2.1 Basis of preparation of standalone financial statements
Compliance with Ind AS: These financial statements have been prepared to comply, in all material aspects,
with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the
‘Act'), read with Companies (Indian Accounting Standards) Rules, 2015 and the relevant provisions of the Act.
Basis of preparation and presenation
These financial statements have been prepared on a historical cost convention and on an accrual basis of
accounting, except for certan finacial instruments and defined benefit plans which are measured at fair
valueat the end of each reporting period,as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
All assets and liabilities have been classified as current and non-current as per the Company's normal
operating cycle. Based on the nature of services rendered to customers and time elapsed between
deployment of resources and the realisation in cash and cash equivalents of the consideration for such
services rendered, the Company has considered an operating cycle of 12 months The statement of cash flows
have been prepared under the indirect method. All amounts included in the financial statements are reported
in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the
numbers presented throughout the document may not add up precisely to the totals and percentages may
not precisely reflect the absolute figures.
2. 2 Use of Estimate and Judgement
The preparation of the financial statements in conformity with Ind AS requires the Management to make
estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application
of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets
and liabilities at the date of the financial statements and reported amounts of revenues and expenses during
the period. The application of accounting policies that require critical accounting estimates involving complex
and subjective judgments and the use of assumptions in these financial statements have been disclosed.
Accounting estimates could change from period to period. Actual results could differ from those estimates.
Appropriate changes in estimates are made as management becomes aware of changes in circumstances
surrounding the estimates. Changes in estimates and judgments are reflected in the financial statements
in the period in which changes are made and, if material, their effects are disclosed in the notes to the
Standalone financial statements.
2. 3 Business combinations and goodwil
Business combinations are accounted for using the acquisition method. The cost of an acquisition is the
aggregate of the consideration transferred measured at fair value at the acquisition date. Acquisition
related costs are expensed as incurred.
Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition
date. Contingent consideration classified as financial liability is measured at fair value with changes in fair
value recognized in the statement of profit and loss.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and
any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of
the net assets acquired is in excess of the aggregate consideration transferred, the excess is recognized as
capital reserve after reassessing the fair values of the net assets.
Business Combination under common control are accounted under “the pooling of interest method” i.e. in
accor dance with Appendix C in Ind AS 103 Business combinations, at carrying amount of assets and liabilities
acquired and any excess of consideration issued over the net assets acquired is recognised as
capital reserve on common control business combination.
2. 4 The Effects of Changes in Foreign Exchange Rates
(i) Initial recognition
Transactions in foreign currencies entered into by the company are accounted at the exchange rates
prevailing on the date of transaction or at rates that closely approximate the rate at the date of the
transaction.
(ii) Measurement of monetary items denominated in foreign currency at the Balance Sheet date
Monetary items denominated in foreign currency (other than those related to acquisition of property
plant and equipment) of the Company outstanding at the Balance Sheet date are restated at the
year-end rates. Non monetary foreign currency items are carried at cost.
(iii) Treatment of exchange differences
Exchange differences arising on foreign currency transactions settled during the year are recognised in
the State ment of profit and loss. The translation differences on monetary assets and liabilities
denominated in foreign currencies are recognized in the Statement of profit and loss. Non-monetary
assets and liabilities are recorded at the rates prevailing on the date of the transaction. Transactions
with fixed Rupee exposure are not revalued at the balance sheet date as the Company's exposure is
fixed in INR terms
The Company records certain financial assets and liabilities at fair value on a recurring basis. The Company
determines fair values based on the price it would receive to sell an asset or pay to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or most
advantageous market for that asset or liability.
The Company holds certain fixed income securities, equity securities, which must be measured using
the guidance for fair value hierarchy and related valuation methodologies. The guidance specifies a
hierarchy of valuation techniques based on whether the inputs to each measurement are observable or
unobservable. Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Company's assumptions about current market conditions. The fair value
hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The prescribed fair value hierarchy and related
valuation methodologies are as follows:
Level 1 - Quoted inputs that reflect quoted prices (unadjusted) for identical assets or liabilities
in active markets.
Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active and model derived valuations, in which all significant inputs are
directly or indirectly observable in active markets.
Level 3 - Valuations derived from valuation techniques, in which one or more significant inputs are
unobservable inputs which are supported by little or no market activity.
