Note 2: Summary of Material Accounting Policy
Information
This note provides a list of material accounting policies adopted
in the preparation of these standalone financial statements. These
policies have been consistently applied to all the years presented,
unless otherwise stated:
a. Basis of preparation
These standalone financial statements of the Company
have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian
Accounting Standards) Rules, 2015 (as amended from time to
time) and presentation requirements of Division II of Schedule
III to the Companies Act, 2013, (Ind AS compliant Schedule
III). These standalone financial statements are presented in
Indian rupees, and all values are rounded to the nearest lakh,
except when otherwise indicated.
b. Historical Cost Convention
These standalone financial statements have been prepared
on the historical cost basis, except for the following items:
- Certain financial assets and liabilities measured at fair
value;
- Defined benefits plans - plan assets measured at fair
value; and
- Share based payments
c. Current and non-current classification
All assets and liabilities have been classified as current
or non-current as per Company's operating cycle and
other criteria set out in the Schedule III (Division II) to the
Companies Act, 2013 as amended from time to time. The
Company has ascertained its operating cycle as 12 months
for the purpose of current or non-current classification of
assets and liabilities.
d. Amendment in Accounting standards adopted by the company
The Ministry of Corporate Affairs has notified Companies
(Indian Accounting Standards) Amendment Rules, 2024
dated August 12, 2024, to introduce Ind AS 117 “Insurance
Contracts”, replacing the existing Ind AS 104 “Insurance
Contracts” and Companies (Indian Accounting Standards)
Second Amendment Rules, 2024 dated September 09, 2024,
to amend Ind AS 116.
These amendments are effective for annual reporting periods
beginning on or after April 01, 2024. The Company has applied
these amendments for the first-time.
(i) Introduction of Ind AS 117:
Insurance Contracts Ind AS 117 Insurance Contracts is a
comprehensive new accounting standard for insurance
contracts covering recognition and measurement,
presentation and disclosure. Ind AS 117 applies to all types
of insurance contracts, regardless of the type of entities that
issue them as well as to certain guarantees and financial
instruments with discretionary participation features.
The amendment has no impact on the Company's financial
statements.
(ii) Lease Liability in a Sale and Leaseback - Amendments to Ind
AS 116:
The amendment specifies the requirements that a seller-
lessee uses in measuring the lease liability arising in a sale
and leaseback transaction to ensure the seller-lessee does
not recognize any amount of the gain or loss that relates to
the right of use asset it retains.
The amendment is effective for annual reporting periods
beginning on or after April 01, 2024 and must be applied
retrospectively to sale and leaseback transactions entered
into after the date of initial application of Ind AS 116.
The amendment has no significant impact on the Company's
financial statements.
e. Property, plant and equipment
All items of property, plant and equipment are carried at cost
less accumulated depreciation / amortisation and impairment
losses, if any. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount
or recognised as a separate asset, as appropriate, only when
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. The carrying amount of any component
accounted for as a separate asset is derecognised when
replaced. All other repairs and maintenance are charged to
the statement of profit and loss during the reporting period in
which they are incurred.
Advances paid towards the acquisition of property, plant
and equipment outstanding at each balance sheet date is
classified as capital advances under the non-current assets.
Depreciation methods, estimated useful lives and residual
value
Depreciation is recognised so as to write off the cost of assets
less their residual values over the useful lives, using the
straight line method. The useful lives have been determined
based on technical evaluation perfomed by the management
which in some cases are different as compared to those
specified by Schedule II to the Companies Act, 2013, in order
to reflect the actual usage of the assets.
The residual value of the assets are assessed to be nil. The
assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately
to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the
statement of profit and loss.
* For these class of assets, based on internal assessment, the
management believes that the useful lives as given above
best represents the period over which the management
expects to use these assets. Hence, useful lives of these
assets are different from the useful lives as prescribed under
Part C of Schedule II of the Companies Act, 2013.
f. Intangible assets
Intangible assets are stated at acquisition cost, net of
accumulated amortisation and accumulated impairment
losses, if any. Intangible assets are amortised on a straight
line basis over their estimated useful lives. The amortisation
period and the amortisation method are reviewed at least
at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortisation period is changed accordingly. Gains or losses
arising from the retirement or disposal of an intangible asset
are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and recognised
as income or expense in the Statement of Profit and Loss.
The Company has software licenses under intangible assets
which are amortised over a period of 3 years.
g. Impairment of non-financial assets
For all non-financial assets, the Company assesses whether
there are indicators of impairment. If such an indicator exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss, if any. Where the
asset does not generate cash flows that are independent from
other assets, the Company estimates the recoverable amount
of the cash-generating unit (CGU) to which the asset belongs.
The recoverable amount for an asset or CGU is the higher
of its value in use and fair value less costs of disposal. If the
recoverable amount of an asset or CGU is estimated to be
less than its carrying amount, the asset or CGU is considered
impaired and the carrying amount of the asset or CGU is
reduced to its recoverable amount. An impairment loss is
recognised immediately in the statement of profit and loss.
