A) Basis of preparation
The financial statements are prepared under the historical cost
convention in accordance with Generally Accepted Accounting Principles
(GAAP), and materially comply with the mandatory accounting standards
notified under Section 211(3C) [(Companies (Accounting Standards)
Rules, 2006, as amended] and other relevant provisions of the Companies
Act, 1956. All income and expenditure having a material bearing on the
financial statements are recognized on the accrual basis.
B) Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported balances of assets and liabilities, disclosure related to
contingent liabilities as at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Examples of such estimates include estimates of expected
contract costs to be incurred to complete software development,
provision for doubtful debts, and the useful life of fixed assets.
Actual results could differ from these estimates.
C) Revenue recognition
Revenue from fixed-price contracts is recognized principally on the
basis of completed milestones as specified in the contracts, on a
percentage of completion basis. Where milestones are not representative
of the percentage of completion method, estimates of work completed to
the Balance Sheet date are used to recognize revenue on fixed-price
contracts. Revenue from software developed on a time-and-materials
basis is recognized as per the terms of specific contracts.
D) Fixed Assets
Fixed assets are stated at the cost of acquisition or construction,
less accumulated depreciation. Direct costs are capitalized until the
assets are ready to be put to use.
Depreciation on fixed assets is provided using the straight-line method
at the rates specified in the Schedule XIV of the Companies Act, 1956.
It is charged on a pro-rata basis for assets purchased/sold during the
year. Individual assets costing Rs. 5,000/- or less are depreciated in
full in the year of purchase.
The Company assesses at each Balance Sheet date whether there is any
indication that any asset may be impaired and if such indication
exists, the carrying value of such asset is reduced to its recoverable
amount and a provision is made for such impairment loss in the profit
and loss account.
G) Foreign Currency Transactions
Foreign currency transactions during the period are recorded at the
exchange rates prevailing on the date of the transaction. Foreign
currency denominated assets and liabilities are translated into rupees
at the rates of exchange prevailing at the date of the balance sheet.
All exchange differences are dealt with in the statement of profit and
loss, except for those relating to the acquisition of fixed assets,
which are adjusted in the cost of the fixed assets.
H) Borrowing Cost
Borrowing cost attributable to the acquisition of fixed assets is
included in the cost of asset. The balance borrowing cost is charged to
Long Term Investments are stated at cost. Other investments are stated
at the lower of cost or market value. Any decline, other than
temporary in the value of long term investments (including investments
in subsidiaries) is charged to the Profit & Loss Account.
J) Income Tax
Current Income tax is computed using the tax effect accounting method,
where taxes are accrued in the same period the related revenue and
expenses arise. Deferred tax asset or liability is recorded for the
timing differences. The Deferred tax asset or liability is recognized
using the tax rates that have been enacted or substantively enacted by
the Balance Sheet date.
K) Export Benefits
The Company accounts for export benefit entitlements under the Duty
Entitlement Pass Book Scheme of Government of India, on accrual basis.
L) Contingent Liabilities
Contingent Liabilities as defined in Accounting Standard-29 are
disclosed by way of notes to accounts.
M) Current / Non Current
All assets and liabilities are presented as Current or Non Current as
per Company''s normal operating cycle and other criteria set out in the
Revised Schedule VI of the Companies Act, 1956. Based on the nature of
products and the time of acquisition of assets and their realisation,
the Company has ascertained its operating cycle as 12 months for the
purpose of Current / Non Current classification of assets and