Basis of preparation
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting, unless
stated otherwise and comply with the mandatory Accounting Standards
(''AS'') prescribed in the Companies (Accounting Standards) Rules, 2006
(as amended) and other pronouncements of the Institute of Chartered
Accountants of India (''ICAI'') and the related provisions of the
Companies Act 1956. The accounting policies adopted in the preparation
of financial statements are consistent with those of the previous year
except for the changes explained below.
Use of estimates
The preparation of financial statements requires the management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities on
the date of the financial statements and the reported amounts of
revenues and expenses for the year. Actual results could differ from
those estimates. Any revision to accounting estimates is recognized
prospectively in current and future years.
Change in accounting policies and estimates
a. Presentation and disclosure of financial statements
During the year ended 31 October 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 preparation of financial statements. However it
has significant impact on presentation and disclosures made in them.
The Company has also reclassified the previous year''s figures in
accordance with the requirements applicable in the current year.
b. Provision for aged receivables
During the year, the Company has revised the basis of estimation of
providing for aged receivables. Had the Company continued the earlier
basis, the receivables would have been lower by Rs. 350.15 millions and
profit for the year ended 31 October 2012 would have been lower by Rs.
The Company derives its revenues primarily from software services &
projects, call centre & business process outsourcing operations,
infrastructure outsourcing services, licensing arrangement, application
services and trading of goods.
Revenues from software services & projects comprise income from
time-and-material and fixed price contracts. Revenue from time and
material contracts is recognized when the services are rendered in
accordance with the terms of contracts with clients. Revenue from fixed
price contracts is recognized using the percentage-of-completion
method, calculated as the proportion of the cost of effort incurred up
to the reporting date to estimated cost of total effort.
Revenues from call centre & business process outsourcing operations
arise from both time-based and unit-priced client contracts. Such
revenue is recognized when the services are rendered in accordance with
the terms of the contracts with clients.
Revenues from infrastructure outsourcing services arise from
time-based, unit-priced and fixed price contracts. Revenue from time
based and unit-priced is recognized when the services are rendered in
accordance with the terms of the contracts with clients. Revenue from
fixed price contracts is recognized using the percentage-of-completion
method, calculated as the proportion of the cost of effort incurred up
to the reporting date to estimated cost of total effort.
Revenue from licensing arrangements is recognized on transfer of the
title in user licenses, except those contracts where transfer of title
is dependent upon rendering of significant implementation services by
the Company, in which case revenue is recognized over the
implementation period in accordance with the specific terms of the
contracts with clients.
Maintenance revenue is recognized rateably over the period of
underlying maintenance agreements.
Revenue from sale of goods is recognized on transfer of significant
risks and rewards in accordance with the terms of contract. Revenue is
shown as net of sales tax, value added tax and applicable discounts.
Provisions for estimated losses on incomplete contracts are recorded in
the period in which such losses become probable based on the current
contract estimates. ''Unbilled revenues'' included in the current
assets represent revenues in excess of amounts billed to clients as at
the balance sheet date. ''Unearned receivables'' included in the
current liabilities represent billings in excess of revenues
Advances received for services are reported as liabilities until all
conditions for revenue recognition are met.
Interest on the deployment of surplus funds is recognized using the
time-proportion method, based on underlying interest rates. Dividend
income is recognized when the right to receive the dividend is
Fixed assets and capital work-in-progress
Fixed assets are stated at the cost of acquisition or construction less
accumulated depreciation and write down for impairment if any. Direct
costs are capitalised until the assets are ready to be put to use.
Borrowing costs directly attributable to acquisition or construction of
those fixed assets which necessarily take a substantial period of time
to get ready for their intended use, are capitalised. Fixed assets
purchased in foreign currency are recorded at cost, based on the
exchange rate on the date of purchase.
Acquired intangible assets are capitalised at the acquisition price.
Internally generated intangible assets are stated at cost that can be
measured reliably during the development phase and capitalised when it
is probable that future economic benefits that are attributable to the
asset will flow to the Company.
Leases under which the Company assumes substantially all the risks and
rewards of ownership are classified as finance leases. Such assets
acquired are capitalised at the fair value of the asset or the present
value of the minimum lease payments at the inception of the lease,
whichever is lower.
