a) Basis of Accounting:
The financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. These financial statements have been
prepared to comply in all material aspects with the generally accepted
accounting principles in India, the Accounting Standards as notified
under the Companies (Accounting Standards ) Rules, 2006 (as amended)
and other relevent provisions of the Companies Act, 1956.
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act, 1956 has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preperation of financial statements, however,
it has significant impact on the presentation and disclosures made in
the financial statements. The previous year''s figures have also been
reclassified in accordance with the requirements applicable to the
b) 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 on the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Differences between the
actual results and estimates are recognized in the period in which the
results are known/materialized.
c) Fixed Assets and Depreciation:
Fixed Assets are stated at cost less accumulated depreciation. Cost
includes all expenses related to acquisition and installation of the
concerned assets and any attributable cost of bringing the asset to the
condition of its intended use. Borrowing costs attributable to the
acquisition or construction of a qualifying assets is also capitalised
as part of the cost of the asset.
Depreciation is provided under the straight line method, based on
useful lives of assets as estimated by the Management or at the rates
prescribed in Schedule VI to the Companies Act 1956, whichever is
higher. Depreciation is charged on a monthly pro-rata basis for assets
purchased/ sold during the year. Individual assets acquired for less
than Rs 5,000/- are entirely depreciated in the year of acquisition. The
Management''s estimate of useful lives for various fixed assets is as
Lease arrangements where the risks and rewards incident to ownership of
an asset substantially vest with the lessor, are recognized as
operating leases. Lease rentals under operating leases are recognized
in the profit and loss account on straight line basis.
e) Asset Impairment:
The Company assesses at each reporting date using external and internal
sources, whether there is an indication that an asset may be impaired.
An impairment occurs where the carrying value exceeds the present value
of future cash flows expected to arise from the continuing use of the
asset and its eventual disposal. The impairment loss to be expensed is
determined as the excess of the carrying amount over the higher of the
asset''s net sales price or present value as determined above.
Investments that are readily available and intended to be held for not
more than one year from the date of acquisition, are classified as
current investments. All other investments are classified as long term
Long-term investments are carried at cost. Provision for diminution,
if any, in the value of each long-term investment is made to recognise
a decline, other than that of a temporary nature. Current investments
intended to be held for less than one year are stated at the lower of
cost and fair value.
g) Foreign Exchange Transactions:
Transactions in foreign currency are recorded in the reporting currency
by applying the exchange rates prevailing on the date of the
transaction. Monetary assets and liabilities related to foreign
currency transactions, remaining unsettled at the year end, are
retranslated at the exchange rate prevailing at the reporting date.
Non-Monetary foreign currency items like investments in foreign
subsidiaries are carried at cost and expressed in Indian currency at
the rate of exchange prevailing at the time of making the original
investment. Forward exchange contracts entered into to hedged foreign
currency risk of an existing asset/liability.
The premium or discount arising at the inception of forward contract is
amortised and recognized as an expense/income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the period in which the exchange rates
change. Cancellation gains or losses on such contracts are also
recognized as income or expenses for the period.
h) Derivative Instruments and Hedge Accounting: The Company uses
foreign currency forward contracts to hedge its risk associated with
foreign currency fluctuations relating to certain firm commitments and
highly probable forecast transactions. The Company designates these as
Cash Flow Hedges.
The use of foreign currency forward contracts is governed by the
Company''s policies approved by the Board of Directors, which provide
written principles on the use of such forward contracts consistent with
the Company''s risk management strategy. The Company does not use
derivative financial instruments for speculation purpose. Forward
exchange contracts obtained to hedge firm commitments or highly
probable forecast revenues are recorded using the principles of hedge
accounting as recommended under Accounting Standard 30 - Financial
Instruments: Recognition and Measurement issued by The Institute of
Chartered Accountants of India. Such forward exchange contracts which
qualify for cash flow hedge accounting and where the conditions of AS
30 have been met are initially measured at fair value and are
remeasured at subsequent reporting dates. Changes in the fair value of
these derivatives that are designated and effective as hedges of the
future cash flows are recognized directly under Shareholder''s Funds in
the Hedging Reserve and the ineffective portion is recognized
immediately in the Statement of Profit and Loss.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognized in the Statement of
Profit and Loss as they arise.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated, exercised, or no longer qualifies for hedge
accounting. At that time for forecasted transactions, any cumulative
gain or loss on the hedging instruments recognized in the Hedging
Reserve is retained there until the forecasted transaction occurs. If a
hedge transaction is no longer expected to occur, the net cumulative
gain or loss recognized in the Hedging Reserve is transferred to the
Statement of Profit and Loss for the year.
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
Revenue from time and material contracts for software development is
recognized on a per hour basis as per the terms and conditions agreed
with the customers or on completion of contracts or when the
deliverables are dispatched to customers. In case of fixed price
contracts, which are generally time bound, revenue is recognized over
the life of the contract using proportionate completion method, on the
basis of work completed. Foreseeable losses on such contracts are
recognized when probable.
Unbilled Revenues included in loans and advances represents costs in
excess of billings as at the balance sheet dates. Advance Billing and
Deferred Revenue included in current liabilities represents billing in
excess of revenue recognized.
