SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (All amounts have been brsented in Rupees unless otherwise specified) 1. Company overview Cambridge Technology Enterprises Limited (CTE), "the Company" is an information technology services provider dedicated to serving the midsize market enterprises and the midsize units of Global 2000 enterprises across the spectrum of business industries. The Company was incorporated on January 28, 1999 in Hyderabad, Andhra Pradesh, India. 2. Significant accounting policies 2.1 Basis of brparation of financial statements The financial statements are brpared in accordance with Indian Generally Accepted Accounting Principles ("GAAP") under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as specified in the Companies (Accounting Standards) Rules, 2014 and the relevant provisions of the Indian Companies Act, 2013. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The management evaluates all recently issued or revised accounting standards on an ongoing basis. 2.2 Use of estimates The brparation of the financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Actual results could differ from those estimates. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes and intangible assets. Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. Impairment occurs where the carrying value exceeds the brsent value of future cash flows 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 the carrying amount over the higher of the asset's net sales price or brsent value as determined above. Contingencies are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated. Where no reliable estimate can be made, a disclosure is made as contingent liability. Actual results could differ from those estimates. 2.3 Revenue recognition Income from Software services and products Revenue from professional services consist primarily of revenue earned from services performed on a "time and material" basis. The related revenue is recognized as and when the services are performed. The Company also performs time bound fixed-price engagements, under which revenue is recognized using the percentage of completion method of accounting. The cumulative impact of any revision in estimates of the percentage of work completed is reflected in the year in which the change becomes known. Provisions for estimated losses on such engagements are made during the year in which a loss becomes probable and can be reasonably estimated. Amounts received or billed in advance of services performed are recorded as advance from customers/ unearned revenue. Unbilled revenue, included in debtors, rebrsents amounts recognized based on services performed in advance of billing in accordance with contract terms. Unearned revenue is calculated on the basis of the unutilized period of time at the Balance Sheet and rebrsents revenue which is expected to be earned in future periods in respect of internet, e-mail services, electronic data interchange and web hosting services. Revenue from the sale of user licenses for software applications is recognized on transfer of the title in the user license, except in case of multiple element contracts requiring significant implementation services, where revenue is recognized as per the percentage of completion method. Other income Interest is recognized using the time-proportion method, based on rates implicit in the transaction. 2.4 Fixed Assets Tangible assets Tangible assets are stated at actual cost less accumulated debrciation. The actual cost capitalized includes material cost, freight, installation cost, duties and taxes, finance charges and other incidental expenses incurred during the construction/installation stage. Intangible assets Intangible assets are recorded at consideration paid for acquisition and other direct costs that can be directly attributed, or allocated on a reasonable and consistent basis, to creating, producing and making the asset ready for its intended use. Debrciation Effective 1st April, 2014, Company debrciates the Fixed Assets over the useful life in the manner brscribed in Schedule II of The Companies Act, 2013 as against the earlier practice of debrciating at the rates brscribed in Schedule XIV of The Companies Act 1956. Debrciation for additions to Fixed Assets of the Company is provided as per Schedule II of the Companies Act, 2013on pro-rata basis. Individual assets acquired for less than Rs.5,000/-are entirely debrciated in the year of acquisition. Leasehold improvements are written off over the lower of, the remaining primary period of lease or the life of the asset. The carrying value of Fixed Assets whose life has completed as per Schedule II of The Companies Act, 2013 is transferred to Retained earnings amounting to Rs.2,48,922/-. Amortization Software used in development for projects are amortized over the license period or estimated useful life of two years, whichever is lower. Cost of internally developed software including the incidental costs is amortized over a period of five years. The company CTE has made investments in Cambridge Technology India Private Limited(CTIPL) which is an 100% subsidiary and CTIPL got merged with the CTE with effective from 1st April 2012. The excess of investment over share capital of CTIPL is treated as goodwill which is an amount of Rs. 12,21,42,503/-. The Goodwill arisen on the basis of merger is decided to write-off for a period of 5 years from the current Financial Year by the Board of Directors. The goodwill amount amortized in the Current Financial Year is Rs. 2,44,28,501/-. The cost of and the accumulated debrciation for fixed assets sold, retired or otherwise disposed off are removed from the stated values and the resulting gains and losses are included in the profit and loss account. Lease payments under operating lease are recognized as an expense in the profit and loss account. An impairment loss is recognized wherever the carrying amount of the fixed assets exceeds its recoverable amount. 2.5 Finance leases Assets taken on lease are capitalized at fair value or net brsent value of the minimum lease payments, whichever is lower. Debrciation on the assets taken on lease is charged at the rate applicable to similar type of owned fixed assets refer accounting policy 2.4. Lease payments made are apportioned between the finance charges and reduction of the outstanding liability in respect of assets taken on lease. 2.6 Investments Investments are either classified as current or long-term, based on the Management's intention at the time of purchase. Current investments are carried at the lower of cost and fair value. Cost for overseas investments comprises the Indian Rupee value of the consideration paid for the investment. Long-term investments are carried at cost and provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment. 2.7 Foreign Currency transactions and translation Transactions in foreign currency are recorded at exchange rate brvailing on the date of transaction(RBI rates). Monetary assets and liabilities denominated in foreign currency are translated at the rate of exchange at the balance sheet date and resultant gain or loss is recognized in the profit and loss account. Nonmonetary assets and liabilities are translated at the rate brvailing on the date of transaction. 