a) Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis, except for certain financial
instruments which are measured at fair value. These financial
statements have been prepared to comply in all material aspects with
the accounting standards notified under Section 211 (3C) [Companies
(Accounting Standards) Rules, 2006, as amended] and the other relevant
provisions of the Companies Act, 1956.
b) Use of estimates
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of the financial statements and
reported amounts of income and expenses during the year. Example of
such estimates include provision for doubtful debts, employee benefits,
provision for income taxes, accounting for contract costs expected to
be incurred, the useful lives of depreciable fixed assets and
provisions for impairment.
c) Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation /
amortisation. Costs include all expenses incurred to bring the asset to
its present location and condition.
Fixed assets exclude computers and other assets individually costing Rs
50,000 or less which are not capitalised except when they are part of a
larger capital investment programme.
d) Depreciation / Amortisation
Depreciation / amortisation on fixed assets, other than freehold land
and capital work-in-progress is charged so as to write-off the cost of
assets, on the following basis:
Assets leased by the Company in its capacity as lessee, where the
Company has substantially all the risks and rewards of ownership are
classified as finance lease. Such a lease is 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 recognised 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 year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor, are recognised as
operating leases. Lease rentals under operating leases are recognised
in the statement of profit and loss on a straight-line basis.
At each balance sheet date, the management reviews the carrying amounts
of its assets included in each cash generating unit to determine
whether there is any indication that those assets were impaired. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of impairment loss.
Recoverable amount is the higher of an assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows expected from the continuing use of the asset and from its
disposal are discounted to their present value using a pre-tax discount
rate that reflects the current market assessments of time value of
money and the risks specific to the asset.
Reversal of impairment loss is recognised immediately as income in the
statement of profit and loss.
Long-term investments are stated at cost, less provision for other than
temporary diminution in value. Current investments, except for current
maturities of long term investments, comprising investment in mutual
funds are stated at the lower of cost and fair value.
h) Employee benefits
(i) Post-employment benefit plans
Contributions to defined contribution retirement benefit schemes are
recognised as an expense when employees have rendered services
entitling them to contributions.
For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognised in full in the statement of profit and
loss for the period in which they occur. Past service cost is
recognised immediately to the extent that the benefits are already
vested, and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognised past service cost, and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to the present value of available refunds and reductions in
future contributions to the scheme.
(ii) Other employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employee renders the service. These benefits
include compensated absences such as paid annual leave, overseas social
security contributions and performance incentives.
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as an actuarially determined liability
at the present value of the defined benefit obligation at the balance
i) Revenue recognition
Revenues from contracts priced on a time and material basis are
recognised when services are rendered and related costs are incurred.
Revenues from turnkey contracts, which are generally time bound fixed
price contracts, are recognised over the life of the contract using the
proportionate completion method, with contract costs determining the
degree of completion. Foreseeable losses on such contracts are
recognised when probable.
Revenues from the sale of equipment are recognised upon delivery, which
is when title passes to the customer.
Revenues from sale of software licences are recognised upon delivery
where there is no customisation required. In case of customisation the
same is recognised over the life of the contract using the
proportionate completion method.
Revenues from maintenance contracts are recognised pro-rata over the
period of the contract.
Revenues from Business Process Outsourcing (BPO) services are
recognised on time and material, fixed price and unit priced contracts.
Revenue on time and material and unit priced contracts is recognised as
the related services are rendered. Revenue from fixed price contracts
is recognised as per the proportionate completion method with contract
cost determining the degree of completion.
Revenues are reported net of discounts.
Dividends are recorded when the right to receive payment is
established. Interest income is recognised on time proportion basis
taking into account the amount outstanding and the rate applicable.
Current income tax expense comprises taxes on income from operations in
India and in foreign jurisdictions. Income tax payable in India is
determined in accordance with the provisions of the Income Tax Act,
1961. Tax expense relating to foreign operations is determined in
accordance with tax laws applicable in countries where such operations
Minimum alternative tax (MAT) paid in accordance to the tax laws, which
gives rise to future economic benefits in the form of adjustment of
future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax after
the tax holiday period. Accordingly, MAT is recognised as an asset in
the balance sheet when it is probable that the future economic benefit
associated with it will flow to the Company and the asset can be
Deferred tax expense or benefit is recognised on timing differences
being the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. 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.
In the event of unabsorbed depreciation and carry forward of losses,
deferred tax assets are recognised only to the extent that there is
virtual certainty that sufficient future taxable income will be
available to realise such assets. In other situations, deferred tax
assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available to
realise these assets.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance taxes paid and income tax
provisions arising in the same tax jurisdiction and where the Company
intends to settle the asset and liability on a net basis.
The Company offsets deferred tax assets and deferred tax liabilities if
it has a legally enforceable right and these relate to taxes on income
levied by the same governing taxation laws.
k) Foreign currency transactions
Income and expenses in foreign currencies are converted at exchange
rates prevailing on the date of the transaction. Foreign currency
monetary assets and liabilities other than net investments in
non-integral foreign operations are translated at the exchange rate
prevailing on the balance sheet date and exchange gain and loss are
recognised in the statement of profit and loss. Exchange difference
arising on a monetary item that, in substance, forms part of an
enterprises net investments in a non-integral foreign operation are
accumulated in a foreign currency translation reserve.
Premium or discount on foreign exchange forward and currency option
contracts are amortised and recognised in the statement of profit and
loss over the period of the contract. Foreign exchange forward and
currency option contracts outstanding at the balance sheet date, other
than designated cash flow hedges, are stated at fair values and any
gains or losses are recognised in the statement of profit and loss.
l) Derivative instruments and hedge accounting
The Company uses foreign exchange forward and currency option contracts
to hedge its risks associated with foreign currency fluctuations
relating to certain firm commitments and forecasted transactions. The
Company designates these hedging instruments as cash flow hedges.
The use of hedging instruments is governed by the Companys policies
approved by the Board of Directors, which provide written principles on
the use of such financial derivatives consistent with the Companys
risk management strategy.
Hedging instruments are initially measured at fair value, and are
remeasured at subsequent reporting dates. Changes in the fair value of
these derivatives that are designated and effective as hedges of future
cash flows are recognised directly in shareholders funds and the
ineffective portion is recognised immediately in the statement of
profit and loss.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognised in the statement of
profit and loss as they arise.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. At that time for forecasted transactions, any cumulative
gain or loss on the hedging instrument recognised in shareholders
funds is retained there until the forecasted transaction occurs. If a
hedged transaction is no longer expected to occur, the net cumulative
gain or loss recognised in shareholders funds is transferred to the
statement of profit and loss for the period.
Raw materials, sub-assemblies and components are carried at the lower
of cost and net realisable value. Cost is determined on a weighted
average basis. Purchased goods-in-transit are carried at cost.
Work-in-progress is carried at the lower of cost and net realisable
value. Stores and spare parts are carried at cost, less provision for
obsolescence. Finished goods produced or purchased by the Company are
carried at lower of cost and net realisable value. Cost includes direct
material and labour cost and a proportion of manufacturing overheads.
n) Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions (excluding retirement benefits) are
not discounted to its present value and are determined based on best
estimate required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to reflect
the current best estimates. Contingent liabilities are not recognised
in the financial statements. A contingent asset is neither recognised
nor disclosed in the financial statements.
o) Cash and cash equivalents
The Company considers all highly liquid financial instruments, which
are readily convertible into cash and have original maturities of three
months or less from the date of purchase, to be cash equivalents.