I.  COMPANYS BACKGROUND Silverline Technologies Limited
 (Silverline or the Company) is engaged in consulting and
 information technology (IT) services. It focuses on providing
 business consulting, systems integration application development and
 product engineering services.  The Company has a development center at
 Seepz, Mumbai.
 
 The development center at Seepz, Mumbai, has an established facility in
 Mumbai (SEEPZ) to deliver its software development services. This
 facility operate as an export unit within the SEEPZ premises at Mumbai.
 Seepz is an SEZ and as such the regulations as per the Government of
 India apply, and are required to export a substantial part of their
 software development services. The Company has been historically
 exporting a significant part of its software development services.
 
 II.  SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING
 
 The financial statements are prepared under the historical cost
 convention in accordance with the Indian generally accepted accounting
 principles (GAAP), applicable accounting standards issued by the
 Institute of Chartered Accountants of India (ICAI) and the provisions
 of the Companies Act, 1956
 
 USE OF ESTIMATES
 
 The preparation of financial statements in conformity with GAAP
 requires management to make estimates and assumptions that affect the
 reported amounts of assets and liabilities disclosure of contingent
 assets and liabilities at the date of financial statements and the
 reported amounts of revenues and expenses during the reporting period.
 Examples of such estimates include estimate of useful life of assets
 and future obligations under employee retirement benefit plans. Actual
 results could differ from these estimates.
 
 REVENUE RECOGNITION
 
 Revenue from software development of fixed-price contracts is
 recognized according to the milestones achieved as specified in the
 contracts on the basis of work-completion method. With respect to time
 and materials contracts, revenue is recognized proportionately over the
 period in which services are rendered. Interest is recognized using the
 time-proportion method, based on rates implicit in the transaction.
 Dividend income is recognized when the Company''s right to receive
 dividend is established.
 
 FIXED ASSETS, CAPITAL WORK-IN-PROGRESS AND DEPRECIATION
 
 Fixed assets are stated at the cost of acquisition including taxes,
 duties, freight, exchange gains/losses and other incidental expenses,
 including interest related to acquisition and installation. Capital
 work in progress includes the cost of fixed assets and amount advanced
 towards capital projects under development.
 
 The Company provides depreciation on straight-line basis at the rates
 and in the manner prescribed under schedule XIV of the companies Act,
 1956. Cost of leasehold land is amortised equally over the period of
 lease.
 
 IMPAIRMENT OF ASSETS
 
 Management evaluates at regular intervals, using external and internal
 sources whether there is any impairment of any asset.  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. Any loss on account of impairment is expensed as
 the excess of the carrying amount over the higher of the asset''s net
 sales price or present value as determined.
 
 BORROWING COSTS
 
 Borrowing costs directly attributable to the acquisition, construction
 or production of qualifying asset is capitalized as part of the cost of
 that asset. Other borrowing costs are recognized as an expense for the
 period. There is no cost on this account during the said financial
 year.
 
 LEASED ASSETS
 
 Lease rentals paid on assets acquired on lease is charged to profit and
 loss account. There are no assets on lease basis.  INVESTMENTS
 
 Investments in overseas subsidiary companies or others, are stated at
 cost (inclusive of expenses on acquisition) and classified as long term
 strategic investment. Provision for diminution in the value of
 Investments is made, if other than temporary.
 
 SHARE ISSUE EXPENSES
 
 Expenses incurred on issue of equity shares are adjusted to securities
 premium account.
 
 SOFTWARE DEVELOPMENT EXPENDITURE
 
 Cost of software that is embedded in the hardware is capitalized and
 purchase of software for development is charged to Profit and Loss
 Account.
 
 EMPLOYEE RETIREMENT BENEFITS
 
 The Company has no outstanding liability towards the employee benefits
 like gratuity as on date.
 
 TAXATION
 
 The provision for current taxation is computed in accordance with the
 relevant tax regulation. Deferred tax is recognized on timing
 differences between the accounting and the taxable income for the year
 and quantified using the tax rates and laws enacted or subsequently
 enacted as on the Balance Sheet date. Deferred tax assets are
 recognized and carried forward to the extent that there is reasonable
 certainty that sufficient future taxable income will be available
 against which such deferred tax assets can be realized in future.
 
 CONVERSION OR TRANSLATION OF FOREIGN CURRENY ITEMS
 
 (i) Transactions in foreign currency are accounted at the rate
 prevailing on the transaction date.
 
 (ii) Current assets and liabilities denominated in foreign currency are
 translated at the exchange rates prevailing at the Balance Sheet date.
 
 (iii) Exchange difference related to acquisition of fixed assets is
 adjusted to the cost of those assets.
 
 (iv) In respect of foreign current liabilities and current assets,
 translations are at the closing exchange rate. Revenue items are
 translated at the average exchange rate. Fixed Assets and depreciation
 thereon are translated at the rates prevailing at the time of their
 acquisition.
 
 DEFERRED REVENUE EXPENSES Deferred revenue expenses are written-off
 equally over a period of five years.  EARNINGS PER SHARE (EPS)
 
 The earnings considered in ascertaining the Company''s earnings per
 share comprise the net profit after tax (and includes post tax effect
 of any extraordinary items.) The number of shares used in computing
 basic earnings per share is the weighed average number of shares
 outstanding during the period. The number of shares used in computing
 diluted earnings per share comprises of the weighted average number of
 shares outstanding during the period. The number of shares used in
 computing diluted earnings per share comprises of the weighted average
 shares considered for deriving basic earning per share, and also the
 weighted average number of equity shares which could have been issued
 on conversion of all dilutive potential equity shares.
 
 SEGMENT REPORTING
 
 The Company provides comprehensive range of information technology
 services comprising software development, system solutions, application
 software system maintenance software to its customers across the
 industry. Accordingly, the Company has identified IT services as a
 single business segment, which constitutes the primary basis of
 segmental reporting, set out in financial statements. Secondary
 segments are reported based on geographical location of the customers.
 Capital expenditure relates to fixed assets purchased during the
 period.
 
 RELATED PARTY TRANSACTIONS
 
 Related party transactions are transfer of resources or obligations
 between related parties, regardless of whether a price is charged.
 Parties are considered to be related, if one party has the ability,
 directly or indirectly, to control the other party of exercise
 significant influence over the other party in making financial or
 operating decisions. Parties are considered to be related if they are
 subject to common control or common significant influence.