1. Significant accounting Policies
1.1 Revenue recognition
Sale of services
The Company derives revenue primarily from software development, maintenance of software and related
services and business process services.
Revenue is recognized on satisfaction of performance obligation upon transfer of control of promised
services to the customers in an amount that reflects the consideration the Company expects to receive in
exchange for those services ("transaction price"). When there exists uncertainty as to collectability, revenue
recognition is postponed until such uncertainty is resolved. Revenue is measured on the basis of transaction
price, after deduction of any discounts and any taxes or duties collected on behalf of the Government such
as goods and services tax, etc. Revenue is only recognised to the extent that it is highly probable a significant
reversal will not occur.
The contract with customers generally contains a single performance obligation and revenue is recognized
over time based on satisfaction of performance criteria included in contractual arrangements with
customers, measured at transaction price. Revenue from time and material and job contracts is recognised
on output basis measured by units delivered, efforts expended, number of transactions processed, etc. In
respect of other fixed-price contracts, revenue is recognised using percentage-of-completion method (POC
method') of accounting with contract costs incurred determining the degree of completion of the
performance obligation. The contract costs used in computing the revenues include cost of fulfilling warranty
obligations. Revenue from the sale of distinct internally developed software and manufactured systems and
third party software is recognised upfront at the point in time when the system / software is delivered to the
customer. In cases where implementation and / or customisation services rendered significantly modifies or
customises the software, these services and software are accounted for as a single performance obligation
and revenue is recognised over time on a POC method.
The Company does not expect to have any contracts where the period between the transfer of the promised
services to the customer and payment by the customer exceeds one year. As a consequence, it does not
adjust any of the transaction prices for the time value of money. The Company's trade receivables are rights
to consideration that are unconditional. Unbilled revenues comprising revenues in excess of invoicing are
classified as financial asset when the right to consideration is unconditional and is due only after a passage of
time.
Dividend and Interest Income
Dividend income from investments is recognised when the shareholder's right to receive payment has been
established.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow
to the Company and the amount of income can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the effective interest rate applicable.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial
liability and of allocating interest income/interest expenses over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts/ payments (including all fees and points
paid or received that form an integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
1.2 Foreign currency Transactions.
Functional currency
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian
rupees (rounded off wherever required)
Transactions and translations
Transactions in foreign currencies entered into by the Company are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the
transaction.
Foreign currency monetary items of the Company, outstanding at the balance sheet date are restated at the
year-end rates. Non-monetary items of the Company that are measured in terms of historical cost in a
foreign currency are not retranslated.
For the purposes of presenting these financial statements, the exchange differences on monetary items
arising, if any, are recognised in the statement of profit and loss in the period in which they arise.
1.3 Taxes
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during
the year. Current and deferred tax are recognized in statement of profit or loss, except when they relate to items
that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred
tax are also recognized in other comprehensive income or directly in equity, respectively.
I. Current Income tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before
tax' as reported in the statement of profit and loss because it excludes items of income or expense that are
taxable or deductible in other years and further excludes items that are never taxable or deductible. The
Company's current tax is calculated using tax rates that have been enacted or substantively enacted by the
end of the reporting date. A provision is recognised for those matters for which the tax determination is
uncertain, but it is considered probable that there will be a future outflow of funds to a tax authority. The
provisions are measured at the best estimate of the amount expected to become payable.
II. Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is
probable that taxable profits will be available against which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from
the initial recognition (other than in a business combination) of assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit. In addition, a deferred tax liability is not
recognised if the temporary difference arises from the initial recognition of the goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the
asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from
the manner in which the Company expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are off set when there is a legally enforceable right to set off current tax
asset against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and liabilities on a net basis.
III. Minimum Alternate Tax
Minimum alternate tax (MAT) credit is recognised in accordance with tax laws in India as an asset only when
and to the extent there is convincing evidence that the Company will pay normal income tax during the
specified period. The Company reviews the MAT credit at each balance sheet date and writes down the
carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect
that the Company will pay normal income tax during the specified period.
