(a) Basis for preparation of accounts:
The accompanying financial statements have been prepared to comply in
all material aspects with generally accepted accounting principles
applicable in India, the Accounting Standards and the relevant
provisions of the Companies Act, 1956.
(b) Use of Estimates:
The preparation of financial statements, in conformity with the
generally accepted accounting principles, requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenues and expenses during the reported period.
Differences between the actual results and estimates are recognised in
the period in which the results are known / materialised.
(c) Fixed Assets including intangible assets:
Fixed assets are stated at cost less accumulated depreciation. Costs
comprise of purchase price and attributable costs, if any.
Assets taken on lease are accounted for as fixed assets in accordance
with Accounting Standard 19 on Leases, (AS 19).
(i) Finance lease
Where the Company, as a lessor, leases assets under finance leases
such amounts are recognized as receivables at an amount equal to the
net investment in the lease and the finance income is based on
constant rate of return on the outstanding net investment.
Assets taken on finance lease are accounted for as fixed assets at
fair value. Lease payments are apportioned between finance charge and
reduction of outstanding liability.
(ii) Operating lease
Lease arrangements under which all risks and rewards of ownership are
effectively retained by the lessor are classifi ed as operating lease.
Lease rental under operating lease are recognised in Statement of Profi
t and Loss on straight line basis.
(e) Depreciation / amortization of fixed assets:
(ii) Leasehold land is amortised over the period of lease.
(iii) Leasehold improvements are amortised over the period of lease or
expected period of occupancy whichever is less.
(iv) Intellectual property rights are amortised over a period of seven
(v) Assets costing upto Rs. 5,000 are fully depreciated in the year of
(vi) The cost of software purchased for internal use is capitalized and
depreciated in full in the month in which it is put to use.
(f) Impairment of Assets:
At the end of each period, the Company determines whether a provision
should be made for impairment loss on assets by considering the
indications that an impairment loss may have occurred in accordance
with Accounting Standard 28 on ''''Impairment of Assets''''. Where the
recoverable amount of any asset is lower than its carrying amount, a
provision for impairment loss on assets is made for the difference.
Recoverable amount is the higher of an asset''s net selling price and
value in use. In assessing value in use, the estimated future cash fl
ows 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 refl ects the current market assessments of time value of money
and the risks specific to the asset.
Reversal of impairment loss if any is recognised immediately as income
in the Statement of Profit and Loss.
Long term investments are carried at cost. Provision is made to
recognise a decline other than temporary in the carrying amount of long
Current investments are carried at lower of cost and fair value.
Components and parts:
Components and parts are valued at lower of cost and net realizable
value. Cost is determined on First-In-First Out basis.
Valued at the lower of the cost or net realisable value. Cost is
determined on First-In-First Out basis.
(i) Revenue recognition:
Revenue from software services and business process outsourcing
services include revenue earned from services rendered on ''time and
material'' basis, time bound fixed price engagements and system
All revenues from services, as rendered, are recognised when persuasive
evidence of an arrangement exists, the sale price is fixed or
determinable and collectability is reasonably assured and are reported
net of sales incentives, discounts based on the terms of the contract
and applicable indirect taxes.
The Company also performs time bound fixed price engagements, under
which revenue is recognized using the proportionate completion method
of accounting, unless work completed cannot be reasonably estimated.
Provision for estimated losses, if any on uncompleted contracts are
recorded in the period in which such losses become probable based on
the current contract estimates.
The cumulative impact of any revision in estimates of the percentage of
work completed is reflected in the year in which the change becomes
Liquidated damages and penalties are accounted as per the contract
terms wherever there is a delayed delivery attributable to the Company
and when there is a reasonable certainty with which the same can be
Revenues from the sale of software and hardware products are recognised
upon delivery/deemed delivery, which is when title passes to the
customer, along with risk and rewards.
Unbilled revenues comprise revenues recognised in relation to efforts
incurred, not billed as of the period end, where services are performed
in accordance with agreed terms.
The Company recognizes unearned finance income as fi nancing revenue
over the lease term using the effective interest method.
Dividend income is recognized when the Company''s right to receive
dividend is established. Interest income is recognized on time
(j) (a) F oreign currency transactions:
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items are translated at
the period end rates. The exchange difference between the rate
prevailing on the date of transaction and on the date of settlement as
also on translation of monetary items at the end of the period is
recognised as income or expense, as the case may be.
Any premium or discount arising at the inception of the forward
exchange contract is recognized as income or expense over the life of
the contract, except in the case where the contract is designated as a
cash fl ow hedge.
(b) Derivative instruments and hedge accounting:
The Company uses foreign currency forward contracts / options to hedge
its risks associated with foreign currency fluctuations relating to
certain forecasted transactions. Effective April 1st 2007 the Company
designates some of these as cash fl ow hedges applying the recognition
and measurement principles set out in the Accounting Standard 30
Financial Instruments: Recognition and Measurements(AS 30).
