iGATE Global Solutions

a.  Basis of preparation of financial statements
 
 The accompanying financial statements are prepared under the historical
 cost convention, following the accrual basis of accounting and in
 accordance with the standards of accounting issued by the Institute of
 Chartered Accountants of India (ICAI), the provisions of the
 Companies Act, 1956 and the guidelines issued by the Securities and
 Exchange Board of India. The following accounting policies have been
 consistently followed except where a newly issued accounting standard
 is initially adopted by the Company. All amounts are stated in Indian
 Rupees except as otherwise stated.
 
 b.  Fixed Assets
 
 Fixed assets are stated at their cost of acquisition, which includes
 direct costs attributable to bringing the assets to their present
 location and working condition for their intended use. Intangible
 assets including computer software products/ licences are stated at
 their cost of acquisition.
 
 Fittings located in premises under leave and license are amortised over
 the Remaining license period from the date of capitalisation of each
 individual asset or at the rates prescribed under Schedule XIV to the
 Companies Act, 1 956, whichever is higher.
 
 Intangible assets are amortized over their estimated useful life on a
 straight-line basis from the date of their acquisition as under:
 
 Computer software products/licenses - Lower of 2 years or license
 period.
 
 Goodwill - 10 years
 
 At the end of every financial year, the amortization period and the
 amortization method is revised if necessary, to recognize any
 significant change in the expected useful life of the asset or the
 expected economic benefits from the asset or any impairment loss.
 
 d.  Capital Work-in-progress
 
 Advances paid towards acquisition of fixed assets, direct costs and
 related incidental expenses incurred on assets that are not yet ready
 for their intended use or not put to use as on the balance sheet date
 are stated as Capital Work-in-progress.
 
 e.  Investments
 
 Investments are classified into current investments and long-term
 investments. Current investments are stated at lower of cost and fair
 value. Long term investments, being strategic in nature, are stated at
 cost unless in the opinion of the management, there is a decline, other
 than temporary, in the value thereof in which case the recorded value
 is reduced to recognize the decline.
 
 Cost of investments in overseas subsidiaries comprises the
 consideration paid for the investment translated in rupee terms.
 
 f.  Foreign currency transactions and translations
 
 Foreign currency transactions are recorded at the rates of exchange in
 force on the dates of transactions.  Monetary items denominated in
 foreign currencies are stated in the Balance Sheet at year-end rates.
 Non- monetary items denominated in foreign currencies are stated at the
 exchange rate prevailing on the date of transaction. Differences
 between year-end rates and original rates are accounted for, as
 exchange loss/gain and dealt with in the profit and loss account.
 
 Financial statements of foreign branches are translated into Indian
 Rupees as follows:
 
 Revenues and expenses are translated into rupees at the month-end
 exchange rates.
 
 Depreciation/Amortization is translated at the rates used for the
 translation of the cost of the respective fixed assets and software
 products/licences.
 
 Monetary items comprising cash, receivables, loans and advances and
 payables are translated using the rate as at the Balance Sheet date.
 
 Non-monetary items comprising fixed assets and software
 products/licenses are translated using the exchange rate at the date of
 the transaction.
 
 The net exchange difference resulting from the translation of items in
 the financial statements of the foreign branches is recognised as
 income or expense.
 
 g.  Forward exchange contracts
 
 As part of its exchange risk management policy, the Company enters into
 forward contracts to hedge its foreign currency exposures.
 
 Forward exchange contracts taken to hedge the foreign currency risk
 other than on account of firm commitments and / or highly probable
 forecast transactions, are translated at the exchange rate prevailing
 on the reporting date. The exchange difference on such translation is
 recognised in the profit and loss account of the relevant period. The
 premium or discount arising at the inception of such forward exchange
 contracts is amortised as expense or income over the life of the
 contract.
 
 In case of forward exchange contracts to hedge the foreign currency
 risk on account of firm commitments or highly probable forecast
 transactions, the gains or losses on cancellation or renewal of such
 forward exchange contracts and the premium or discount arising at the
 inception of such forward exchange contracts is recognized as income or
 expense in the period in which the transaction occurs
 
 h.  Revenue Recognition
 
 The contracts between the Company and its customers are either time and
 material contracts, fixed price contracts or other contracts like
 transaction fees, monthly commitment etc., with amounts to be billed
 upon completion of agreed milestones or application maintenance
 outsourcing contracts with amounts to be billed periodically.
 
 (i) Time and material contracts 
 
 Revenues from time and material services are recognized as the
 respective services are provided.
 