1.4 Earnings per share
Basic earnings per share is computed by dividing the profit/loss) after tax (including the post-tax effect of
extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of
extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any
attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity
shares considered for deriving basic earnings per share and the weighted average number of equity shares which
could have been issued on the conversion of all dilutive potential equity shares.The number of equity shares and
potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and
bonus shares issues including for changes effected prior to the approval of the financial statements by the Board
of Directors.
1.5 Property, plant and equipment (PPE)
Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses, if any.
The initial cost of property, plant and equipment comprises its purchase price net of any trade discounts and
rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities),
any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses
and borrowings costs attributable to acquisition of qualifying property, plant and equipment up to the date the
asset is ready for its intended use. Freehold land is not depreciated.
Subsequent costs incurred are included in the assets carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably. All other repairs and maintenance cost are charged
to the Statement of Profit and Loss during the period in which they were incurred.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of
an item of property, plant and equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit and loss.
Depreciation is provided on the basis of straight-line method at the useful life and in the manner prescribed in
Schedule II of the Companies Act, 2013. Management believes that these estimated useful lives are realistic and
reflect fair approximation of the period over which the assets are likely to be used.
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.
At each reporting date, the Company reviews the carrying amounts of its property, plant and equipment and
intangible assets to determine whether there is any indication that those assets have suffered an Impairment
loss. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to
sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows
that are largely independent of those from other assets. In such cases, the recoverable amount is determined for
the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognised in the Statement of Profit and Loss
is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount
of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the
estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised
recoverable amount, provided that this amount does not exceed the carrying amount that would have been
determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for
the asset in prior years.
1.6 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to
the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the statement of profit and loss in the period in which they are
incurred.
1.7 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value, plus in the case of financial assets not recorded at fair
value through profit or loss (FVTPL), transaction costs that are attributable to the acquisition of the financial
asset. However, trade receivables that do not contain a significant financing component are measured at
transaction price.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in one category:
• Debt instruments at amortised cost
Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised cost if both the following conditions are met:
a. The asset is held within a business model, whose objective is to hold assets for collecting contractual
cash flows, and
b. Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the following financial assets and credit risk exposure:
• Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt
securities, deposits, trade receivables and bank balances.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade
receivables that do not contain a significant financing component. The application of simplified approach does
not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on
lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the company determines that
whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not
increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that
there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to
recognising impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a
financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are
possible within 12 months after the reporting date. ECL is the difference between all contractual cash flows that
are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive
(i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to
consider:
o All contractual terms of the financial instrument (including prepayment, extension, call and similar options)
over the expected life of the financial instrument. However, in rare cases when the expected life of the
financial instrument cannot be estimated reliably, then the entity is required to use the remaining
contractual term of the financial instrument; and
o Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual
terms. ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/
expense in the standalone statement of profit and loss. This amount is reflected under the head 'other
expenses' in the standalone statement of profit and loss. The standalone balance sheet presentation for
various financial instruments is described below:
o inancial assets measured at amortised cost: ECL is presented as an allowance, i.e., as an integral part of the
measurement of those assets in the standalone balance sheet. The allowance reduces the net carrying
amount. Until the asset meets write-off criteria, the company does not reduce impairment allowance from
the gross carrying amount.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss,
loans and borrowings or payables, as appropriate. All financial liabilities are recognised initially at fair value and,
in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company's
financial liabilities include trade and other payables, loans and borrowings including derivative financial
instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are
classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category
also includes derivative financial instruments entered into by the company that are not designated as hedging
instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified
as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the standalone statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at
the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as
FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses
are not ubsequently transferred to the standalone statement of profit and loss. However, the company may
transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in
the standalone statement of profit and loss. The company has not designated any financial liability as at fair value
through profit and loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in the standalone statement of profit and loss when the
liabilities are derecognized as well as through the EIR amortization process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is included as finance costs in the standalone statement of
profit and loss. This category generally applies to borrowings from banks.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid as per agreed terms. Trade and other
payables are presented as current liabilities unless payment is not due within 12 months after the reporting
period. They are recognised initially at their fair value and subsequently measured at amortised cost using the
effective interest method.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
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
de-recognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognised in the standalone statement of profit and loss.
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