The use of foreign currency forward contracts/options is governed by
the Company''s policies approved by the Board of Directors, which
provide written principles on the use of such financial derivatives
consistent with the Company''s risk management strategy. The counter
party to the Company''s foreign currency forward contracts is generally
a bank. The Company does not use derivative financial instruments for
speculative purposes. Foreign currency forward contract/ option
derivative instruments are initially measured at fair value and are
re-measured at subsequent reporting dates. Changes in the fair value of
these derivatives that are designated and effective as hedges of future
cash fl ows are recognized directly in reserves and the ineffective
portion is recognized immediately in Statement of Profit and Loss.
The accumulated gains and losses on the derivatives in reserves are
transferred to Statement of Profit and Loss in the same period in
which gains or losses on the item hedged are recognized in Statement of
Profit and Loss.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognized 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. When hedge accounting is discontinued for a cash fl ow
hedge, the net gain or loss will remain in reserves and be reclassifi
ed to Statement of Profit and Loss in the same period or periods
during which the formerly hedged transaction is reported in Statement
of Profit and Loss. If a hedged transaction is no longer expected to
occur, the net cumulative gain or loss recognized in reserves is
transferred to Statement of Profit and Loss (k) Employee Retirement
benefits: (a) Gratuity:
The Company accounts for its gratuity liability, a defi ned retirement
benefit plan covering eligible employees. The gratuity plan provides
for a lump sum payment to employees at retirement, death,
incapacitation or termination of the employment based on the respective
employee''s salary and the tenure of the employment. Liabilities with
regard to a Gratuity plan are determined based on the actuarial
valuation carried out by an independent actuary as at the Balance Sheet
date using the Projected Unit Credit method.
Actuarial gains and losses are recognised in full in the Statement of
Profit and Loss in the year in which they occur. (Refer note 29 below)
(b) Provident fund:
The eligible employees of the Company are entitled to receive the
benefits of Provident fund, a defi ned contribution plan, in which
both employees and the Company make monthly contributions at a specifi
ed percentage of the covered employees'' salary (currently at 12% of the
basic salary) and super annuation contributions, which are charged to
the Statement of Profit and Loss on accrual basis. The provident fund
contributions are paid to the Regional Provident Fund Commissioner by
The Company has no further obligations for future provident fund and
superannuation fund benefits other than its annual contributions.
(c) Compensated absences:
The Company provides for the encashment of leave subject to certain
Company''s rules. The employees are entitled to accumulate leave subject
to certain limits, for future encashment or availment. The liability is
provided based on the number of days of unavailed leave at each balance
sheet date on the basis of an independent actuarial valuation using the
Projected Unit Credit method.
Actuarial gains and losses are recognised in full in the Statement of
Profit and Loss in the year in which they occur.
The Company also offers a short term benefit in the form of encashment
of unavailed accumulated leave above certain limit for all of its
employees and same is being provided for in the books at actual cost.
(d) Other short term employee benefits:
Other short-term employee benefits, including overseas social security
contributions and performance incentives expected to be paid in
exchange for the services rendered by employees, are recognised during
the period when the employee renders the service.
(l) Borrowing costs:
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are charged to revenue.
Tax expense comprises of current tax and deferred tax. Current tax is
measured at the amount expected to be paid to/recovered from the tax
authorities, based on estimated tax liability computed after taking
credit for allowances and exemption in accordance with the local tax
laws existing in the respective countries.
Minimum Alternative Tax (MAT) paid in accordance with 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 tax after the tax
holiday period. Accordingly, it is recognized as an asset in the
Balance Sheet when it is probable that the future economic benefit
associated with it will fl ow to the Company and the asset can be
Deferred tax assets and liabilities are recognised for future tax
consequences attributable to timing differences between taxable income
and accounting income that are capable of reversal in one or more
subsequent years and are measured using relevant enacted tax rates. The
carrying amount of deferred tax assets at each Balance Sheet date is
reduced to the extent that it is no longer reasonably certain that
sufficient future taxable income will be available against which the
deferred tax asset can be realized.
Tax on distributed Profits payable in accordance with the provisions
of the Income-Tax Act, 1961 is disclosed in accordance with the
Guidance Note on Accounting for Corporate Dividend Tax issued by the
(n) Employee Stock Option Plans:
Stock options granted to the employees are accounted as per the
accounting treatment prescribed by the Employee Stock Option Scheme and
Employee Stock Purchase Scheme Guidelines, 1999 (ESOP Guidelines)
issued by Securities and Exchange Board of India (SEBI) and the
Guidance Note on Accounting for Employee Share-based Payments, issued
by the ICAI. Employees eligible for Employee Stock Option Plan 2010 are
granted an option to purchase shares of TML at predetermined exercise
price. These options vest over a period of three years from the date of
grant. The stock compensation cost is computed under the intrinsic
value method and amortised on a straight line basis over the total
vesting period of three years.
(o) Provision, Contingent Liabilities and Contingent Assets:
Provision is recognised, when the Company has a present obligation as a
result of arising out of past events and it becomes probable that any
outfl ow of resources embodying economic benefits will be required to
settle the obligation, in respect of which a reliable estimate can be
Contingent liabilities are not recognised in the financial statement.
A Contingent asset is neither recognised nor disclosed in Financial