1 Significant Accounting Policies
a. Basis of Preparation:
The Standalone financial Statements have been prepared to comply in all material aspects with the Accounting Standars notified under Section 133 of Companies Act, 2013 as per Companies (Indian Accounting Standards (Ind AS) Rules, 2015 and other relevant provisions of the Companies Act, 2013 and rules framed thereunder. Till the year ended 31st March 2017 the finacial statement ofthe company have been prepared as perCompanies (Accounting Standards) Rules, 2006 as amended and other relevant provisions of the Companies Act, 2013 and rules framed thereunder.
b. Use of estimates:
The preparation of financial statements in conformity with I nd AS requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosures relating to contingent liabilities, at the end ofthe reporting period. Actual results could differ from these estimates and adjustments are recognised in the periods in which the results are known / materialised.
c. Property Plant and Equipment:
Under the previous GAAP (Indian GAAP), Property Plant and Equipment were recorded at cost of acquisition or construction. On transition to Ind AS, the Company has elected to continue with the carrying value measured as per previous GAAP for the balances. These values are recognized as deemed cost as at April 01, 2016.
Cost of acquisition comprises of all costs incurred to bring the assets to their location and working condition up to the date the assets are put to their intended use. Costs of construction are composed of those costs that relate directly to specific assets and those that are attributable to the construction or project activity in general and can be allocated to specific assets up to the date the assets are put to their intended use.
Depreciation on fixed assets is provided on a straight-line method over their estimated useful lives at the rates as prescribed under Schedule II ofthe Companies Act, 2013. Depreciation is charged on pro-rata basis from the date of capitalisation. Individual assets costing Rs.5,000 or less are fully depreciated in the year of acquisition.
Amortisation on softwares is provided on a straight-line method over their estimated useful lives of 3 years. Amortisation is charged on pro-rata basis from the date of capitalisation.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use ofthe asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Expenditure incurred towards development eligible for capitalization are carried as intangible assets under development where such assets are not yet ready for their intended use.
An Intangible asset is de-recognised upon disposal or when no future economic benefits are expected to arise from the continued use ofthe asset. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount ofthe asset, are recognised in profit or loss when the asset is de-recognised.
d. Impairment of assets other than financial assets:
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount but limited to the carrying amount that would have been determined (net ofdepreciation / amortization and depletion) had no impairment loss been recognised in prior accounting periods. A reversal of an impairment loss is recognised immediately in P&L.
e. Revenue Recognition:
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable.
Revenue recognition depends on the arrangements with the customer which are either on “Time and material” or on a “ fixed-price” basis. Revenue from software services performed on a “time and material” basis is recognized as and when services are performed and/or on the basis ofman-days/man hours spent as per terms of the contracts.
The Company also performs work under” fixed-price” arrangements, under which customers are billed, based on completion of specified milestones. Revenue from such arrangements is recognized over the life of the contract using the percentage of completion method. The cumulative impact of any revision in estimates ofthe percentage of work completed is reflected in the year in which the change becomes known. Provision for estimated losses on such engagements is made in the year in which such loss becomes probable and can be reasonably estimated.
Unbilled revenue represents amounts recognized based on services performed in advance of billings in accordance with contract terms and is net of estimated allowances for uncertainties and provision for estimated losses.
Revenues from Annual maintenance contracts are recognised pro-rata over the period of the contract in which the services are rendered.
Reimbursement of expenditure is recognised under revenue along with recognition of sale of service to which it relates.
Revenue is net ofvolume discounts/price incentives which are estimated and accounted for based on the terms ofthe contracts and also net ofapplicable indirect taxes.
Revenue from sale of licenses, hardware and other related items are recognized when the significant risk and rewards of ownership and title of the product is transferred to the buyer which generally coincides with acknowledgement of delivery. The value of the sale is net of taxes.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.
