(i) Basis for preparation of Financial Statements
The financial statements which have been prepared under the historical
cost convention on the accrual basis of accounting, are in accordance
with the applicable requirements of the Companies Act, 1956 (the ''Act'')
and comply in all material aspects with the Accounting Standards
prescribed by the Central Government, in accordance with the Companies
(Accounting Standards) Rules, 2006 as adopted consistently by the
Company, to the extent applicable.
(ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
(iii) Revenue recognition
The Company recognizes revenue on accrual basis in accordance with
Accounting Standard 9. The Company derives its revenue from either
supply or on installation of educational products and provision of
The revenue from sale of educational products/ technology equipments is
recognized on transfer of property in goods which generally coincides
with dispatch/ delivery to the customer.
Revenue from Edureach (ICT) under BOOT contract is recognized ratably
over the period of the contract/contractual obligations. Revenue from
professional development is recognized after the professional
development services have been rendered to the customer. Revenue from
online educational services (if charged) is recognized upon receipt of
subscription fee in case non-refundable otherwise ratably over the
Revenue from franchisee constituting one time franchisee fee (non-
refundable) is recognized upon receipt of fee from the franchisee. The
recurring revenue from franchisee is recognized on accrua basis. The
revenue from tuition fee is recorded equally over the period of
Revenue for smartclass projects is recognized under various heads,
namely: BOOT Contracts / Out right sale basis contracts / Boot business
transferred under BOOT contracts/ Exports. Revenue from smartclass
BOOT contracts is recognized ratably over the period of the Contract/
contractual obligations. Revenue from Out right sale basis contracts
consisting of both hardware and knowledge based content, wherein
knowledge based content is recognized on icensing /delivery / grant of
the same for the contract period and technology Equipments on
delivery/dispatch basis. Revenue from transfer of existing BOOT
Contracts is recognized on grant of right to use of Knowledge based
However , a portion of the revenue earned on right to use/licensing of
educational content/ Knowledge Based content under Out right Sale
basis contracts and BOOT Business transferred under Boot Contracts
is treated as unearned towards future cost of updates due to economic
obligation of the Company to provide the same. The unearned revenue is
recognized in subsequent period matching with the cost of future
updates incurred in those period.
Revenue from overseas agreements / exports is recognized when the
Educational knowledge Based content license is delivered & accepted.
However in case where knowledge base content is icensed for a long term
period, and is dependent on percent of revenue earned by the licensee,
the revenue is recognized on establishment of right to receive.
Income from interest on fixed deposits is recognized using the time
proportion method, based on interest rates implicit in the transaction.
Dividends income is recognized when the right to receive payment is
Expenses are accounted for on accrual basis and provisions are made for
all known losses and liabilities.
License Fees for educational content
In respect of licensing contracts with fixed license fee for fixed
period and a pre-defined number of sublicensing arrangements, icense
fee is expensed in such a manner that cumulative amount of fee expense
at the end of each year is based on higher of the following two:
(i) Number of sub-licensing arrangements for which content has been
provided. This will be computed based on total license fee divided by
predefined number of sub licensing arrangements.
(ii) Number of years of license period already expired. This will be
computed based on total license fee divided by fixed period of
In respect of contracts where license fees is paid on the basis of
period of usage, the license fees is charged in the respective periods.
In respect of contracts where license fee is paid on the basis of per
year per sub licensing arrangement, the entire cost of license for each
of the sub-licensing arrangement is expensed at the time the revenue
from sub licensing arrangement is recognized.
(v) Fixed assets/ Depreciation & Amortization
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. Costs include all expenses incurred to bring
the assets to its present location and condition for its intended use.
Depreciation on tangible fixed assets is provided at the written down
value method at the rates and in the manner prescribed in Schedule XIV
to the Companies Act, 1956. Depreciation on addition to fixed assets is
provided on pro-rata basis from the date the assets are ready to use.
Depreciation on sale / deduction from fixed assets is provided for upto
the date of sale, deduction, discardment as the case may be.
Fixed assets purchased for utilization and implementing the contractual
obligations under the project undertaken under Edureach (ICT), Turnkey
and smartclass are depreciated on a straight-line basis over the period
of contractual obligation generally ranging from 3-6 years depending
upon the period of the contract.
Leasehold improvements are amortized on the straight-line basis over
the primary period of lease.
Assets costing less than Rs.5,000 are fully depreciated in the year of
purchase except in case of deployment as project assets (if any)
Capital work-in-progress comprises of capital assets which are not yet
put to use and also include outstanding advances paid to acquire fixed
An Intangible asset is recognized, where it is probable that the future
economic benefits attributable to the asset will flow to the enterprise
and where its cost can be reliably measured.
Intangible asset are stated at cost of acquisition less accumulated
amortization. Amortization on the Intangible assets is provided on
pro-rata basis on the straight-line method based on management''s
estimate of useful life, i.e. 3 years for software, 4 years for
Knowledge-based content including smartclass content. Licensed
intangible assets are amortised over the period of license.
Cost of an internally generated asset comprises all expenditure that
can be directly attributed, or allocated on a reasonable and consistent
basis, to create, produce and make the asset ready for its intended
(vi) Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/ external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
higher of asset''s net selling price and value in use which means the
present value of future cash flows expected to arise form the
continuing use of the assets and its eventual disposal. An Impairment
loss is charged to the statement of profit & loss in the year in which
an asset is impaired.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
Lease rentals in respect of operating lease arrangements including
assets taken on operating lease are recognized as an expense in the
statement of profit & loss on accrual basis.
