Provisions and contingencies
Provisions
A provision is recognised if, as a result of a past event, the
Company has a present legal or constructive obligation
that is reasonably estimable, and it is probable that an
outflow of economic benefits will be required to settle
the obligation. If the effect of the time value of money
is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. The increase in the
provision due to the passage of time is recognised as
interest expense.
Contingent liabilities
A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the
Company or a present obligation that is not recognised
because it is not probable that an outflow of resources
will be required to settle the obligation or it cannot be
measured with sufficient reliability. The Company does not
recognise a contingent liability but discloses its existence
in the financial statements.
Contingent assets
Contingent assets are neither recognised nor disclosed.
However, when realisation of income is virtually certain,
related asset is recognised.
Onerous contracts
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous
contract is considered to exist where the Company has
a contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic
benefits expected to be received from the contract.
o) Financial instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value and
transaction cost that is attributable to the acquisition of
the financial asset is also adjusted.
Subsequent measurement
For purposes of subsequent measurement, financial assets
are classified in four categories:
i. Debt instruments at amortised cost;
ii. Debt instruments at fair value through other
comprehensive income (FVTOCI);
iii. Debt instruments, derivatives and equity instruments
at fair value through profit or loss (FVTPL); and
iv. Equity investments.
i. Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised
cost if both the following conditions are met:
a) The asset is held within a business model
whose objective is to hold assets for collecting
contractual cash flows; and
b) Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the
principal amount outstanding.
This category is the most relevant to the
Company. After initial measurement, such
financial assets are subsequently measured at
amortised cost using the effective interest rate
(EIR) method. Amortised cost is calculated by
taking into account any discount or premium
on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation
is included in finance income in the Statement
of Profit and Loss. The losses arising from
impairment are recognised in the Statement of
Profit and Loss. This category generally applies
to trade and other receivables.
ii. Debt instrument at FVTOCI
A 'debt instrument' is classified as at the FVTOCI if
both of the following criteria are met:
a) The objective of the business model is achieved
both by collecting contractual cash flows and
selling the financial assets; and
b) The asset's contractual cash flows represent
SPPI.
Debt instruments included within the FVTOCI
category are measured initially as well as at
each reporting date at fair value. Fair value
movements are recognized in the other
comprehensive income (OCI). However,
the Company recognizes interest income,
impairment losses and reversals and foreign
exchange gain or loss in the Statement of
Profit and Loss. On derecognition of the asset,
cumulative gain or loss previously recognised in
OCI is reclassified from the equity to Statement
of Profit and Loss. Interest earned whilst holding
FVTOCI debt instrument is reported as interest
income using the EIR method.
iii. Debt instrument at FVTPL
FVTPL is a residual category for debt instruments.
Any debt instrument, which does not meet the
criteria for categorization as at amortized cost
or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to
designate a debt instrument, which otherwise
meets amortized cost or FVTOCI criteria, as at
FVTPL. However, such election is allowed only if
doing so reduces or eliminates a measurement
or recognition inconsistency (referred to as
'accounting mismatch'). The Company has not
designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL
category are measured at fair value with all
changes recognized in the Statement of Profit
and Loss.
iv. Equity investments
All equity investments in scope of Ind AS 109,
Financial Instruments, are measured at fair value.
Equity instruments which are held for trading
and contingent consideration recognised
by an acquirer in a business combination to
which Ind AS 103 Business Combinations,
applies are classified as at FVTPL. For all other
equity instruments, the Company may make
an irrevocable election to present in other
comprehensive income subsequent changes
in the fair value. The Company makes such
election on an instrument-by-instrument basis.
The classification is made on initial recognition
and is irrevocable.
If the Company decides to classify an equity
instrument as at FVTOCI, then all fair value
changes on the instrument, excluding dividends,
are recognized in the OCI. There is no recycling
of the amounts from OCI to Statement of Profit
and Loss, even on sale of investment. However,
the Company may transfer the cumulative gain
or loss within equity.
Equity instruments included within the FVTPL
category are measured at fair value with all
changes recognized in the Statement of Profit
and Loss.
