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
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 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
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 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
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
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
EMPLOYEE RETIREMENT BENEFITS
The Company has no outstanding liability towards the employee benefits
like gratuity as on date.
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
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.
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
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.