NOTE-23: SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS Company Overview FCS Software Solutions Limited ('FCS or 'the Company') was incorporated on 5 May, 1993 in India. The Company made an initial public offer in September 2005. As at 31 March, 2015, the Company is listed on two stock exchanges in India namely National Stock Exchange and Bombay Stock Exchange. The Company has its wholly owned subsidiaries in USA, China, Germany, UAE and India (the Company and its subsidiaries constitute 'the group'). The group business consists of software product development and marketing and providing support services mainly for corporate business entities in the BPO, software development and e-learning service sector. 23. Significant Accounting Policies 23.1 Basis for brparation. (i) The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("2013 Act"), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBI"). Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. All Income and expenditure having a material bearing on the financial statements are recognized on the accrual Basis. (ii) Use of estimates The brparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Examples of such estimates include estimates of expected contract costs to be incurred to complete contracts, future obligations under employee retirement benefit plans. Actual result could differ from these estimates. 23.2 Revenue recognition. Revenue is recognized in accordance with the completion method. Income accrued but not due rebrsents revenue recognized on contracts to be billed in the subsequent period, in accordance with terms of the contract. Further Revenue from software development services and other projects on a time-and -material basis is recognized based on services rendered and billed to clients as per the terms of specific contracts as per milestones achieved, as specified in the contracts, on a percentage of completion basis. Interest on deployment of surplus funds is recognized using the time-proportion method, based on interest rates implicit in the transaction. 23.3 Cash flow statement Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. 23.4 Expenditure Expenses are accounted for on accrual basis and provisions are made for all known losses and liabilities. Company has booked sales incentive on cash basis. 23.5 Fixed Assets Fixed assets are stated at the cost of acquisition including incidental costs related to acquisition and installation. All direct costs are capitalized till the assets are ready to be put to use. Fixed assets under construction, advances paid towards acquisition of fixed assets and cost of assets not put to use before the period/year end, are disclosed as capital work in progress. (a) Tangible fixed assets and capital work-in-progress Tangible fixed assets (except freehold land which is carried at cost) are stated at cost of acquisition less accumulated debrciation and impairment loss, if any. Cost of acquisition includes freight inward, duties, taxes and other directly attributable expenses incurred to bring the assets to their working condition for Fixed assets under construction and cost of assets not ready for use before the year-end, are disclosed as capital work-in-progress. (b) Intangible fixed assets Intangible fixed assets comprising of computer software, are stated at cost of acquisition less accumulated amortization and impairment loss, if any. Intangible fixed assets are capitalized where they are expected to provide future enduring economic benefits. Capitalization costs include license fees and cost of implementation/system integration services. The costs are capitalized in the year in which the software is fully implemented for use. 23.6 Debrciation Debrciation on fixed assets is provided using the written down value method, as rates specified in schedule II of the Companies Act, 2013. Debrciation is charged on a pro-rata basis for assets purchased/sold during the year. 23.7 Impairment of assets Management periodically assesses using external and internal sources where there is an indication that an asset may be impaired. Impairment occurs where the carrying value exceed the brsent value of future cash flow expected to arise from the continuing use of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of carrying amount over the higher of the assets net sales price or brsent value as determined above. The management is of the view that impairment does not apply to the Company, hence not recognized. 23.8 Foreign Currency Transactions. Foreign exchange transactions are recorded at the exchange rates brvailing at the date of transaction. Realized gains or losses on foreign exchange transactions during the period are recognized in profit and loss account. However, sundry debtors are accounted upon the brvailing rates on the date of invoice issuance. Expenditure in foreign currency is accounted at the conversion rate brvalent when such expenditure is incurred. Where realizations are deposited into, and disbursements made out of, a foreign currency bank account, all transactions during the month are reported at a rate as per the actual monthly rate. In the case of current assets and current liabilities exbrssed in foreign currency, the exchange rate brvalent at the end of the year is taken for the purposes of transaction. Exchange differences are arising on foreign currency transactions are recognized as income or expenses in the year in which they arise. In the case of forward contracts, the difference between the forward rate and the exchange rate on the date of the transaction is recognized as income or expenses over the life of the contracts. 