2. Significant Accounting Policies
A) Basis of Preparation of Standalone Financial Statement
These standalone financial statements are prepared in accordance with Indian Generally Accepted
Accounting Principles (Indian GAAP) under the historical cost convention on the accrual basis. Indian
GAAP comprises mandatory accounting standards as prescribed under Section 133 of the
Companies Act, 2013 ('the Act') read together with rules made thereunder. In accordance with
proviso to the Rule 4(A) of the Companies (Accounts) Rules, 2014, the term used in these standalone
financial statements are in accordance with the definition and other requirements specified in
applicable accounting standards. The accounting policies adopted in the preparation of standalone
financial statements have been consistently applied.
All assets and liabilities have been classified as current or non-current as per the company's normal
operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on
the nature of operations and time difference between the provision of services and realization of
cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the
purpose of current and non-current classification of assets and liabilities.
The Company follows the mercantile system of accounting, recognizing income and expenditure on
accrual basis. The accounts are prepared on historical cost basis and as a going concern. Accounting
policies not referred to specifically otherwise, are consistent with the generally accepted accounting
principles.
Amounts in the financial statements are rounded off to nearest lakhs.
B) Use of Estimates
The preparation of standalone financial statements is in conformity with Indian GAAP requires
judgements, estimates and assumptions to be made that affect the reported amount of assets and
liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Although these estimates are based
on the management's best knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a material adjustment to the
carrying amounts of assets or liabilities in future periods.
C) Accounting Convention
The following significant accounting policies are adopted in the preparation and presentation of
these standalone financial statements:
i) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to
the Company and the revenue can be reliably measured.
Revenue from sale of services is recognized when invoices are raised after the contract
conditions are satisfied and as per the terms of agreement with the customers and the
milestones achieved under the agreement. The company collects Goods and Service Tax (GST)
and other taxes on behalf of the government and, therefore, these are not economic benefits
flowing to the company. Hence, they are excluded from revenue.
Revenues from maintenance contracts are recognized pro-rata over the period of the contract
as and when services are rendered. The company collects GST on behalf of the government and,
therefore, it is not an economic benefit flowing to the company. Hence, it is excluded from
revenue.
Interest income is recognized on a time proportion basis taking into account the amount
outstanding and the applicable interest rate. Interest income is included under the head "other
income" in the statement of profit and loss.
Dividends from investments in subsidiaries will be recognized as income in the income statement
when the right to receive payment is established.
Interest on income tax refund is recognised as other income in the year in which such interest is
received.
Accounts Written Back: Liabilities or provisions no longer required are written back and
recognised in the Statement of Profit and Loss under 'Other Income'. Such reversals are
recognised only when there is certainty that the obligation no longer exists or that the risk
requiring provision has ceased to exist.
Profit or loss arising from the sale of mutual fund units is recognised as capital gain or capital
loss in the Statement of Profit and Loss under 'Other Income' or 'Other Expenses', as applicable.
The capital gain is determined as the difference between the net sale proceeds and the carrying
amount of the investment at the time of sale.
ii) Property, Plant & Equipment and Intangible Assets
I) Property, Plant & Equipments
a) Property, Plant and Equipments are stated as per Cost Model i.e., at cost less accumulated
depreciation and impairment, if any;
b) The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly
attributable cost of bringing the asset to its working condition for the intended use and initial
estimate of decommissioning, restoring and similar liabilities. Any trade discounts and
rebates are deducted in arriving at the purchase price.
c) Subsequent expenditures relating to Property, Plant and Equipments are capitalized only
when it is probable that future economic benefits associated with these will flow to the
Company and the cost of the item can be measured reliably. Repairs & maintenance costs
are recognized in the Statement of profit & Loss as and when incurred;
d) The cost and related accumulated depreciation are eliminated from the standalone financial
statements upon sale or retirement of the asset and the resultant gains or losses are
recognized in the Statement of Profit or Loss. Assets to be disposed of are reported at the
lower of the carrying value or the fair value less cost to sell;
e) Depreciation on Property, Plant and Equipments is provided to the extent of depreciable
amount on Written Down Value (WDV) Method in such a manner so that the cost of asset
(Net of realizable value) will be amortized over their estimated remaining useful life on SLM
basis as per the useful life prescribed under Schedule II to the Companies Act 2013.
All Property, Plant and Equipments assets individually costing Rs. 5,000/- or less are fully
depreciated in the year of installation/purchase.
f) Depreciation methods, useful lives, and residual values are reviewed periodically at each
financial year end.
II) Intangible Assets
Intangible assets are identifiable non-monetary assets without physical substance,
controlled by the company, and from which future economic benefits are expected to flow.