Divided income is recognised on right to receive the payment is established.
f. Impairment of assets:
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount but limited to the carrying amount that would have been determined (net of depreciation / amortization and depletion) had no impairment loss been recognised in prior accounting periods. A reversal of an impairment loss is recognised immediately in P&L.
g. Investments:
i) Classification -: The company classifies its financial assets at fair value (either through other comprehensive income, or through profit or loss). The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
ii) Measurement-: At initial recognition, the company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction cost that are directly attributable to the acquisition of the financial asset. Transaction cost of financial assets carried at fair value through profit or loss are expensed in profit or loss.
iii) Investments in subsidiary / Associate companies are recorded at cost and reviewed for impairment at each reporting date
h. Foreign currency transactions/translations:
i) Functional and Presentation Currency - The company’s financial statements are presented in Indian Rupee (Rs.) , which is also the company’s functional and presentation currency
ii) Transactions in foreign currencies are translated into functional currency using the exchange rate at the date of the transactions. Foreign exchange gains / loss from transaction and translation of monetary items at the end of the year are recognised in statement of profit and loss accounts.
iii) Non monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value is determined. The gain or loss on translation of non monetary items measured at fair value is recognised in Other comprehensive income or Profit and loss.
i. Retirement and other Employee benefits:
i. Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii. Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss
The Company operates the following post-employment schemes:
(a) defined benefit plans
(b) defined contribution plans Gratuity obligations
The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The net interest cost and Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised in statement of Profit & Loss account.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income.
Defined contribution plans
Provident fund contributions are recognised as employee benefit expense when they are due. j. Income Tax:
Tax expense represents the sum of Current Tax and Deferred Tax. Current and deferred tax are recognised as an expense or income in the income statement, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity.
i. Current Tax- Current Tax payable by Company is computed in accordance with the applicable tax rates and tax laws.
ii. Deferred Tax- Deferred tax is recognised on all temporary differences between the carrying amount ofAssets and Liabilities in the Financial Statements and the corresponding tax bases used in computation of Taxable profit.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset will be realized or the liability will be settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
k. Cash flow statement:
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the Company are segregated.
l. Provisions, contingent liabilities and contingent assets:
A provision is recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Contingent liabilities are not recognised butdisclosed unless the probability ofan outflow ofresources is remote. Contingent assets are not recognized but disclosed when an inflow of economic benefits is probable.
m. Borrowing costs:
Borrowing costs are expensed as incurred and any Borrowing costs attributable to the acquisition or construction of qualifying assets, as defined in Ind AS 23 on “Borrowing Costs” are capitalised as part of the cost of such asset up to the date when the asset is ready for its intended use.
Borrowing costs are expensed as incurred and any Borrowing costs attributable to the acquisition or construction of qualifying assets, as defined in Ind AS 23 on “Borrowing Costs” are capitalised as part of the cost of such asset up to the date when the asset is ready for its intended use.
n. Financial Instruments:
Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability.
i. Cash and cash equivalents- The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
ii. Financial assets at amortised cost- Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms ofthe financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
iii. Financial assets at fair value through other comprehensive income (FVTOCI)- Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows that give rise on specified dates to solely payments of principal and interest on the principal amount outstanding and by selling financial assets.
The Company has made an irrevocable election to present subsequent changes in the fair value ofequity investments not held for trading in Other Comprehensive Income.
iv.Financial assets at fair value through profit or loss (FVTPL)- Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in profit or loss.
v. Financial liabilities are measured at amortised cost using the effective interest method.
vi. Equity investments other than equity investment in subsidiaries & associates- Investments in equity instruments are classified as at FVTPL, unless the company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
vii. Equity instruments- An equity instrument is a contract that evidences residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are measured at the proceeds received net of direct issue costs.
viii. Offsetting of financial instruments- Financial assets and financial liabilities are off set and the net amount is reported in financial statements if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
ix. Impairment of Financial assets- The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
o. Segment Reporting:
The Company has only one reportable business segment, which is Software and related products. Accordingly, the amounts appearing in the standalone financial statements relate to the Company’s single business segment.
p. Earning Per Share:
The company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
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