De-recognition of financial assets
A financial asset (or, where applicable, a part of a
financial asset) is primarily derecognised (i.e. removed
from the Company's balance sheet) when:
a. The rights to receive cash flows from the asset
have expired, or
b. The Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under
a 'pass-through' arrangement; and either (i)
the Company has transferred substantially all
the risks and rewards of the asset, or (ii) the
Company has neither transferred nor retained
substantially all the risks and rewards of the
asset, but has transferred control of the asset.
When the Company has transferred its rights to
receive cash flows from an asset or has entered into
a pass-through arrangement, it evaluates if and to
what extent it has retained the risks and rewards
of ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the
Company continues to recognise the transferred
asset to the extent of the Company's continuing
involvement. In that case, the Company also
recognises an associated liability. The transferred
asset and the associated liability are measured on a
basis that reflects the rights and obligations that the
Company has retained.
Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at
the lower of the original carrying amount of the asset
and the maximum amount of consideration that the
Company could be required to repay.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
The Company's financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts,
financial guarantee contracts and derivative financial
instruments.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss. Financial liabilities are classified as
held for trading if they are incurred for the purpose of
repurchasing in the near term. This category also includes
derivative financial instruments entered into by the
Company that are not designated as hedging instruments
in hedge relationships as defined by Ind AS 109, Financial
Instruments.
Gains or losses on liabilities held for trading are
recognised in the profit or loss.
Financial liabilities designated upon initial recognition at
fair value through profit or loss are designated as such at
the initial date of recognition, and only if the criteria in Ind
AS 109 are satisfied. For liabilities designated as FVTPL,
fair value gains/ losses attributable to changes in own
credit risk are recognized in OCI. These gains/ loss are not
subsequently transferred to Statement of Profit and Loss.
However, the Company may transfer the cumulative gain
or loss within equity. All other changes in fair value of such
liability are recognised in the Statement of Profit and Loss.
The Company has not designated any financial liability as
at fair value through profit and loss.
Loans and borrowings
This is the category most relevant to the Company. After
initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in profit or loss
when the liabilities are derecognised as well as through
the EIR amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or cost that
are an integral part of the EIR. The EIR amortisation is
included as finance costs in the Statement of Profit and
Loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the
derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying
amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the balance sheet 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.
Derivative financial instruments and Hedge
accounting
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such
as forward currency contracts to hedge its foreign currency
risks arising from highly probable future forecasted sales.
This derivative financial instrument are designated in a
cash flow hedge relationship. Such derivative financial
instruments are initially recognised at fair value on the
date on which a derivative contract is entered into and
are subsequently re-measured at fair value. Derivatives are
carried as financial assets when the fair value is positive
and as financial liabilities when the fair value is negative.
At the inception of a hedge relationship, the Company
formally designates and documents the hedge relationship
to which the Company wishes to apply hedge accounting
and the risk management objective and strategy for
undertaking the hedge. The documentation includes the
Company's risk management objective and strategy for
undertaking hedge, the hedging/ economic relationship,
the hedged item or transaction, the nature of the risk
being hedged, hedge ratio and how the entity will assess
the effectiveness of changes in the hedging instrument's
fair value in offsetting the exposure to changes in the
hedged item's fair value or cash flows attributable to
the hedged risk. Such hedges are expected to be highly
effective in achieving offsetting changes in cash flows and
are assessed on an ongoing basis to determine that they
actually have been highly effective throughout the financial
reporting periods for which they were designated.
The effective portion of the gain or loss on the hedging
instrument is recognised in OCI in the cash flow hedge
reserve, while any ineffective portion is recognised
immediately in the Statement of Profit and Loss.
Any gains or losses arising from changes in the fair value
of derivatives are taken directly to profit or loss, except
for the effective portion of cash flow hedges, which
is recognised in OCI and later reclassified to profit or
loss when the hedge item affects profit or loss and is
reclassified to underlying hedged item.
p) Impairment of financial assets
In accordance with Ind AS 109 Financial Instruments,
the Company applies expected credit loss (ECL) model
for measurement and recognition of impairment loss for
financial assets.