This policy is prepared in accordance with the AS-26 'Intangible Assets' as notified under
section 133 of the Companies Act, 2013 and will be consistently applied throughout the
organization.
a) Recognition: Intangible Assets are recognized based on the below mentioned policies:
A. Internally Generated Intangible assets will be recognized on the balance sheet when all
of the following criteria are met:
i) Identifiability: The intangible asset is capable of being separated or divided from the
company and sold, transferred, licensed, rented, or exchanged, either individually or
together with a related contract, asset, or liability.
ii) Control: The company has the power to obtain future economic benefits from the
intangible asset, either through its use or by granting others the right to use it.
iii) Probable Future Economic Benefits: It is probable that the future economic benefits
associated with the intangible asset will flow to the company.
iv) Reliable Measurement: The cost or fair value of the intangible asset can be measured
reliably.
B. Intangible assets acquired separately from other assets will be initially measured at cost,
which includes the purchase price, directly attributable acquisition costs, and any other costs
necessary to bring the asset to its intended use.
Intangible assets acquired through a business combination will be measured at cost less
accumulated amortization and impairment value, if any on the acquisition date. Fair value
reflects the price that would be received to sell the asset in an orderly transaction between
market participants at the acquisition date.
b) Subsequent Measurement: After initial recognition, intangible assets will be carried at cost
less accumulated amortization and accumulated impairment losses i.e cost Model.
Subsequent expenditures relating to Intangible assets are capitalized only when it is probable
that future economic benefits associated with these will flow to the Company and the cost
of the item can be measured reliably.
c) Amortization: Amortization is the systematic allocation of the cost of an intangible asset
with a finite useful life over its expected useful life. The amortization method used will reflect
the pattern in which the asset's economic benefits are consumed or utilized.
Intangible assets with an indefinite useful life, such as certain brands or trademarks, will not
be amortized but will be subject to an annual impairment review. If there has been a
significant change in the expected pattern of economic benefits from the asset, the
amortization method is changed to reflect the changed pattern. Such changes are accounted
for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes
in Accounting Policies.
d) Derecognition: Intangible assets will be derecognized from the balance sheet when they
are disposed of, or when no future economic benefits are expected from their use or
disposal. Any gain or loss arising from the derecognition of an intangible asset will be
recognized in the income statement.
iii) Impairment of Assets
The Management periodically assesses, using external and internal sources, whether there
is an indication that an asset may be impaired. An impairment loss is recognized wherever
the carrying value of an asset exceeds its recoverable amount. An impairment loss is charged
to the Statement of Profit and Loss in the year in which an asset is identified as impaired.
The recoverable amount is higher of the asset's net selling price and value in use, which
means the present value of future cash flows expected to arise from the continuing use of
the asset and its eventual disposal. An impairment loss for an asset is reversed if, and only if,
the reversal can be related objectively to an event occurring after the impairment loss was
recognized. The carrying amount of an asset is increased to its revised recoverable amount,
provided that this amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset in prior years.
iv) Investments
Classification of Investments:
Current Investments: Investments that are held with the intention of being disposed of
within twelve months from the date of acquisition. These investments will be measured at
the lower of cost and fair value. Changes in fair value will be recognized in the income
statement
Non-Current Investments: Investments that are not classified as current investments. Non¬
current investments will be measured at cost and will be subject to impairment testing. Any
impairment loss will be recognized in the income statement.
Measurement of Investments:
a) Initial Measurement: Investments in shares will be initially recognized at cost, which
includes the acquisition cost, transaction fees, and directly attributable acquisition costs.
b) Subsequent Measurement:
i) Current Investments: Current investments will be measured at the lower of cost and
fair value at each reporting date. Any changes in fair value will be recognized in the
income statement as gains or losses.
ii) Non-Current Investments: Non-current investments will be measured at cost less any
impairment loss recognized in the income statement.
c) Investments will be derecognized from the balance sheet when they are sold or when
their ownership interest is relinquished.
v) Retirement & Other employee benefits
Employee benefits include various forms of compensation and benefits provided to
employees, and proper accounting is essential to accurately report the financial position and
performance of the company. This policy will be consistently applied throughout the
organization.
(a) Short-term Employees Benefits:
Short-term employee benefits, such as salaries, wages, bonuses, and short-term compensated
absences, will be recognized as an expense in the income statement in the period in which the
related service is provided by the employees. The amounts recognized will be based on the
undiscounted amount expected to be paid or provided.
(b) Post-Employment Benefits:
i. Defined Contribution Plans: Contributions to defined contribution plans, such as Provident
Fund as per Employee Provident Fund Law and Employee State Insurance (ESI), will be
recognized as an expense in the income statement when employees render the related service.
The company's obligations are limited to the amount of contributions made, and there are no
further obligations once the contributions are paid.
ii. Defined Benefit Plans: For defined benefit plans, such as gratuity and pensions, the cost of
providing benefits will be determined using the projected unit credit method. The present value
of the defined benefit obligation will be measured, taking into account actuarial assumptions
regarding employee turnover, mortality, and future salary increases. Any actuarial gains or losses
and past service costs will be recognized immediately in the income statement.
(c) Other Long-Term Employee Benefits:
Other long-term employee benefits, such as compensated absences will be recognized as an
expense in the income statement when employees render the related service and become
entitled to receive the benefits.
