
probable that the economic benefits shall
flow and the amount can be measured
reliably.
c) Interest income
I nterest income is recorded using the effective
interest rate (EIR). EIR is the rate that exactly
discounts the estimated future cash payments
IRQ
or receipts over the expected life of the
financial instrument or a shorter period, where
appropriate, to the gross carrying amount of
the financial asset or to the amortised cost
of a financial liability. When calculating the
effective interest rate, the Company estimates
the expected cash flows by considering all the
contractual terms of the financial instrument
(for example, prepayment, extension, call and
similar options) but does not consider the
expected credit losses.
d) Property, plant and equipment (ppe)
Presentation
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
plant and equipment and borrowing costs of
a qualifying asset, if the recognition criteria
are met. 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.
All other repair and maintenance costs are
recognised in profit or loss as incurred.
Advances paid towards the acquisition of
tangible assets outstanding at each balance
sheet date, are disclosed as capital advances
under long term loans and advances and the
cost of the tangible assets not ready for their
intended use before such date, are disclosed as
capital work-in-progress.
Derecognition
Gains or losses arising from derecognition of
property, plant and equipment are measured
as the difference between the net disposal
proceeds and the carrying amount of the asset
and are recognized in the statement of profit
and loss when the asset is derecognized.
Depreciation on property, plant and equipment
Depreciation is the systematic allocation of the
depreciable amount of an asset over its useful
life.
The useful life is as per Schedule II of the
companies Act, 2013.
The useful life of the leasehold improvement is
according to the lease agreement terms.
Depreciation for PPE on additions is
calculated on pro-rata basis from the date
of such additions. For deletion/ disposals, the
depreciation is calculated on pro-rata basis
up to the date on which such assets have
been discarded/ sold. Depreciation is also
accelerated on assets, based on their condition,
usability, etc. as per the technical estimates
of the management wherever necessary.
Additions to fixed assets, costing ' 5,000 each or
less are fully depreciated retaining its residual
value.
The residual values, estimated useful lives and
methods of depreciation of property, plant and
equipment are reviewed at each financial year
end and adjusted prospectively, if appropriate.
e) Intangible assets
Internally generated intangible asset are
measured on initial recognition at cost. The
cost comprises of all directly attributable costs
necessary to create, produce, and prepare the
asset to be capable of operating in the manner
intended by management.
Subsequent to initial recognition, internally-
generated intangible assets are reported
at cost less accumulated amortisation and
accumulated impairment losses, on the same
basis as intangible assets that are acquired
separately.
Useful life and amortisation of intangible
assets
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. Amortisation is
also accelerated on assets, based on their
condition, usability, etc. as per the technical
estimates of the management wherever
necessary. Further, the Company has 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.
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 under development
Costs incurred during research phase are
charged to statement of profit and loss in the
year in which they are incurred. Development
phase expenses are initially recognized as
intangible assets under development until the
development phase is complete, upon which
the amount is capitalized as intangible asset.
f) Loans and borrowings
Borrowings are initially recognised at fair value,
net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost.
Any difference between the proceeds (net of
transaction costs) and the redemption amount
is recognised in profit or loss over the period
of the borrowings using the effective interest
method.
Borrowings are classified as current liabilities
unless the Company has an unconditional right
to defer settlement of the liability for at least 12
months after the reporting period. Where there
is a breach of a material provision of a long¬
term loan arrangement on or before the end
of the reporting period with the effect that the
liability becomes payable on demand on the
reporting date, the Company does not classify
the liability as current, if the lender agreed, after
the reporting period and before the approval
of the financial statements for issue, not to
demand payment as a consequence of the
breach.
Derecognition of financial liabilities
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expired. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the
terms of an existing liability are substantially
modified, such an exchange or modification
is treated as the derecognition of the original
liability and the recognition of a new liability. The
difference in the respective carrying amounts is
recognised in the statement of profit or loss.
g) Borrowing costs
Borrowing cost include interest computed using
effective interest rate method, amortisation
of ancillary costs incurred and exchange
differences arising from foreign currency
borrowings to the extent they are regarded as
an adjustment to the interest cost.
Borrowing costs that are directly attributable
to the acquisition, construction and production
of a qualifying asset are capitalised as part of
the cost of that asset which takes substantial
period of time to get ready for its intended use.
All other borrowings costs are expensed in the
period in which they occur.
h) 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. The tax rates and tax laws used to
compute the amount are those that are enacted
or substantively enacted, at the reporting date
in the countries where the Company operates
and generates taxable income.
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 establishes provisions where
appropriate.
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.
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. Where there is deferred tax assets
arising from carry forward of unused tax losses
and unused tax created, they are recognised to
the extent of deferred tax liability.
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.
i) Retirement and other employee benefits
Provident fund
Retirement benefit in the form of provident
fund is a defined contribution scheme. The
Company has no obligation, other than the
contribution payable to the provident fund.
The Company recognizes contribution payable
to the provident fund scheme as expenditure,
when an employee renders the related service.
Gratuity
Gratuity is a defined benefit plan. The costs
of providing benefits under this plan are
determined on the basis of actuarial valuation
at each year-end. Separate actuarial valuation
is carried out for the plan using the projected
unit credit method. Actuarial gains and losses
for the plan is recognized in full in the period in
which they occur in the statement of profit and
loss.
Compensated absences
Short term compensated absences are
provided for based on estimates. Long term
compensated balances are provided for based
on actuarial valuation. The actuarial valuation
is done as per projected unit credit method.
Leave encashment liability of an employee, who
leaves the Company before the close of the
year and which is remaining unpaid, is provided
for on actual computation basis.
j) Share based payments
Select employees of the Company receive
remuneration in the form of equity settled
instruments or cash settled instruments, for
rendering services over a defined vesting
period and for Company's performance-
based stock options over the defined period.
The cost of equity-settled transactions is
determined by the fair value of the options
which are estimated using the Black-Scholes
method of valuation for time and non-market
performance-based options. In cases, where
equity instruments are granted at a nominal
exercise price, the intrinsic value on the date of
grant approximates the fair value. The expense
is recognized in the statement of income with
a corresponding increase to the share-based
payment reserve, a component of equity. The
equity instruments or cash settled instruments
generally vest in a graded manner over the
vesting period. The fair value determined at
the grant date is expensed over the vesting
period of the respective tranches of such
grants (accelerated amortization). The stock
compensation expense is determined based on
the Company's estimate of equity instruments
or cash settled instruments that will eventually
vest. Cash Settled instruments granted are re¬
measured by reference to the fair value at the
end of each reporting period and at the time
of vesting. The expense is recognized in the
statement of income with a corresponding
increase to financial liability or Share-based
payment reserve, when the liability is settled
through allotment of shares of another entity.
k) 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 groups 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.
|