In assessing value in use, the estimated future cash flows
of the asset or CGU are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the asset. In determining fair value less costs of disposal,
recent market transactions are taken into account.
If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated
by valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed
budgets and forecast calculations. These budgets and forecast
calculations generally cover a period of five years. For longer
periods, a long-term growth rate is calculated and applied to
project future cash flows after the fifth year. To estimate cash
flow projections beyond periods covered by the most recent
budgets/forecasts, the Company extrapolates cash flow
projections in the budget using a steady or declining growth
rate for subsequent years, unless an increasing rate can be
justified. In any case, this growth rate does not exceed the
long-term average growth rate for the products, industries,
or country or countries in which the entity operates, or for the
market in which the asset is used.
An assessment is made at each reporting date to determine
whether there is an indication that previously recognised
impairment losses no longer exist or have decreased. If
such indication exists, the Company estimates the asset's
or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change
in the assumptions used to determine the asset's or CGU's
recoverable amount since the last impairment loss was
recognised. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount,
nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is
recognised in the statement of profit and loss.
i. Revenue recognition
Revenue is measured based on the consideration specified in
a contract with a customer. The Company recognises revenue
as follows:
Sale of services
The Company earns revenue from services as described
below:
1) IT support services - includes services related to IT
application and solutions
Revenue from above services (other than IT support
services) is recognized at a point in time when the related
services are rendered as per the terms of the agreement with
customer. Revenue from IT Support Services is recognised
over time. Revenue is disclosed net of the Goods and Service
tax charged on such services. In terms of the contract,
excess of revenue over the billed at the year-end is carried
in the balance sheet as unbilled trade receivables as the
amount is recoverable from the customer without any future
performance obligation. Cash received before the services
are delivered is recognised as a contract liability, if any.
Revenue from above services is recognized in the accounting
period in which the services are rendered. When there is
uncertainty as to measurement or ultimate collectability,
revenue recognition is postponed until such uncertainty is
resolved.
No significant element of financing is deemed present as the
services are rendered with a credit term of 30-45 days, which
is consistent with market practice.
Intellectual Property Rights (IPR) Fees
Income from IPR fees is recognised on an accrual basis in
accordance with the substance of the relevant agreements.
refer note 28.
i. Trade receivables
Trade receivables are amounts due from customers for
services performed in the ordinary course of business.
Trade receivables are recognised initially at the amount of
consideration that is unconditional. The Company holds
the trade receivables with the objective of collecting the
contractual cash flows and therefore measures them
subsequently at amortised cost, less loss allowance.
j. Foreign currency transactions
Functional and presentation currency
Items included in the standalone financial statements of the
Company are measured using the currency of the primary
economic environment in which the Company operates ('the
functional currency') i.e. Indian rupee (INR), which is PB
Fintech Limited's functional and presentation currency.
Transactions and balances
Initial recognition: On initial recognition, all foreign currency
transactions are recorded by applying to the foreign currency
amount the spot exchange rate between the functional
currency and the foreign currency at the date of the
transactions.
Subsequent recognition: As at the reporting date, foreign
currency monetary items are translated using the closing
rate and non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction.
Exchange gains and losses arising on the settlement of
monetary items or on translating monetary items at rates
different from those at which they were translated on
initial recognition during the year or in previous financial
statements are recognised in the statement of profit and loss
in the year in which they arise.
k. Employee benefits
Employee benefits include Provident Fund,
Employee State Insurance scheme, Gratuity,
Compensated absences and Share based payments.
i) Defined contribution plans
The Company's contributions to Provident Fund and
Employee State Insurance scheme are considered as
contribution to defined contribution plan and charged
as an expense based on the amount of contributions
required to be made as and when services are rendered
by the employees.
ii) Defined benefits plans
For defined benefits plans in the form of gratuity, the
cost of providing benefits is determined using the
Projected Unit Credit method, with actuarial valuations
being carried out at each balance sheet date. Re¬
measurement, comprising actuarial gains and losses,
the effect of the changes to the asset ceiling and the
return on plan asset, is reflected immediately in the
balance sheet with a charge or credit recognized in other
comprehensive income in the period in which they occur.
Re-measurement recognized in other comprehensive
income is reflected immediately in retained earnings
and is not reclassified to the statement of profit and loss.
Past service cost is recognized in profit and loss in the
period of a plan amendment. Net interest is calculated
by applying the discount rate at the beginning of the
period to the net defined liability or asset.
iii) Short-term obligations
The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the services
rendered by employees are recognised during the year
when the employees render the services.
These benefits include performance incentive and
compensated absences which are expected to occur
within twelve months after the end of the period in
which the employee renders the related service.
The cost of short-term compensated absences is
accounted as under:
a. in case of accumulated compensated absences,
when employees render the services that increase
their entitlement of future compensated absences;
b. in case of non-accumulating compensated
absences, when the absences occur.
iv) Other long-term employee benefits obligations
The liabilities for compensated absences 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
the statement of profit and loss.