The Company tracks credit risk and changes thereon for
each customer. For recognition of impairment loss on
other financial assets and risk exposure, the Company
determines that whether there has been a significant
increase in the credit risk since initial recognition. If
credit risk has not increased significantly, 12-month ECL
is used to provide for impairment loss. However, if credit
risk has increased significantly, life time ECL is used. If
in a subsequent period, credit quality of the instrument
improves such that there is no longer a significant increase
in risk since initial recognition, then the entity reverts
to recognising impairment loss allowance based on
12-month ECL.
ECL is the difference between all contractual cash flows
that are due to the Company in accordance with the
contract and all the cash flows that the entity expects to
receive (i.e., all cash shortfalls), discounted at the original
EIR. When estimating the cash flows, an entity is required
to consider:
- All contractual terms of the financial instrument
over the expected life of the financial instrument.
However, in rare cases when the expected life of the
financial instrument cannot be estimated reliably,
then the entity is required to use the remaining
contractual term of the financial instrument.
- Cash flows from the sale of collateral held or
other credit enhancements that are integral to the
contractual terms.
The Company uses default rate for credit risk to determine
impairment loss allowance on portfolio of its trade
receivables.
ECL impairment loss allowance (or reversal) recognized
during the period is recognized as income/ expense in
the Statement of Profit and Loss. This amount is reflected
under the head 'other expenses' in the Statement of
Profit and Loss. The balance sheet presentation for various
financial instruments is described below:
a. Financial assets measured as at amortised
cost, contractual revenue receivables and lease
receivables: ECL is presented as an allowance, i.e., as
an integral part of the measurement of those assets
in the balance sheet. The allowance reduces the net
carrying amount. Until the asset meets write-off
criteria, the Company does not reduce impairment
allowance from the gross carrying amount.
b. Loan commitments and financial guarantee
contracts: ECL is presented as a provision in the
balance sheet, i.e. as a liability.
c. Debt instruments measured at FVTOCI: Since financial
assets are already reflected at fair value, impairment
allowance is not further reduced from its value.
Rather, ECL amount is presented as 'accumulated
impairment amount' in the OCI.
Trade receivables
The Company applies approach permitted by Ind AS
109 Financial Instruments, which requires expected
lifetime losses to be recognised from initial recognition of
receivables.
Other financial assets
For recognition of impairment loss on other financial
assets and risk exposure, the Company determines
whether there has been a significant increase in the credit
risk since initial recognition and if credit risk has increased
significantly, impairment loss is provided.
q) Fair value measurement
The Company measures financial instruments, such as,
derivatives at fair value at each balance sheet date.
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.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must be
accessible by the Company.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
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 that
would use the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the use
of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active
markets for identical assets or liabilities;
Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
directly or indirectly observable;
Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the
lowest level input that is significant to the fair value
measurements as a whole) at the end of each reporting
period.
For the purpose of fair value disclosures, the Company
has determined the classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset
or liabilities and the level of the fair value hierarchy as
explained above.
External valuers are involved for valuation of significant
assets, such as properties and unquoted financial assets,
and significant liabilities, such as contingent consideration.
Involvement of external valuers is decided upon annually
by the Management. Selection criteria include market
knowledge, reputation, independence and whether
professional standards are maintained. The Management
decides, after discussions with the Company's external
valuers, which valuation techniques and inputs to use for
each case.
At each reporting date, the Management analyses the
movements in the values of assets and liabilities which
are required to be remeasured or re-assessed as per the
Company's accounting policies. For this analysis, the
Management verifies the major inputs applied in the latest
valuation by agreeing the information in the valuation
computation to contracts and other relevant documents.
The Management also compares the change in the fair
value of each asset and liability with relevant external
sources to determine whether the change is reasonable.
On an interim basis, the Management present the valuation
results to the Audit Committee and the Company's
independent auditors. This includes a discussion of the
major assumptions used in the valuations.
