The development center at Seepz, Mumbai, has an established facility in Mumbai (SEEPZ) to deliver its software development services. This facility operate as an export unit within the SEEPZ premises at Mumbai. Seepz is an SEZ and as such the regulations as per the Government of India apply, and are required to export a substantial part of their software development services. The Company has been historically exporting a significant part of its software development services.

II. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING

The financial statements are prepared under the historical cost convention in accordance with the Indian generally accepted accounting principles (GAAP), applicable accounting standards issued by the Institute of Chartered Accountants of India (ICAI) and the provisions of the Companies Act, 1956

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include estimate of useful life of assets and future obligations under employee retirement benefit plans. Actual results could differ from these estimates.

REVENUE RECOGNITION

Revenue from software development of fixed-price contracts is recognized according to the milestones achieved as specified in the contracts on the basis of work-completion method. With respect to time and materials contracts, revenue is recognized proportionately over the period in which services are rendered. Interest is recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the Company's right to receive dividend is established.

FIXED ASSETS, CAPITAL WORK-IN-PROGRESS AND DEPRECIATION

Fixed assets are stated at the cost of acquisition including taxes, duties, freight, exchange gains/losses and other incidental expenses, including interest related to acquisition and installation. Capital work in progress includes the cost of fixed assets and amount advanced towards capital projects under development.

The Company provides depreciation on straight-line basis at the rates and in the manner prescribed under schedule XIV of the companies Act, 1956. Cost of leasehold land is amortised equally over the period of lease.

IMPAIRMENT OF ASSETS

Management evaluates at regular intervals, using external and internal sources whether there is any impairment of any asset. Impairment occurs where the carrying value exceeds the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. Any loss on account of impairment is expensed as the excess of the carrying amount over the higher of the asset's net sales price or present value as determined.

BORROWING COSTS

Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset is capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense for the period. There is no cost on this account during the said financial year.

LEASED ASSETS

Lease rentals paid on assets acquired on lease is charged to profit and loss account. There are no assets on lease basis. INVESTMENTS

Investments in overseas subsidiary companies or others, are stated at cost (inclusive of expenses on acquisition) and classified as long term strategic investment. Provision for diminution in the value of Investments is made, if other than temporary.

SHARE ISSUE EXPENSES

Expenses incurred on issue of equity shares are adjusted to securities premium account.

SOFTWARE DEVELOPMENT EXPENDITURE

Cost of software that is embedded in the hardware is capitalized and purchase of software for development is charged to Profit and Loss Account.

EMPLOYEE RETIREMENT BENEFITS

The Company has no outstanding liability towards the employee benefits like gratuity as on date.

TAXATION

The provision for current taxation is computed in accordance with the relevant tax regulation. Deferred tax is recognized on timing differences between the accounting and the taxable income for the year and quantified using the tax rates and laws enacted or subsequently enacted as on the Balance Sheet date. Deferred tax assets are recognized and carried forward to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized in future.

CONVERSION OR TRANSLATION OF FOREIGN CURRENY ITEMS

(i) Transactions in foreign currency are accounted at the rate prevailing on the transaction date.

(ii) Current assets and liabilities denominated in foreign currency are translated at the exchange rates prevailing at the Balance Sheet date.

(iii) Exchange difference related to acquisition of fixed assets is adjusted to the cost of those assets.

(iv) In respect of foreign current liabilities and current assets, translations are at the closing exchange rate. Revenue items are translated at the average exchange rate. Fixed Assets and depreciation thereon are translated at the rates prevailing at the time of their acquisition.

DEFERRED REVENUE EXPENSES Deferred revenue expenses are written-off equally over a period of five years. EARNINGS PER SHARE (EPS)

The earnings considered in ascertaining the Company's earnings per share comprise the net profit after tax (and includes post tax effect of any extraordinary items.) The number of shares used in computing basic earnings per share is the weighed average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises of the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises of the weighted average shares considered for deriving basic earning per share, and also the weighted average number of equity shares which could have been issued on conversion of all dilutive potential equity shares.

SEGMENT REPORTING

The Company provides comprehensive range of information technology services comprising software development, system solutions, application software system maintenance software to its customers across the industry. Accordingly, the Company has identified IT services as a single business segment, which constitutes the primary basis of segmental reporting, set out in financial statements. Secondary segments are reported based on geographical location of the customers. Capital expenditure relates to fixed assets purchased during the period.

RELATED PARTY TRANSACTIONS

Related party transactions are transfer of resources or obligations between related parties, regardless of whether a price is charged. Parties are considered to be related, if one party has the ability, directly or indirectly, to control the other party of exercise significant influence over the other party in making financial or operating decisions. Parties are considered to be related if they are subject to common control or common significant influence.