The obligations in relation to compensated absences
are presented as current liabilities in the balance
sheet as the Company does not have an unconditional
right to defer settlement for at least 12 months after
the reporting period, regardless of when the actual
settlement is expected to occur.
v) Share-based payments
The Company operates a number of equity settled,
employee share based compensation plans, under
which the Company receives services from employees
as consideration for equity shares of the Company. The
Company has granted stock options to its employees
and employees of its subsidiaries.
The fair value of the employees services received in
exchange for the grant of the options is determined
by reference to the fair value of the options as at the
grant date and is recognised as an 'employee benefits
expense' with a corresponding increase in other equity.
The total expense is recognised over the vesting period
which is the period over which the applicable vesting
condition is to be satisfied. The total amount to be
expensed is determined by reference to the fair value
of the options granted:
1. including any market performance conditions (e.g.,
the entity's share price)
2. excluding the impact of any service and non-market
performance vesting conditions, and
3. including the impact of any non-vesting conditions
At the end of each period, the entity revises its estimates
of the number of options that are expected to vest based
on the non-market vesting and service conditions.
It recognises the impact of the revision to original
estimates, if any, in the statement of profit and loss, with
a corresponding adjustment to other equity.
The expense relating to options granted to the
employees of subsidiaries is cross charged to the
subsidiaries w.e.f. October 01,2024. Therefore, the fair
value of the employees' services received by these
subsidiaries (determined by reference to the fair value
of the options as at the grant date) is recognised as
an 'receivable from subsidiaries' with a corresponding
increase in other equity.
l. Treasury shares (Shares held by the ESOP Trust)
The Company has created an Etechaces Employee Stock
Option Plan Trust (ESOP Trust) for providing share-based
payment to its employees under Employee Stock Option
Plan 2014 (“ESOP- 2014”) and Employee Stock Option Plan
2020 (“ESOP - 2020”). The Company uses Trust as a vehicle
for transferring shares to employees under the employee
remuneration schemes. The Company allots shares to ESOP
Trust. The Company in its standalone financial statements
treats ESOP trust as its extension and shares held by ESOP
Trust are treated as treasury shares. Share options exercised
during the reporting year are settled with treasury shares.
m. Leases
Company as a lessee:
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset
is available for use by the Company. Contracts may contain
both lease and non-lease components.
Lease liabilities:
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the future lease payments.
The lease payments include fixed payments (including
in substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on an index
or a rate and amounts expected to be paid under residual
value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to
be exercised by the Company and payments of penalties for
terminating the lease, if the lease term reflects the Company
exercising the option to terminate. Variable lease payments
that do not depend on an index or a rate are recognised as
expenses in the period in which the event or condition that
triggers the payment occurs. Lease payments to be made
under reasonably certain extension options are also included
in the measurement of the liability.
The lease payments are discounted using the lessee's
incremental borrowing rate. Lease payments are allocated
between principal and finance cost.
The finance cost is charged to the statement of profit and loss
over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for
each period.
Right-of-use assets:
Right-of-use assets are measured at cost comprising the
amount of the initial measurement of lease liability and lease
payments made before the commencement date.
Right-of-use assets are depreciated over the asset's lease
term on a straight-line basis. Right-of-use assets are
measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the
amount of lease liabilities recognised, and lease payments
made at or before the commencement date less any lease
incentives received.
Short term leases and leases of low value assets:
Payments associated with short-term leases of equipment,
and all leases of low-value assets are recognised on a
straight-line basis as an expense in the statement of profit
and loss. Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise small items of
office equipment including IT equipment.
n. Earnings per share (EPS)
Basic earnings per share are computed by dividing the
profit after tax by the weighted average number of equity
shares outstanding during the year excluding treasury
shares. Diluted earnings per share is computed by dividing
the profit after tax as adjusted for dividend, interest and
other charges to expense or income relating to the dilutive
potential equity shares, by the weighted average number
of equity shares considered for deriving basic earnings per
share and the weighted average number of equity shares
which could have been issued on the conversion of all
dilutive potential equity shares, except where results are
anti-dilutive.
o. Cash and cash equivalents
For the purpose of presentation in the statement of cash
flows, cash and cash equivalents includes cash on hand, other
short term, highly liquid investments with original maturities
of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk
of change in value.
p. Trade Payables
These amounts represent liabilities for goods and services
provided to the Company prior to the end of the financial
year which are unpaid. The amounts are unsecured and
are usually paid within 30 days of recognition. Trade and
other payables are presented as current liabilities unless
payment is not due within 12 months after the reporting
period. They are recognised initially at their fair value
and subsequently measured at amortised cost using the
effective interest method.
q. Income Taxes
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based on the
applicable income tax rate adjusted by changes in deferred
tax assets and liabilities attributable to temporary differences
and to unused tax losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is recognised on temporary differences
arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements. Deferred
tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are generally
recognised for all deductible temporary differences and
unused tax losses to the extent that is probable that tax
profits will be available against which those deductible
temporary differences can be utilized.
Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to
offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Current and deferred tax is recognised in the statement of
profit and loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
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