For the purpose of fair value disclosures, the Company has
determined classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability
and the level of the fair value hierarchy as explained above.
r) Cash and cash equivalent
Cash and cash equivalent in the balance sheet comprise
cash at banks and on hand and short-term deposits with
an original maturity of three months or less, which are
subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, Cash and
cash equivalent consist of cash at banks and on hand and
short-term deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral part of
the Company's cash management.
s) Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision maker. The Company is engaged in the
Technology Services and Solutions, which constitutes its
single reportable segment.
t) Earnings per Share (EPS)
Basic EPS are calculated by dividing the net profit or loss
for the period attributable to equity shareholders by the
weighted average number of equity shares outstanding
during the period. Partly paid equity shares are treated as
a fraction of an equity share to the extent that they are
entitled to participate in dividends relative to a fully paid
equity share during the reporting period. The weighted
average number of equity shares outstanding during the
period is adjusted for events such as bonus issue that
have changed the number of equity shares outstanding,
without a corresponding change in resources.
Diluted EPS amounts are calculated by dividing the profit
attributable to equity shareholders of the Company
(after adjusting for interest on the convertible preference
shares, if any) by the weighted average number of equity
shares outstanding during the year plus the weighted
average number of equity shares that would be issued on
conversion of all the dilutive potential equity shares into
equity 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.
u) Business combinations
Business combinations between entities under common
control is accounted for at carrying value under the
provisions of Ind AS 103, Business Combinations.
Transaction costs that the Company incurs in connection
with a business combination such as finders' fees, legal
fees, due diligence fees, and other professional and
consulting fees are expensed as incurred.
v) Share-based payments
The cost of equity-settled transactions is determined by
the fair value at the date when the grant is made using
an appropriate valuation model. That cost is recognised,
together with a corresponding increase in share-based
payment (SBP) reserves in equity, over the period in
which the performance and/or service conditions are
fulfilled in employee benefits expense. The dilutive effect
of outstanding options is reflected as additional share
dilution in the computation of diluted earnings per share.
w) Corporate Social Responsibility (CSR) expenditure
CSR expenditure as per provisions of Section 135 of
the Companies Act, 2013 read with the Companies
(Corporate Social Responsibility Policy) Rules, 2014, is
charged to the Statement of Profit and Loss as expense as
and when incurred.
2(ii) Changes in accounting policies and disclosures
There are no new accounting policies applied during the
current year
2(iii) New and amended standards
The Company applied for the first-time certain standards
and amendments, which are effective for annual periods
beginning on or after 1 April 2022. The Company has not
early adopted any other standard or amendment that has
been issued but is not yet effective:
(i) Ind AS 16 - Property, Plant and Equipment: Proceeds
before Intended Use
The Ministry of Corporate Affairs has notified Companies
(Indian Accounting Standard) Amendment Rules 2022
dated 23 March 2022,which is effective from 1 April 2022
to amend the Ind AS 16 to clarify that excess of net sale
proceeds of items produced over the cost of testing, if any,
shall not be recognised in the profit or loss but deducted
from the directly attributable costs considered as part of
cost of an item of property, plant, and equipment.
The amendments are effective for annual reporting
periods beginning on or after 1 April 2022. These
amendments had no impact on the standalone financial
statements of the company as there were no sales of such
items produced by property, plant and equipment made
available for use on or after the beginning of the earliest
period presented.
(ii) Ind AS 109 Financial Instruments - Fees in the '10 per
cent' test for derecognition of financial liabilities
The Ministry of Corporate Affairs has notified Companies
(Indian Accounting Standard) Amendment Rules 2022
dated 23 March 2022, which is effective from 1 April 2022
to amend the Ind AS 109 to clarify the fees that an entity
includes when assessing whether the terms of a new or
modified financial liability are substantially different from
the terms of the original financial liability. These fees
include only those paid or received between the borrower
and the lender, including fees paid or received by either
the borrower or lender on the other's behalf.
The amendments are effective for annual reporting periods
beginning on or after 1 April 2022.These amendments
had no impact on the standalone financial statements of
the company as there were no modifications/exchange's
of the Company financial instruments during the period.
(iii) Ind AS 37 - Onerous Contracts - Costs of Fulfilling a
Contract
The Ministry of Corporate Affairs has notified Companies
(Indian Accounting Standard) Amendment Rules 2022
dated 23 March 2022,which is effective from 1 April 2022
to clarify that an onerous contract is a contract under
which the unavoidable of meeting the obligations under
the contract costs (i.e., the costs that the Company cannot
avoid because it has the contract) exceed the economic
benefits expected to be received under it.