In accordance with Ind AS 113, assets and liabilities at fair value are measured based on the following
valuation techniques:
(a) Market approach - Prices and other relevant information generated by market transactions involving
dentical or comparable assets or liabilities.
(b) Income approach - Converting the future amounts based on market expectations to its present
value using the discounting method.
(c) Cost approach - Replacement cost method.
Certain assets are measured at fair value on a non-recurring basis. These assets consist primarily of
non-financial assets such as goodwill and intangible assets. Goodwill and intangible assets recognized
in business combinations are measured at fair value initially and subsequently when there is an indicator
of impairment, the impairment is recognized.
A fair value measurement of a non-financial asset takes into account a market participant's ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant who would use the asset in its highest and best use.
2. 6 Revenue Recognition
1. The Company derives from information technology services, staffing and related services. These include
revenue earned from services rendered on ‘time and material' basis, time bound fixed price engagements
and fixed price development contracts.
(i) Revenue is recognized upon transfer of control of promised products or services to customers in an
amount that reflects the consideration the Company expect to receive in exchange for those products or
services. Revenue is measured based on transaction price, which is the consideration, net of indirect taxes,
discounts, rebates, credits, price concessions, incentives, performance bonus, penalties, or other similar item.
2. (i) Fixed-price maintenance revenue is recognized ratably on a straight-line basis when services are
performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price
maintenance contract is recognized ratably using a percentage-of-completion method when the pattern of
benefits from the services rendered to the customer and Company's costs to fulfil the contract is not even
through the period of the contract because the services are generally discrete in nature and not repetitive.
The use of method to recognize the maintenance revenues requires judgment and is based on the promises
in the contract and nature of the deliverables.
3. Revenue with respect to time-and-material, volume based and transaction based contracts is recognized
as the related services are performed through efforts expended, volume serviced transactions are
processed etc. that correspond with value transferred to customer till date which is related to the right to
invoice for services performed.
4. (i) Contracts assets are recognised when there is excess of revenue earned over billings on contracts.
Contract assets are classified as unbilled revenue for time and material and fixed price maintenance contracts,
when there is unconditional right to receive cash, and only passage of time is required, as per contractual
terms. Invoicing to the clients for other fixed-price contracts is based on milestones as defined in the contract
and, therefore, the timing of revenue recognition is different from the timing of invoicing to the customers.
The right to consideration in such cases depends on completion of contractual milestones.
(ii) Contract liability (“Unearned revenue”) arises when there are billing in excess of revenue.
2. 7 Interest Income
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.
2. 8 Income Tax
Income tax expense comprises current and deferred income tax.
Income tax expense is recognized in the statement of profit and loss except to the extent that it relates to
items recognized directly in equity, in which case it is recognized in equity. Current income tax for current and
prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using
the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Provision for income tax includes the impact of provisions established for uncertain income tax positions.
Tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognized amounts,
and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
Deferred income tax assets and liabilities recognized for all temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax
assets and liabilities are recognized for those temporary differences which originate during the tax holiday
period and are reversed after the tax holiday period. For this purpose, reversal of timing differences is
determined using first-in-first-out method.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized. Deferred income tax assets and liabilities are measured
using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and
are expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
2. 9 Property, plant and equipment
At costs less accumulated depreciation (other than freehold land) and impairment loss, if any.
The cost includes purchase price net of any trade discounts and rebates, any import duties and other taxes
(other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on
making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable
to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. The cost of an
item of property, plant and equipment shall be recognised as an asset if, and only if it is probable that future
economic benefits associated with the item will flow to the Company and the cost of the item can be
measured reliably. Subsequent expenditure on fixed assets after its purchase/completion is capitalized only
if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed
standard of performance.
Derecognisation
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use. Gains or losses arising from de¬
recognition of property, plant and equipment and intangible assets are measured as the difference between
the net disposal proceeds and the carrying amount of property, plant and equipment and are recognized in
the statement of profit and loss when the property, plant and equipment is derecognized.
Life of Assets
(ii) Depreciation/Amortisation:
Depreciation is provided on straight-line basis for property, plant and equipment so as to expense the
depreciable amount, i.e. the costless estimated residual value, over its estimated useful lives. The estimated
useful lives and residual values are reviewed annually and the effect of any changes in estimate is accounted
for on a prospective basis.