(d) Termination Benefits:
Termination benefits will be recognized as an expense when the company is demonstrably
committed to either terminating the employment of an employee before the normal retirement
date or providing benefits as a result of an offer made to encourage voluntary redundancy.
(e) Share-Based Payment:
For share-based payment transactions, such as stock options or equity-settled stock appreciation
rights (SARs) granted to employees, the fair value of the equity instruments granted will be
recognized as an expense in the income statement over the vesting period. The fair value of the
equity instruments will be measured at the grant date.
(f) Other Employee Benefits:
Other employee benefits, not covered by the above categories, will be recognized as an expense
in the income statement when the company has a present legal or constructive obligation to
make the payments as a result of past events, and a reliable estimate of the obligation can be
made.
vi) Foreign exchange transactions
Transactions arising in foreign currencies during the year are converted at the rates closely
approximating the rates ruling on the transaction dates. Foreign-currency denominated monetary
assets and liabilities outstanding as on year end, if any are translated at exchange rates in effect at
the Balance Sheet date. Foreign currency denominated non-monetary assets and liabilities
measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
The gains or losses resulting from conversion in terms of the above are included in the Statement of
Profit and Loss. Revenue, expense and cash-flow items denominated in foreign currencies are
translated using the exchange rate in effect on the date of the transaction.
vii) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the
effects of transactions of a non- cash nature, any deferrals or accruals of past or future operating
cash receipts or payments and item of income or expenses associated with investing or financing
cash flows. The cash flows from operating, investing and financing activities are segregated.
viii) Borrowings and finance cost
Borrowings are recognised at the amount received from lenders. These include term loans, cash
credit, overdraft facilities, and other credit arrangements obtained from banks and financial
institutions and related parties.
Borrowings are classified as:
Current liabilities, if repayable within 12 months from the reporting date; and
Non-current liabilities, if the repayment is due after 12 months.
Repayments due within 12 months under long-term borrowing arrangements are presented as the
current portion of long-term borrowings.
Borrowings are measured at their outstanding principal amount as on the balance sheet date.
Accrued but unpaid interest is shown separately under other liabilities.
Finance costs comprise interest and other costs incurred in connection with the borrowing of funds.
These includes generally Interest on term loans and overdrafts, bank charges, processing fees or
other financing-related charges.Finance costs are recognised as an expense in the Statement of
Profit and Loss in the period in which they are incurred, using the accrual basis of accounting.
ix) Trade Receivables & Payable
Trade receivables are stated at their carrying value after deducting provision for doubtful debts, if
any. The carrying value represents amounts receivable in the ordinary course of business, which are
expected to be realised within a normal operating cycle and are classified as current assets.
Provision for doubtful receivables is made based on a review of outstanding amounts at the year-
end and is charged to the Statement of Profit and Loss. Receivables are written off when there is no
reasonable expectation of recovery.
Trade payables represent liabilities for goods and services provided to the Company prior to the end
of the financial year and which remain unpaid as on the reporting date. These are recognised at the
contractual amounts and are settled as per agreed credit terms with vendors.
Trade payables are classified as current liabilities. The Company classifies its trade payables into:
- Dues to Micro, Small and Medium Enterprises (MSMEs), and
- Dues to other than MSMEs, based on information available with the management and disclosures
required under the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMED Act").
Identification of MSME status is based on confirmation from vendors and information available with
the Company. Interest payable, if any, under the provisions of the MSMED Act for delayed payments
beyond the stipulated date, is recognised in the books only when such liability is ascertained and
accepted by the Company.
x) Taxation
The accounting treatment for the Income Tax is based on the Accounting Standard on 'Accounting
for Taxes on Income' (AS-22). The provision made for Income Tax in Accounts comprises both, the
current tax and deferred tax. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted, at the reporting date.
Provision for Current Tax is made on the assessable Income Tax rate applicable to the relevant
assessment year after considering various deductions available under the Income Tax Act, 1961.
Deferred income taxes reflect the impact of timing differences between taxable income and
accounting income originating during the current year and reversal of timing differences for the
earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively
enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are
recognized for deductible timing differences only 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 situations where the company has unabsorbed depreciation or carry forward tax losses,
all deferred tax assets are recognized only if there is virtual certainty supported by convincing
evidence that they can be realized against future taxable profits. The carrying amount of deferred
tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried
out.
xi) Earnings per share
Basic earnings per share is computed by dividing the net profit after tax by the weighted average
number of equity shares outstanding during the period, in accordance with AS-20. Diluted earnings
per share is computed by dividing the profit after tax by the weighted average number of equity
shares considered for deriving basic earnings per share and also the weighted average number of
equity shares that could have been issued upon conversion of all dilutive potential equity shares.
The diluted potential equity shares are adjusted for the proceeds receivable had the shares been
actually issued at fair value which is the average market value of the outstanding shares. Dilutive
potential equity shares are deemed converted as of the beginning of the period, unless issued at a
later date. Dilutive potential equity shares are determined independently for each period presented.
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