The amendments specify that when assessing whether
a contract is onerous or loss-making, an entity needs to
include costs that relate directly to a contract to provide
goods or services including both incremental costs (e.g.,
the costs of direct labour and materials) and an allocation
of costs directly related to contract activities (e.g.,
depreciation of equipment used to fulfil the contract and
costs of contract management and supervision). General
and administrative costs do not relate directly to a contract
and are excluded unless they are explicitly chargeable to
the counterparty under the contract.
The amendments are effective for annual reporting periods
beginning on or after 1 April 2022.These amendments
had no impact on the standalone financial statements of
the company as there were no contracts for which the
Company has not yet fulfilled all of its obligations.
(iv) Ind AS 103 - Reference to the Conceptual Framework
The amendments replaced the reference to the ICAI's
"Framework for the Preparation and Presentation of
Financial Statements under Indian Accounting Standards"
with the reference to the "Conceptual Framework for
Financial Reporting under Indian Accounting Standard"
without significantly changing its requirements.
The amendments also added an exception to the
recognition principle of Ind AS 103 Business Combinations
to avoid the issue of potential 'day 2' gains or losses arising
for liabilities and contingent liabilities that would be within
the scope of Ind AS 37 Provisions, Contingent Liabilities
and Contingent Assets or Appendix C, Levies, of Ind AS
37, if incurred separately. The exception requires entities
to apply the criteria in Ind AS 37 or Appendix C, Levies,
of Ind AS 37, respectively, instead of the Conceptual
Framework, to determine whether a present obligation
exists at the acquisition date.
The amendments also add a new paragraph to Ind AS
103 to clarify that contingent assets do not qualify for
recognition at the acquisition date.
These amendments had no impact on the standalone
financial statements of the Company as there were no
contingent assets, liabilities or contingent liabilities within
the scope of these amendments that arose during the
period.
2(iv) Standards notified but not yet effective
The Ministry of Corporate Affairs has notified Companies
(Indian Accounting Standards) Amendment Rules, 2023
dated 31 March 2023 to amend the following Ind AS
which are effective from 01 April 2023.
(i) Ind AS 8 - Definition of Accounting Estimates
The amendments clarify the distinction between changes
in accounting estimates and changes in accounting
policies and the correction of errors. It has also been
clarified how entities use measurement techniques and
inputs to develop accounting estimates.
The amendments are effective for annual reporting
periods beginning on or after 1 April 2023 and apply to
changes in accounting policies and changes in accounting
estimates that occur on or after the start of that period.
The amendments are not expected to have a material
impact on the standalone financial statements.
(ii) Ind AS 1 - Disclosure of Accounting Policies
The amendments aim to help entities provide accounting
policy disclosures that are more useful by replacing the
requirement for entities to disclose their 'significant'
accounting policies with a requirement to disclose their
'material' accounting policies and adding guidance on
how entities apply the concept of materiality in making
decisions about accounting policy disclosures.
The amendments to Ind AS 1 are applicable for annual
periods beginning on or after 1 April 2023. Consequential
amendments have been made in Ind AS 107.
The Company is currently revisiting their accounting policy
information disclosures to ensure consistency with the
amended requirements.
(iii) Ind AS 12 - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
The amendments narrow the scope of the initial recognition
exception under Ind AS 12, so that it no longer applies to
transactions that give rise to equal taxable and deductible
temporary differences.
The amendments should be applied to transactions that
occur on or after the beginning of the earliest comparative
period presented. In addition, at the beginning of the
earliest comparative period presented, a deferred tax
asset (provided that sufficient taxable profit is available)
and a deferred tax liability should also be recognised
for all deductible and taxable temporary differences
associated with leases and decommissioning obligations.
Consequential amendments have been made in Ind AS
101. The amendments to Ind AS 12 are applicable for
annual periods beginning on or after 1 April 2023.
The Company is currently assessing the impact of the
amendments.
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