Cost of assets not ready for use at the balance sheet date are
disclosed under capital work- in- progress.
Depreciation and amortization
Depreciation on fixed assets is provided using the straight-line method
over the estimated useful lives of assets. Depreciation is charged on a
proportionate basis for all assets purchased and sold during the year.
Individual assets costing less than '' 5,000 are depreciated in full
in the year of purchase. The estimated useful lives of assets are as
Assets used for Unique Identification (UID) services have been
depreciated over a period of 2 years.
Freehold land is not depreciated. Leasehold improvements are amortized
over the remaining lease term or 3 years (5 years for call centre
services), whichever is shorter. Significant purchased application
software and internally generated software that is an integral part of
the Company''s computer systems and expected to provide lasting
benefits, is capitalised at cost and amortized on the straight-line
method over its estimated useful life or 3 years, whichever is shorter.
Internally generated software for sale expected to provide lasting
benefits is amortized on the straight-line method over its estimated
life or 7 years, whichever is shorter.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased items, are classified as
Where the Company is lessee, operating lease payments are recognized as
an expense in the statement of profit and loss on a straight-line basis
over the lease term.
Where the Company is lessor, lease income is recognized in the
statement of profit and loss on straight-line basis over the lease
term. Costs are recognized as an expense in the statement of profit
and loss. Initial direct costs such as legal costs, brokerage costs
etc, are recognized immediately in the statement of profit and loss.
Profit or loss on sale and lease back arrangements resulting in
operating leases are recognized immediately in case the transaction is
established at fair value, else, the excess over the fair value is
deferred and amortized over the period for which the asset is expected
to be used. If the sale price is below fair value, any profit or loss
is recognized immediately in the statement of profit and loss.
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that a fixed asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using the pre-tax discount
rate that reflects current market assessments of the time value of
money and risks specific to the assets. If such recoverable amount of
the asset or the recoverable amount of the cash generating unit to
which the asset belongs is less than its carrying amount, the carrying
amount is reduced to its recoverable amount. The reduction is treated
as an impairment loss and is recognized in the statement of profit and
loss. If at the balance sheet date there is an indication that a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the recoverable
amount subject to a maximum of depreciated historical cost.
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. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis.
Long-term investments are carried at cost. Provision for diminution in
the value of investments is made if the impairment is not temporary in
Gratuity which is a defined benefit is accrued based on an independent
actuarial valuation, which is done based on project unit credit method
as at the balance sheet date. Actuarial gains/losses are immediately
taken to the statement of profit and loss and are not deferred.
The cost of short term compensated absences are provided for based on
estimates. Long term compensated absence costs are provided for based
on actuarial valuation using the project unit credit method. The
company presents the entire leave as a current liability in the balance
sheet, since it does not have an unconditional right to defer its
settlement for 12 months after the reporting date.
Contributions payable to recognized provident funds, which are defined
contribution schemes, are charged to the statement of profit and loss.
The Company''s liability is limited to the contribution made to the
Stock-based compensation (Equity settled)
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the intrinsic value
method except for RSU plan 2010 and RSU plan 2011 and Employees Stock
Option Plan - 2012 wherein compensation cost is measured based on fair
valuation. Compensation expense is amortized over the vesting period of
the option on a straight line basis.
Foreign exchange transactions are recorded at the rates of exchange
prevailing on the dates of the respective transactions. Exchange
differences arising on foreign exchange transactions settled during the
year are recognized in the statement of profit and loss of that year.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the exchange rates on that
date. The resultant exchange differences are recognized in the
statement of profit and loss. Non-monetary items which are carried in
terms of historical cost denominated in foreign currency are reported
using the exchange rate at the date of the transaction.