(iii) Derecognition:
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss on derecognition of an item of property, plant and
equip ment is measured as the difference between the net disposal proceeds and the carrying amount of the
item and is recognised in the statement of profit or loss in the year the asset is derecognised.
2. 10 Intangible Assets
Intangible assets purchased are measured at cost as of the date of acquisition, as applicable, less
accumulated amortization and accumulated impairment, if any. Intangible assets are amortized on a straight
line basis over their estimated useful lives from the date that they are available for use. The estimated usefu
lives of the intangible assets and the amortization period are reviewed at the end of each financial year and
the amortization period is revised to reflect the changed pattern, if any.
The estimated useful life on a straightline basis of amortization is mentioned below:
Type of Asset Useful Life
Softtware 3 Year
2. 11 Borrowing Cost
Borrowing costs, general or specific, that are directly attributable to the acquisition or construction of
qualifying assets is capitalized as part of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other borrowing costs are charged to the
Statement of Profit and Loss.
The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing
costs incurred on that borrowing during the year less any interest income earned on temporary investment
of specific bor rowings pending their expenditure on qualifying assets, to the extent that an entity borrows
funds specifically for the purpose of obtaining a qualifying asset. In case if the Company borrows generally
and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined
by applying a capitalisation rate to the expenditures on that asset.
Borrowing cost includes exchange differences arising from foreign currency borrowings to the extent they
are regard ed as an adjustment to the finance cost.
2.12 Lease
The Group evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116 and
this may require significant judgment. The Group also uses significant judgement in assessing the lease
term (including anticipated renewals) and the applicable discount rate.
The Group determines the lease term as the non-cancellable period of a lease, together with both
periods covered by an option to extend or terminate the lease if the Group is reasonably certain based
on relevant facts and circumstances that the option to extend or terminate will be exercised. If there is
a change in facts and circumstances, the expected lease term is revised accordingly.
The discount rate is generally based on the interest rate specific to the lease being evaluated or if that
cannot be easily determined the incremental borrowing rate for similar term is used.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases
that have a lease term of 12 months or less and leases of low-value assets. The Group recognises the
lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Company As Lessor
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of
the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease
are added to the carrying amount of the leased asset and recognized over the lease term on the same
basis as rental income. Contingent rents are recognized as revenue in the year in which they are earned
or contingency is resolved.
Leases in which the Company transfers substantially all the risk and benefits of ownership of the asset
are classified as finance leases. Assets given under finance lease are recognized as a receivables at an
amount equal to the present value of lease receivables. After initial recognition, the Company apportions
lease rentals between the principal repayment and interest income so as to achieve a constant periodic
rate of return on the net investment outstanding in respect of the finance leases.
The interest income is recognized in the statement of profit and loss. Initial direct costs such as legal cost,
brokerage cost etc. are recognized immediately in the statement of profit and loss.
2. 13 Impairment of Non Financial Assets
Goodwill
Goodwill is tested annually on March 31, for impairment, or sooner whenever there is an indication that
goodwill may be impaired, relying on a number of factors including operating results, business plans and
future cash flows. For the purpose of impairment testing, goodwill acquired in a business combination is
allocated to the Company's cash generating units (CGU) expected to benefit from the synergies arising from
the business combination. A CGU is the smallest identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when
the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU.
The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value
in-use is the present value of future cash flows expected to be derived from the CGU. Total impairment loss
of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the
other assets of the CGU, pro-rata on the basis of the carrying amount of each asset in the CGU.
An impairment loss on goodwill recognized in the statement of profit and loss is not reversed in the
subsequent period
Intangible assets and property, plant and equipment.
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of
impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in¬
use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely
independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to
which the asset belongs. Impairment, if any, is measured by the amount by which the carrying value of the
asset exceeds the estimated recoverable amount of the asset. Subsequently if there is a change in the
estimates used to determine the recoverable amount, the impairment loss is reversed. Such reversal is made
only to the extent that the asset's carrying amount does not exceed the carrying amount that would have
been determined on the date of reversal, if no impairment loss had been recognized. Such impairment and
any subsequent reversal is recognized under the head "Depreciation and amortization expense” in the
statement of profit and loss.
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