2.8 Employee Stock Option Scheme Stock options granted to the employees under the stock option schemes established after June 19, 1999 are evaluated as per the accounting treatment brscribed by Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines 1999 issued by Securities and Exchange Board of India and the Guidance Note on Accounting for employee share-based payments issued by the Institute of Chartered Accountants of India. Accordingly the Company measures the compensation cost relating to employee stock options using the intrinsic value method. The compensation cost is amortized on a straight line basis over the total vesting period of the stock options. 2.9 Taxes on Income Tax expense for the year comprises of current tax and deferred tax. Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. A provision is made for income tax annually based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. Minimum alternate tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of adjustments of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal tax after the tax holiday period. Accordingly, it is recognized as an asset in the balance sheet when it is probable that the future economic benefit associated with it will flow to the Company and the asset can be measured reliably. The differences that result between the profit considered for income taxes and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of the accounting period based on brvailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is virtual certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date. 2.10 Earnings per share In determining earnings per share, the Company considers the net profit after tax and includes the post-tax effect of any extra-ordinary / exceptional item is considered. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of equity shares that could have been issued on the 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 (i.e. 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. 2.11 Retirement benefits to employees Gratuity The Company provides for gratuity, a defined benefit retirement plan covering eligible employees, based on actuarial valuation made by an independent actuary as at the balance sheet date. In accordance with the Payment of Gratuity Act, 1972, the gratuity plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees' salary and the tenure of employment. Provident fund Contributions to defined Schemes such as Provident Fund are charged as incurred on accrual basis. Eligible employees receive benefits from a provident fund, which is a defined contribution plan. Aggregate contributions along with interest thereon are paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contributions to the government administered authority. Notes to Financial Statements 2. The Company has written-off the trade receivables amounting to Rs.21, 48, 81,750/- during the brvious financial year 2012-13, due from erstwhile wholly owned step down subsidiary Cambridge Technology Enterprises Inc. The company has made an application to RBI through the authorized dealer for the approval of the same which is pending for the year ended 31-03-2015. 3. The Company has written-off the domestic trade receivables amounting to Rs.4, 46,389/- during the current year 2014-15. 4. M/s. Cambridge Technology India Private Limited which is a 100% subsidiary of CTE has got merged in CTE with effective from 1st April 2012 under the method Amalgamation by Merger as per the Honorable Karnataka High Court Order dated 7th August, 2014. All the Assets and liabilities of M/s. Cambridge Technology India Private Limited has taken into books of accounts of CTE on 1st April 2014 at book values. There is no allotment of equity shares of CTE to M/s. Cambridge Technology India Private Limited share holders since it is a 100% subsidiary to CTE. 5. As per the Amalgamation order the Cambridge Technology India Private Limited merged with Cambridge Technology Enterprises Limited with effect from 1st April 2012. Due to this necessary adjustments in opening balances and closing balances of Cambridge Technology India Private Limited are considered in the financials of Cambridge Technology enterprises Limited for the year ending 31st March 2015. 6. The Cambridge Technology Enterprises Limited income is including the Cambridge Technology India Private Limited income as per the court order. Necessary TDS credits and income of Cambridge Technology India Private Limited are included in Cambridge Technology Enterprises Limited for the year ending 31st March 2015. 7. The Company CTE has sold its Assets for an amount of Rs. 12,75,308/- and it has incurred a loss of Rs. 95,038/-. 8. Details of Deposits Deposit amount consists of Rental Deposit of Cyber Pearlbuilding for Hyderabad Office brmises, ChandrasagarEnterprises for Bangalore Branch, Regus Chennai Office Centre Pvt Ltd for Chennai Office Premises and Regus Suburbs Centre Pvt Ltd for Mumbai Office Premises. Fixed Deposits in Axis Bank,State Bank Hyderabad and others. 9. Employee Stock Option Scheme- Pending The Group has three stock option plans that are currently operational. CTEL ESOP 2006 The 2006 Plan was approved by the board of directors on April 13, 2006 and by the shareholders on April 21, 2006, under which scheme 1,236,542 options were granted till date of 31st March, 2015. 10. Segment reporting As required by the Accounting Standard - 17, 'Segment reporting', the Company is mainlyengaged in the area of software development and related services. Hence segment reporting is not applicable to the Company and to the nature of business. 11. Payables to micro enterprises and small enterprises There were no overdue principal amounts (and interest thereon) payable to micro enterprises and small enterprises, as at March 31, 2015. 12. Quantitative details The Company is engaged in the development and maintenance of computer software. The production and sale of such software cannot be exbrssed in any generic unit. Hence, it is not practicable to give the quantitative details of sales and certain other information as required under paragraphs 3, 4A, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956. 13. Prior year comparatives. Previous years' figures have been regrouped and reclassified wherever necessary to confirm to current year's classification. For P. Murali & Co. For and on behalf of board of Directors Chartered Accountants Firm Regn. No.007257S P.Murali Mohana Rao Membership No: 23412 D.R.R.Swaroop Whole-time Director Venkat Motaparthy Director V. Ramana Reddy CFO & Company Secretary Place: Hyderabad Date: 29-05-2015 |