a Basis of Preparation
The financial statements are prepared under the historical cost
convention, in accordance with the accounting standards and the
provisions of the Companies'' Act, 1956, as adopted consistently by the
company. All income and expenditure having a material bearing on the
financial statements are recognized on accrual basis.
The preparation of statements in conformity with accounting standards,
requires management to make estimates and assumptions that effect the
reported amounts of assets and liabilities at the date of financial
statements, and the reported amounts of revenues and expenses during
the reporting period. Examples of such expenses include provision for
doubtful debts, miscellaneous expenditure and useful lives of fixed
assets. Actual results could differ from those estimates. Any revision
to such accounting estimates is recognized in the accounting period in
which such revision takes place.
b Revenue Recognition Izmo Cars Solutions :
Revenue from fixed price software contracts are recognized principally
on the basis of completed mile-stones as specified in the contracts.
Revenue from software development and service on time basis is
recognized as per terms of specified contracts.
Enterprise Connectivity & Security :
Revenue from sale of hardware and software products is recognized on
the dispatch of goods from the company''s premises/transfer of Licenses.
Income from Maintenance Contracts is accounted for in the ratio of the
period expired to the total period of contract and the amount invoiced
from the customers towards the unexpired portion of such contracts is
treated as Deferred Revenue.
Dividend Income & Interest Income :
Dividend income is recognized when the right to receive dividend is
established and Interest income is accrued at the applicable interest
c Inventory Valuation
Trading Stock have been valued at the lower of cost or net realizable
value. Software Work-in-Progress is valued at the cost incurred on the
specific project up to the date of Balance Sheet pending achievement of
requisite mile- stone on which revenue is recognized subsequent to the
date of the Balance Sheet.
d Fixed Assets
Fixed Assets are stated at the original cost of acquisition less
depreciation. Original cost includes purchase price, levies, directly
attributable cost of bringing the assets to its working condition for
its intended use as also the capitalized portion of pre-operative
Depreciation is provided at the rates prescribed in Schedule
XIV of the Companies Act, 1956, under Written Down Value Method.
Depreciation is charged on prorata basis on the additions during the
year. Intangible assets are amortized over a period of 3-5 years.
Short Term Investments: It is re-stated at lower of the cost or Market
value as at the year end.
Subsidiary Companies: Investments held by the company are long term in
nature and are stated at cost unless there is a permanent diminution in
the value of the Investment.
g Foreign Currency Transactions
Transactions in Foreign Currency are recorded at a rate which
approximates the exchange rate prevailing on the date of the
transaction. Current Assets and Liabilities denominated in Foreign
Currency are translated at the exchange rate as at the Balance Sheet
date. The resulting net gain or loss is recognized in the Profit and
Loss Account. h Borrowing Cost Borrowing costs that are attributable
to the acquisition/ construction of fixed assets are capitalized as
part of the cost of the respective assets. Other borrowing costs are
recognized as expenses in the year in which they are incurred. i
Provision for Income-tax has been made at the current tax rates at the
higher of that on the basis of estimated assessable income or on the
basis of Section 115 J B of the Income Tax Act, 1961.
Deferred tax is recognized subject to consideration of prudence, on
timing differences being the differences between taxable income and
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. The deferred tax charge or
credit is recognized using current tax rates. Deferred tax
assets/liabilities are reviewed as at each Balance sheet date. In
terms of the Guidance note on accounting for credit available in
respect of Minimum Alternative Tax(MAT) under the Income Tax Act, 1961,
issued by the ICAI, the excess of MAT over normal current tax payable
has been recognized as an asset by way of credit to the profit & loss
account as MAT credit entitlement.
j Retirement/ Employee Benefits
In accordance with the requirements of revised Accounting Standard-15
Employee Benefits, the company provides for gratuity covering
eligible employees on the basis of actuarial valuation as carried out
by an Actuary using the Projected Unit Credit Method. The liability in
unfunded Actuarial gains or losses arising from the changes in the
actuarial assumptions are charged or credited to the Profit and Loss
account in the year in which such gains or losses arise.
Leave encashment benefits payable to the employees of the Company with
respect to accumulated leave outstanding at the year end are accounted
for on the basis of actuarial valuation using Projected Unit Credit
Method as at the Balance Sheet date. The liability is unfunded. The
Company''s contribution to employee'' Provident Fund is accounted on
Other Employee benefits are accounted for on accrual basis.
Since the attrition rate in the software industry is significant, the
company has taken the stand, as in the previous years, not to provide
for superannuation benefits to the employees . Superannuation expenses
will be charged to the Profit & Loss Account as and when it is paid.
Due to the nature of the industry, the company does not foresee
significant expenses under this head in the foreseeable future.
K Intangible Assets
Intangible assets, mainly software, are capitalized at cost. Based on
the managements estimate of useful life, the same are amortized over
3-5 years. All Intangible assets are reviewed as at the date of the
financial statements for impairment.
l Earnings per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity share holders by the
weighted average number of equity shares during the period. For the
purpose of calculating the diluted earnings per share, the net profit
or loss for the period attributable to the equity share holders and
weighted average number of shares outstanding during
the period are adjusted for the effects of all potential dilutive
m Provisions & Contingent Liabilities
The Company recognizes a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not, require an outflow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure is made. n Employee
Stock Option Plan
The Company measures the compensation cost relating to employee stock
options using the intrinsic value method. The compensation cost is
amortized over the vesting period of the option. The Number of options
expected to vest is based on the best available estimate and revised,
if necessary, if subsequent information indicates that the number of
stock options expected to vest differs from the previous estimates.