Lease rental income under operating lease are recognized in the Profit
and Loss on a straight -line basis/ agreed terms over the period of
lease as the case may be
Leases where the lessor effectively transfers substantially all the
risks and benefits of ownership over the lease term are classified as
finance lease. Assets taken on finance lease are capitalized at fair
value or net present value of the minimum lease payments, whichever is
lower. The principal component in the lease rental is adjusted against
the lease liability and the interest component is charged to Profit and
Items of Inventories are measured at lower of cost and net realizable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, freight & other expenses incurred in
bringing the inventories to their present location and condition. The
cost is determined using the weighted average method.
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at acquisition cost. Provision for
diminution in the value of long-term investments is made only if such a
decline is other than temporary. Current investments are valued at
lower of cost and market rate on individual investment basis.
Classification in the financial statements
Investments that are realisable within the period of twelve months from
the balance sheet date are classified as current investment. All other
investments are classified as non-current investments.
(x) Foreign exchange transactions
a. Foreign exchange transactions are recorded at the exchange rates
prevailing at the date of transaction. Exchange differences arising on
the settlement of monetary items or on restatement of the Company''s
monetary items at rates different from those at which they were
initially recorded during the year, or reported in previous financial
statements, other than those relating to fixed assets & other long term
assets are recognised as income or as expenses in the year in which
b. The Company has opted for accounting the exchange differences
arising on the reporting of long term foreign currency monetary items
in line with Companies (Accounting Standards) Second Amendment Rules
2011 on Accounting Standard 11 as notified by the Central Government
vide Notification dated 29th December, 2011. Accordingly, the effect of
exchange difference on foreign currency loan (including FCCB) is
accounted for by addition or deduction to the cost of the assets so far
it relates to depreciable capital asset and in other cases by transfer
to Foreign Currency Monetary Items Translation Difference
Account(FCMITDA) to be amortized as provided in the aforesaid
(xi) Employee benefits
(a) Short term employee benefits
2. All employee benefits payable wholly within twelve months of
rendering the service are classified as Short term employee benefits.
Benefits such as salaries, wages, and bonus etc are recognized in the
Profit and Loss Account in the period in which the employee renders the
related service. The employees are further entitled to sick leaves
which cannot be encashed and will lapse at the end of the calendar
year. The company is providing provision for such employee benefits on
the basis of its best estimate.
(a) Long term employee benefits
(i) Defined contribution plan
Contributions to provident fund, labour welfare fund and ESI are
deposited with the appropriate authorities and charged to the statement
of profit & loss on accrual basis. The Company has no further
obligations under these plans beyond its monthly contributions.
(ii) Defined benefit plan
Leave encashment- The Company has provided for the liability at the
year end on account of unavailed earned leave as per the actuarial
valuation as per the Projected Unit Credit method in accordance with
Accounting Standard 15, Employee benefits. All actuarial gains/losses
are charged to the statement of profit & loss in the year these arise.
Gratuity- The Company provides for retirement benefits in the form of
Gratuity. The Company''s gratuity plan is a defined benefit plan. The
present value of gratuity obligation under such defined plan is
determined based on an actuarial valuation carried out by an
independent actuary using the Projected Unit Credit Method, which
recognizes each period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit separately to build
up the final obligation. The obligation is measured at the present
value of the estimated future cash flows. The discount rate used for
determining the present value of the obligation under the defined
benefit plans, is based on the market yields on Government securities
as at the valuation date having maturity periods approximating to the
terms of the related obligations. Actuarial gains and losses are
recognized immediately in the statement of profit & loss.
(b) Employee stock option scheme
The stock options are accounted as per the accounting treatment
prescribed by the employee stock option scheme and Employee Stock
Purchase Guidelines, 1999 issued by Securities Exchange Board of India,
whereby the intrinsic value of the option being, excess of market value
of the underlying share immediately prior to the date of award over its
exercise price is recognized as deferred employee compensation with a
credit to Employee stock options outstanding account. The deferred
employee compensation is charged to statement of profit & loss on
straight line basis over the vesting period of the option. The balance
in employee stock option outstanding account net of any unamortized
deferred employee compensation is shown separately as part of
(ii) Borrowing cost
Borrowing costs are determined in accordance with the provisions of AS
16. Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
(iii) Provision for tax
Tax expense for the year comprises current and deferred is included in
determining the net profit for the year.
Provision for current tax is based on the tax liabilities computed in
accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognized on timing difference
between accounting and taxable income that originates in one year and
is capable of reversal in one or more subsequent period. Deferred tax
assets and liabilities are measured using the tax rates and laws that
have been substantively enacted by the balance sheet date.
The Deferred tax assets are recognized only to the extent there is
reasonable certainty that sufficient future taxable income will be
available against which these assets can be realized in future where as
in cases of existence of carry forward of losses or unabsorbed
depreciation, deferred tax assets are recognized only if there is
virtual certainty of realization backed by convincing evidence.
Deferred tax assets are reviewed at each Balance Sheet date and are
written-down or written-up to reflect the amount that is reasonably /
virtually certain (as the case may be) to be realized.
Minimum Alternative Tax (MAT) credit assets is recognized in the
balance sheet where it is likely that it will be adjusted against the
discharge of tax liability in future under the Income Tax Act, 1961.
(iv) Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
notes. Contingent assets are neither recognized nor disclosed in the
(iv) Earning per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders after tax by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period, are adjusted for events of bonus issued to existing
For the purpose of calculating diluted earning per share, the net
profits or loss attributable to equity shareholders and the weighted
average number of shares outstanding are adjusted for the effects of
all dilutive potentia equity shares, if any.
(v) Cash Flow Statement
Cash flows are reported using the indirect method, whereby net profits
before tax is adjusted for the effect of transaction of non-cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing
and financing activities are segregated.
(vi) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
(vii) Material Events
Material Events occurring after the Balance Sheet date are taken into