 (ii) Fixed price, milestone based contracts
 
 Revenue from fixed-price development contracts are recognized using the
 percentage of completion method, under which the contract performance
 is determined by relating the actual work performed to date to the
 estimated total work for each contract. Any anticipated losses expected
 upon contract completion are recognized immediately. Changes in job
 performance, conditions and estimated profitability may result in
 revisions and corresponding revenues and costs are retognized in the
 period in which the changes are identified
 
 (iii) Other Contracts
 
 Revenue from contracts with amounts to be billed on monthly basis is
 recognized on rendering of services as per the terms of the contracts.
 Revenue from unit priced contracts is recognized on rendering of the
 services as per the terms of the contracts.
 
 Unbilled receivables represent amounts recognized as revenues for the
 periods presented based on services performed in accordance with the
 terms of contracts that will be billed in subsequent periods. Deferred
 revenue represents amounts billed in excess of revenue earned for which
 related services are expected to be performed in the next operating
 cycle.
 
 i.  Leave encashment
 
 Liability for leave encashment of employees, in accordance with the
 rules of the Company, is accrued for the un-availed encashable leave
 balance standing to the credit of employees as at the balance sheet
 date, supported by actuarial valuation for India-based employees.
 
 j.  Employment obligation
 
 (i) Provident Fund is a defined contribution scheme and the
 contributions are charged to the Profit & Loss Account of the year when
 the contributions to the fund is due.
 
 (ii) Gratuity Liability is defined benefit obligation and is provided
 for on the basis of an actuarial valuation made at the end of each
 financial year. Pension liability is defined contribution scheme and
 the contributions are charged to the Profit and Loss Account of the
 year when the contributions to the fund is accrued.
 
 (iii) Employment benefits, includes retirement benefits in respect of
 employees at foreign branches are accrued based on the statutes of the
 respective countries.
 
 (iv) Actuarial gains/losses are immediately taken to the Profit and
 Loss Account and are not deferred.
 
 k.  Taxes on income
 
 Taxes on income is computed using the tax effect accounting method
 whereby such taxes are accrued in the same period as the revenue and
 expense to which they relate.
 
 Current tax liability is measured using the applicable tax rates and
 tax laws and the necessary provision is made annually. Deferred tax
 asset/liability arising out of the tax effect of timing differences is
 measured using the tax rates and the tax laws that have been
 enacted/substantially enacted at the balance sheet date.
 
 Deferred tax assets are recognized only if there is a reasonable
 certainty of their realization. However, where the deferred tax asset
 arises on account of unabsorbed depreciation or carried forward loss,
 these are recognized only if there is virtual certainty of realization.
 
 I.  Earnings per Share
 
 In determining basic earnings per share, the Company considers the net
 profit after tax and includes the post- tax effect of any
 extra-ordinary items. The number of shares used in computing basic
 earnings per share is the weighted average number of shares outstanding
 during the period The number of shares used in computing diluted
 earnings per share comprises the weighted average shares considered for
 deriving basic earnings per share, and also the weighted average number
 of equity shares which could have been issued on the conversion of all
 dilutive potential equity shares. The diluted potential equity shares
 are adjusted for the proceeds receivable, had the shares been actually
 issued at fair value (i.e. the average market value of the outstanding
 shares),Dilutive potential equity shares are deemed converted as of the
 beginning of the period, unless issued at a later date.
 
 m.  Segmental reporting
 
 The Companys operations predominantly relate to providing Information
 Technology (IT) services, Contact Center services and IT Enabled
 services, delivered to customers globally across the geographies, the
 work being performed onsite and offshore. Accordingly, revenues
 represented along various geographies based on the location of the
 customer comprise the primary basis of segmental information set out in
 these financial statements with the offshore revenues allocated to the
 geographies based on the location of the customers.
 
 Income and expenses in relation to segments is categorized based on
 items that are individually identifiable to that segment, while the
 remainder of the costs are separately disclosed as unallocable and
 directly charged against total income.
 
 n.  Employees Stock Option Plan
 
 In accordance with the SEBI (Employee Stock Option Scheme and Employee
 Stock Purchase Scheme) Guidelines, 1 999 as amended on June 30, 2003,
 the excess of the market price of the underlying equity shares as on
 the date of grant of the options over the exercise price of the option
 is charged as ESOP compensation cost to the profit and loss account on
 a straight line basis over the vesting period. The aggregate discount
 on options granted net of the aggregate unamortized balance of ESOP
 compensation cost is disclosed under shareholders equity.