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
Forward contracts are entered into, to hedge the foreign currency risk
of the underlying outstanding at the balance sheet date and also to
hedge the foreign currency risk of firm commitment or highly probable
forecast transactions. The premium or discount on forward contracts
that are entered into, to hedge the foreign currency risk of the
underlying outstanding at the balance sheet date arising at the
inception of each contract is amortized as income or expense over the
life of the contract. Any profit or loss arising on the cancellation or
renewal of forward contracts is recognized as income or as expense for
In relation to the forward contracts entered into, to hedge the foreign
currency risk of the underlying outstanding at the balance sheet date,
the exchange difference is calculated and recorded in accordance with
paragraphs 36 and 37 of AS 11. The exchange difference on such a
forward exchange contract is calculated as the difference between the
foreign currency amount of the contract translated at the exchange rate
at the reporting date or the settlement date where the transaction is
settled during the reporting year, and the corresponding foreign
currency amount translated at the later of the date of inception of the
forward exchange contract and the last reporting date. Such exchange
differences are recognized in the statement of profit and loss in the
reporting period in which the exchange rates change.
The Company has adopted the principles of AS 30 Financial
Instruments: Recognition and Measurement in respect of its
derivative financial instruments (excluding embedded derivative) that
are not covered by AS 11 The Effects of Changes in Foreign Exchange
Rates and that relate to a firm commitment or a highly probable
forecast transaction. In accordance with AS 30, such derivative
financial instruments, which qualify for cash flow hedge accounting and
where the Company has met all the conditions of AS 30, are fair valued
at the balance sheet date and the resultant gain / loss is credited /
debited to the hedging reserve included in the Reserves and Surplus.
This gain / loss is recorded in the statement of profit and loss when
the underlying transactions affect earnings. Other derivative
instruments that relate to a firm commitment or a highly probable
forecast transaction and that do not qualify for hedge accounting, have
been recorded at fair value at the reporting date and the resultant
gain / loss has been credited / debited to the statement of profit and
loss for the year.
The current charge for income taxes is calculated in accordance with
the relevant tax regulations. Minimum Alternative Tax (''MAT'') paid in
accordance with the tax laws, which gives rise to future economic
benefits in the form of adjustments of future income tax li- ability,
is considered as an asset if there is convincing evidence that the
Company will pay normal tax after the tax holiday period. MAT credit
entitlement can be carried forward and utilised for a period as
specified in the tax laws of the respective countries.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to timing differences that result between
taxable profits and accounting profits. Deferred tax in respect of
timing differences which originate during the tax holiday period but
reverse after the tax holiday period, is recognized in the period in
which the timing differences originate. For this purpose the timing
difference which originates first is considered to reverse first.
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. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the period that includes the
enactment date. Deferred tax assets on timing differences are
recognized only if there is a reasonable certainty that sufficient
future taxable income will be available against which such deferred tax
assets can be realised. However, deferred tax assets on the timing
differences when unabsorbed depreciation and losses carried forward
exist, are recognized only to the extent that there is virtual
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. Deferred tax
assets are reassessed for the appropriateness of their respective
carrying values at each balance sheet date.
Provisions and contingent liabilities
A provision is recognized when an enterprise has a present obligation
as result of past event and it is probable that an outflow of resources
will be required to settle a reliably estimable obligation. Provisions
are not discounted to present value and are determined based on best
estimate required to settle each obligation at each balance sheet date.
Provisions for onerous contracts, i.e. contracts where the expected
unavoidable costs of meeting obligations under a contract exceed the
economic benefits expected to be received, are recognized when it is
probable that an outflow of resources embodying economic benefits will
be required to settle a present obligation as a result of an obligating
event, based on a reliable estimate of such obligation. Provisions are
not discounted to their present value and are determined based on best
estimate required to settle the obligation at each balance sheet date.
Earnings per share
The basic earnings per share is computed by dividing the net profit
attributable to equity shareholders for the year by the weighted
average number of equity shares outstanding during the year. 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 could be
issued on the conversion of all dilutive potential equity shares.
Dilutive potential equity shares are deemed converted as of the
beginning of the year, unless they have been issued at a later date.
The diluted potential equity shares have been arrived at, assuming that
the proceeds receivable were based on shares having been issued at the
average market value of the outstanding shares. In computing dilutive
earnings per share, only potential equity shares that are dilutive and
that would, if issued, either reduce future earnings per share or
increase loss per share, are included.
Inventory comprises of traded goods and is measured at lower of cost
and net realisable value. Cost includes direct materials and related
direct expenses. Cost is determined on a weighted average basis. Net
realisable value is the estimated selling price in the ordinary course
of business, less estimated cost necessary to make the sale.
Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.