2.6 Provisions and Contingent Liabilities
a) Provisions
Provisions are recognized when the Company has a present obligation (legal or
constructive) as a result of a past event, and it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of obligation. Provisions are measured
at the best estimate of the expenditure required to settle the present obligation, at
the balances sheet date.
If the effect of the time value of money is material, provisions are discounted to
reflect its present value using a current pre-tax rate that reflects the current market
assessments of the time value of money and the risks specific to the obligation.
When discounting is used, the increase in the provision due to the passage of time is
recognised as a finance cost.
b) Contingent Liabilities
A disclosure for a contingent liability is made when there is a possible obligation
arising from past events, the existence of which will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly
within the control of the Company or a present obligation arising as a result of past
event that probably will not require an outflow of resources or where a reliable
estimate of the obligation cannot be made.
2.7 Revenue Recognition
a) Revenue from rendering of services is recognized when the performance of agreed
contractual task has been completed.
b) Interest income is recognized on time proportion basis taking into account the
amount outstanding and applicable interest rates.
c) Insurance claims are recognized to the extent the Company is reasonably certain of
their ultimate receipt.
d) Dividend income on investment is recognized when the right to receive dividend is
established.
e) Export Incentive such as duty drawbacks is recognized on post export basis on the
basis of their entitlement rates.
f) The Company has evaluated the impact of COVID - 19 resulting from (i) the
possibility of constraints to render services which may require revision of estimations
of costs to complete the contract because of additional efforts (ii) onerous
obligations (iii) penalties relating to breaches of service level agreements and
(iv)termination or deferment of contracts by customers. The Company has concluded
that the impact of COVID - 19 is not material based on such evaluation. Due to the
nature of the pandemic, the Company will continue to monitor developments to
identify significant uncertainties relating to revenue in future periods.
2.8 Employee Benefits
Short Term Employee Benefits
All Employee benefits payable within twelve months of rendering the services are
classified as short term benefits. Such benefits include salaries, wages, bonus, awards,
ex-gratia, performance incentive/pay etc. and the same are recognized in the period in
which the employee renders the related services.
2.9 Operating leases
Operating leases where the lessor effectively retains substantially all the risks and
benefits of ownership over the leased term are classified as operating leases. Operating
lease rentals are recognized as an expense in the statement of profit and loss on straight
line basis over the lease term, unless the payments are structured to increase in line
with the expected general inflation to compensate for the lessor in expected inflationary
cost increase.
2.10 Foreign Currency Transactions
Foreign currency transactions are recorded at the exchange rate prevailing on the date
of transaction. Monetary assets and liabilities in foreign currency existing at balance
sheet date are translated at the year end exchange rates. Exchange rate differences
arising on settlement of transaction and translation of monetary items are recognized as
income or expenses in the year in which they arise.
Non- monetary items that are measured in terms of historical cost in foreign currency
are translated using the exchange rates at the dates of initial transactions. Non¬
monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the far value is determined.
Premium or discount on forward exchange contract is amortised as income or expense
over the life of the contract. Exchange difference on such contract is recognized in the
Statement of Profit and Loss in the reporting period in which the exchange rate changes.
Any profit or loss arising on cancellation or renewal of forward contract is recognized as
income or expenditure during the period.
2.11 Taxation
Tax expense for the year comprises of Current Tax and Deferred Tax.
a. Current Tax
Current income tax, assets and liabilities are measured at the amount expected
to be paid to or recovered from the taxation authorities in accordance with the
Income Tax Act, 1961 and the Income Computation and Disclosure Standards
(ICDS) enacted in India by using tax rates and the tax laws that are enacted at
the reporting date.
b. 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 assets and
liabilities 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.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 realized or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the reporting
date.
2.12 Earnings per Share:
Basic earnings per share is calculated by dividing net profit of the year
attributable to equity shareholders by the weighted average number of equity
shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss
forP the year attributable to equity shareholders and the weighted average
number of shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
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