Revenue from sale of traded software products is recognized when the
software has been delivered, in accordance with sales contract. Revenue
from software upgradation fees on software developed by the Company is
recognized over the period for which it is received.
Interest income is recognized on time proportion basis. Dividend income
is recognized when the right to receive the dividend is established by
the reporting date.
j) Borrowing Costs:
Borrowing costs that are directly attributable to the acquisition of an
asset that necessarily takes a substantial period of time to get ready
for its intended use are capitalized as part of the cost of that asset
till the date it is put to use. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
k) Research and Development Expenditure:
Expenditure on in-house development of software is charged to the
Statement of Profit and Loss in the year in which it is incurred. l)
Software purchased is capitalized and written off over its useful life,
which is normally three years, provided the software is regularly
updated through a maintenance contract, failing which, the unamortized
balance is charged to revenue. If the usage of software is
discontinued, its unamortized cost is also charged to revenue.
The cost of software purchased for specific software development
contracts is charged over the period of such contracts, or three years,
whichever is less. Small-value software purchases costing between Rs
5,000 and Rs 50,000, other than software categorized as ''Standard
Software Development Tools'', is written off as and when incurred.
Software categorized as ''Standard Software Development Tools'' is
capitalized and depreciated over a period of three years.
Software costing below Rs 5,000 is written off as and when the cost is
l) Employee Stock Option Schemes:
Stock Options granted to employees are in accordance with the SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 and are at market price calculated under the said
Guidelines. The intrinsic value, being the difference, if any, between
market price and exercise price is treated as Personnel Expenses and
charged to Statement of Profit and Loss. The value of the options is
treated as a part of employee compensation in the financial statements
and is amortised over the vesting period. n) Warranty Obligations:
In respect of products sold by the Company, which carry a specified
warranty, future costs that will be incurred by the Company in carrying
out its obligations are estimated and accounted for on accrual basis.
Tax expense comprise of current and deferred tax. Current income tax
comprises taxes on income from operations in India and in foreign
jurisdictions. Income tax payable in India is determined in accordance
with the provisions of the Income Tax Act, 1961. Tax expense relating
to foreign operations is determined in accordance with tax laws
applicable in jurisdictions where such operations are domiciled.
Minimum alternative tax (MAT) paid in a year is charged to the
Statement of Profit and Loss as current tax. The Company recognises MAT
credit available as an asset only to the extent there is convincing
evidence that the Company will pay normal income tax after the
specified period. Accordingly, MAT is recognized as an asset in the
balance sheet when it is probable that the future economic benefit
associated with it will flow to the Company and the asset can be
measured reliably. Deferred tax is recognized on timing differences
being the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. Deferred tax assets and liabilities are measured
using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
In the event of unabsorbed depreciation and carry forward of losses,
deferred tax assets are recognized only to the extent that there is
virtual certainty that sufficient future taxable income will be
available to realise such assets. In other situations, deferred tax
assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available to
realise these assets.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-seffing advance taxes paid and income tax
provisions arising in the same tax jurisdiction and the Company intends
to settle the asset and liability on a net basis. The Company offsets
deferred tax assets and deferred tax liabilities if it has a legally
enforceable right and these relate to taxes on income levied by the
same governing taxation laws. p) Segment Reporting:
As per AS-17 Segment Reporting if a single financial report contains
both consolidated financial statements and the separate financial
statement of the parent, segment information need be presented only on
the basis of the consolidated financial statements. Accordingly
information required to be presented under AS-17 Segment Reporting has
been given in the consolidated financial statements. q) Employee
Short-term Employee benefits:
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. Benefits
such as salaries, performance incentives, leave encashment etc., are
recognized as an expense at the undiscounted amount in the Statement of
Profit and Loss of the year in which the employee renders the related
Post Employment benefits:
Defined Contribution Plans:
Payments made to defined contribution plans such as Provident Fund and
Superannuation are charged as an expense in the Statement of Profit and
Loss as they fall due.
Defined Benefit Plans:
The Company has maintained a Group Gratuity Cum Life Assurance Scheme
through a Master Policy with the Life Insurance Corporation of India
towards which annual premiums as determined by actuarial valuation are
paid and charged against revenue. Under the Gratuity plan, every
employee is entitled to the benefit equivalent to fifteen days final
salary last drawn for each completed year of service depending on the
date of joining. The same is payable on termination of services or
retirement whichever is earlier. The benefit vests after five years of
n) Provision and Contingent Liabilities:
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
in respect of which a reliable estimate of the amount of the obligation
can be made. Provisions are not discounted to its present value and are
determined based on current best estimate.
A contingent liability is a possible obligation that arrises from past
events whose existance will be confirmed by the occurance or non
occurance of one or more uncertain future events beyond the control
of the company or a present obligation that is not recognized because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability is/not recognized but its
existance is disclosed in the financial statements. s) Earnings Per
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in right issue,
share split and reverse share split (consolidation of shares) that have
changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
o) Right/terms attached to Equity Shares:
The Company has only one class of equity shares having a par value of Rs
2 per share. Each share holder is eligible for one vote per share held.
The dividend proposed by the Board of Directors is subject to the
approval of shareholders in the ensuing general meeting, except in case
of interim dividend. In the event of liquidation of the Company, the
holders of equity shares will be entitled to receive remaining assets
of the Company, after distribution of all prefrential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.