1) Basis of Accounting
The financial statements are prepared under the historical cost
convention, on the accrual basis of accounting to comply in all
material aspects with the applicable accounting principles in India,
the applicable Accounting Standards notified under section 211(3C) of
the Companies Act, 1956 and the relevant provisions of the Companies
2) Revenue Recognition
(I) Revenue from fixed price service contracts is recognised in
proportion to the degree of completion of service by reference to and
based on milestones/acts performed as specified in the contracts and in
case of time and material service contracts, it is recognised on the
basis of hours completed and material used.
(ii) Revenue from the sale of user licenses for software applications
is recognized on transfer of the title in the user license.
(iii) Subscription revenue from data base products is recognized
proportionately over the period of subscription.
(iv) Revenue from annual maintenance contracts is recognised
proportionately over the period in which services are rendered.
(v) Revenue from Software Consultancy and Support Services is
recognized based on proportionate completion method as per specific
agreements with the customers.
Revenue in excess of billings on service contracts is recorded as
unbilled receivables and is included in trade accounts receivable.
Billings in excess of revenue that is recognised on service contracts
are recorded as deferred revenue until the above revenue recognition
criteria are met and are included in current liabilities.
Interest on investments and deposits is recognized on a time proportion
3) Borrowing Costs
Borrowing costs incurred for the acquisition of qualifying assets are
recognised as part of cost of such assets when it is considered
probable that they will result in future economic benefits to the
company while other borrowing costs are expensed in the period in which
they are incurred.
4) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Cost
includes duties, taxes and other expenses incidental to development /
acquisition and installation. In respect of internally developed
software, costs include development costs directly attributable to the
design and development of software. Intangible assets are recorded at
the consideration paid for acquisition/ development.
Operating software is capitalised along with the fixed assets.
Application software (other than those having an enduring benefit) is
expensed off on acquisition.
Intangible assets are amortized over a period of three to six years on
a straight-line basis, commencing from the date the asset is available
to the company for its use.
Fixed assets individually costing upto Rs.5,000 are depreciated at the
rate of 100% on purchase.
Long-term investments are valued at cost. Cost includes incidental
charges incurred towards acquisition of such investments. Provision
for diminution, if any, in the value of investments is made to
recognize a decline, other than temporary in nature. Current
investments are valued at lower of cost and fair value.
8) Employee Benefits
Defined Contribution Plans:
Contributions to the Employees Provident Fund are as per statute and
are recognized as expense during the period in which the employees
perform the services.
Defined Benefit Plans
Liability towards gratuity is determined on actuarial valuation using
Projected Unit Credit Method at the balance sheet date. Actuarial gains
and losses are recognized immediately in the Profit and Loss Account.
Other Long Term Employee Benefits:
Liability towards leave benefits is recognized at the present value
based on actuarial valuation at each Balance Sheet date.
Liability of earned leave, compensated absences, performance incentives
etc. are recognized during the period when the employee renders the
9) Accounting for Leases
Assets acquired under leases where the Company has substantially all
the risks and rewards of ownership are classified as finance lease.
Such leases are capitalised at the inception of the lease at lower of
the fair value or the present value of the minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period.
Assets acquired under leases where a significant portion of the risk
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the Profit and Loss
Account on accrual basis.
10) Income Tax
Current tax is determined on the basis of the Income Tax Act, 1961.
Fringe Benefit Tax is determined at current applicable rates on
expenses falling within the ambit of ‘Fringe Benefit’ as defined under
the Income Tax Act, 1961.
Deferred tax is recognised on timing differences between the accounting
income and the taxable income for the year and quantified using the tax
rates and laws enacted or substantively enacted as on the Balance Sheet
Deferred tax assets are recognised and carried forward to the extent
that there is a reasonable certainty that sufficient future taxable
income will be available against which such deferred tax asset can be
realised, except for unabsorbed depreciation and carry forward of
losses under the tax laws where deferred tax assets are recognised only
to the extent that there is virtual certainty, supported by convincing
evidence that sufficient future taxable income will be available
against which such deferred tax assets can be realised.
11) Stock based compensation
The Company measures the compensation cost relating to employee stock
options using the intrinsic value method.
The compensation cost is amortised over the vesting period of the
12) Earnings per Share
Earning (basic and diluted) per equity share is arrived at based on Net
Profit after taxation to the weighted average number of equity shares
outstanding during the year.
13) Provisions and contingencies
A Provision is recognised when the Company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Provisions are determined based on management estimate required to
settle the obligation at the balance sheet date.
Provisions are reviewed regularly and are adjusted where necessary to
reflect the current best estimates of the obligation. When the Company
expects a provision to be reimbursed, the reimbursement is recognised
as a separate asset, only when such reimbursement is virtually certain.
Liabilities which are material and whose future outcome cannot be
ascertained with reasonable certainty is treated as contingent and to
the extent not provided for are disclosed by way of notes on the
14) Impairment of assets
At each Balance Sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognized in the Profit and Loss Account to the extent the carrying
amount exceeds the recoverable amount.