23.9 Investment Investments are classified into long-term and current investments based on the intent of management at the time of acquisition. Long-term investments including investment in subsidiaries are stated at cost. Current investments are stated at the lower of cost and the fair value 23.10 Retirement Benefits. Own Contributions to provident fund and ESI are charged to the profit and loss account as incurred. Provisions for gratuity and leave encashment are accounted at the year-end and charged off to the profit and loss account. Company has provided the provision for gratuity and leave encashment on the basis of actuarial valuation as brscribed under AS-15 brscribed by ICAI and liability was provided only for those employees who are covered under Gratuity Act as certified by valuer. Company does not owe any liability for bonus as no employee is covered under Payment of Bonus Act and no provision for Bonus or Ex Gratia was made. 23.11 Earning per Share Basic earning per share is computed using the weighted average number of equity shares outstanding during the year in pursuance with AS-20 brscribed by ICAI. Diluted earnings per share is computed using the weighted average number of equity and diluted equity equivalent shares outstanding during the year-end, except where the results would be anti-dilutive. 23.12 Income Tax a. Provision is made for income tax on a yearly basis in pursuance with the provision brscribed under Income Tax Act, 1961 under the tax-payable method, based on the tax liability as computed after taking credit for allowances and exemptions as the case may be. b. In compliance of Accounting Standard-22 on "Accounting for taxes on Income" issued by ICAI, the company has recorded the deferred tax Asset of Rs. 2,810,423/- for the year ended March 31, 2015, has been provided and the post tax profit has accordingly increased 23.15 Research & Development Revenue Expenditure incurred on research and development is charged to revenue in the year it is incurred. Assets used for research and development activities are included in fixed assets. 23.16 Foreign Branch All revenue and expenses transactions are during the year reported at average rate. The assets and liabilities both monetary and non-monetary are translated at the rate brvailing on the balance sheet date. All resulting exchange differences are accumulated in a foreign currency translation reserve until the disposal of the net investment. However the Balance sheet of branch as on 31st March 2015 has been considered and accounted as certified by the certified public accountant and as certified by the management for the purpose of this Balance Sheet. 23.17 Segment Reporting The Segment reporting policy complies with the accounting policies adopted for brparation and brsentation of financial statements of the Company and is in conformity with Accounting Standard -17 on "Segment Reporting", issued by ICAI. The primary segmentation is based on the Geographies in which Company operates and internal reporting system. The Company operates in two main Geographical Segments India and USA. 23.18 Provision and contingencies The Company recognizes a provision when there is a brsent obligation as a result of a past event and it is probable that it would involve an outflow of resources and a reliable estimate can be made of the amount of such obligation. Such provisions are not discounted to their brsent value and are determined based on the management's estimation of the obligation required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect management's current estimates. Contingent assets are not recognized in the financial statements. 23.19 Service tax input credit Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilising the credits. 23.26 As explained to us, during the year the Corporate Social Responsibility (CSR) committee has been formed by the Company, however the Company does not qualified the norms specified as required under section 135 of Companies Act, 2013 to contribute towards CSR. 23.27 The Previous year figures have been regrouped/ reclassified wherever necessary to make them comparable with the current year figures. AUDITOR'S REPORT As per our separate report of even date For SPMG & COMPANY Chartered Accountants Firm Registration Number: 509249C Sd/- (Vinod Gupta) Partner M.No. : 090687 On behalf of the Board of Directors For FCS Software Solutions Limited Sd/- Dalip Kumar Chairman & Managing Director Sd/- Anil Sharma Chief Financial Officer Sd/- S.N. Sharma Director Sd/- Gagan Kaushik Company Secretary Place : Noida Date : May 30, 2015 |