Notes forming part of the Financial Statements 1 SIGNIFICANT ACCOUNTING POLICIES a. Basis of brparation of financial statements 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. The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year. b. Use of Estimates The brparation of the financial statements in conformity with Indian GAAP requires that the management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Examples of such estimates includes provision for doubtful trade receivables , future obligations under employee benefit plans, income taxes and the useful lives of fixed assets. Contingencies are recorded when it is probable that a liability will be incurred and the amount can be reliably estimated. When no reliable estimate can be made, a disclosure is made as contingent liability. Actual results could differ from those estimates. c. Cash flow Statement Cash Flow Statement has been brpared in accordance with the Indirect method brscribed in Accounting Standard 3 - "Cash flow statements". The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. d. Cash and cash equivalents Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. e. Debrciation/Amortisation Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed on commercial lives of these assets as estimated by the Management. The useful/commercial lives are as follows: . Revenue Recognition Revenue from Telecom Value Added Services, net of credit notes, is recognized on provision of services in terms of revenue sharing arrangements with the telecom operators. Revenue from sale of user licences for software application is recognized when the applications are functionally installed at the customer's location as per the terms of the contracts. Revenue from Other Services including maintenance services is recognized proportionately over the period during which the services are rendered as per the terms of contract. Dividend on current investments is recognized on an accrual basis. Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sale price and the carrying value of the investment. Rental Income is recognised on an accrual basis. Interest Income is recognised on an accrual basis. g. Fixed assets Fixed assets are stated at cost of acquisition including taxes, duties, freight and other incidental expenses relating to acquisition and installation. Subsequent expenditure on fixed assets after its purchase is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. Capital work in progress is stated at cost and includes the cost of fixed assets that are not ready for their intended use at the Balance Sheet date. h. Foreign currency transactions Initial recognition: Company: Transactions in foreign currencies entered into by the Company are accounted at the exchange rates brvailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. Integral foreign operations: Transactions in foreign currencies entered into by the Company's integral foreign operations are accounted at the exchange rates brvailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. Measurement at the Balance Sheet date: Company: Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the Balance Sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost. Integral foreign operations: Foreign currency monetary items (other than derivative contracts) of the Company's integral foreign operations outstanding at the Balance Sheet date are restated at the year-end rates. Non-monetary items of the Company's integral foreign operations are carried at historical cost. Treatment of exchange differences: Company: Exchange differences arising on settlement/ restatement of foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss. Integral foreign operations: Exchange differences arising on settlement/ restatement of foreign currency monetary assets and liabilities of the Company's integral foreign operations are recognised as income or expense in the Statement of Profit and Loss. Premium or discount on forward exchange contract, which are not intended for trading or speculation purposes is amortised over the life of such contract and is recognised as income or expense. Any profit or loss arising on cancellation, renewal or restatement of forward contract is recognised in the Statement of Profit and Loss as income or expense in the period in which such cancellation or renewal is made. i. Investments Current investments are carried individually at lower of cost and fair value. Long-term investments are stated at cost. Provision is made for any diminution in value of long-term investment which is other than temporary in nature. Cost of investments include acquisition charges such as brokerage, fees and duties. j. Employee Benefits a) Short-term employee benefits includes salaries, social security contributions, short term compensated absences (such as paid annual leave) where the absences are expected to occur within twelve months after the end of the period in which the employees render the related employee service, profit sharing and bonuses payable within twelve months after the end of the period in which the employees render the related services and non monetary benefits (such as medical care) etc, for current employees are estimated and measured on an undiscounted basis. b) Defined Contribution Plan The Company's contribution to provident fund, employee state insurance scheme, Social security etc are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. c) Defined Benefit Plan Post employment benefit plans other than Defined Contribution Plans includes liabilities for gratuity funded in terms of a scheme administered by the Life Insurance Corporation of India, are determined by Actuarial Valuation made at the end of each financial year. Provision for liabilities pending remittance to the fund is carried in the Balance Sheet. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the brsent value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation. d) Long-term liability for compensated absences is provided based on actuarial valuation of the accumulated leave credit outstanding to the employees as on the Balance Sheet date. k. Employee Stock Option Plan The Company has formulated 14 Employee Stock Option Plans ("ESOP") - OnMobile Employees Stock Option Plan - I 2003, OnMobile Employees Stock Option Plan - II 2003, OnMobile Employees Stock Option Plan - III 2006, OnMobile Employees Stock Option Plan - I 2007 ,OnMobile Employees Stock Option Plan - II 2007 , OnMobile Employees Stock Option Plan - I 2008, OnMobile Employees Stock Option Plan - II 2008, OnMobile Employees Stock Option Plan - III 2008, OnMobile Employees Stock Option Plan - IV 2008, OnMobile Employees Stock Option Plan - I 2010, OnMobile Employees Stock Option Plan - II 2010, OnMobile Employees Stock Option Plan 2011,OnMobile Employees Stock Option Plan 1, 2012 and OnMobile Employees Stock Option Plan 1, 2013. The Company has obtained legal opinion that the Guidance Note on Accounting for Employee Share Based Payments are not applicable to OnMobile Employee Stock Option Plan - I 2003 and II 2003. Options granted in terms of OnMobile Employee Stock Option Plan - III 2006, OnMobile Employees Stock Option Plan - I 2007 , OnMobile Employees Stock Option Plan - II 2007, OnMobile Employees Stock Option Plan - I 2008, OnMobile Employees Stock Option Plan - II 2008, OnMobile Employees Stock Option Plan - III 2008, OnMobile Employees Stock Option Plan - IV 2008, OnMobile Employees Stock Option Plan - I 2010, OnMobile Employees Stock Option Plan - II 2010, OnMobile Employees Stock Option Plan 2011, OnMobile Employees Stock Option Plan 1, 2012 and OnMobile Employees Stock Option Plan 1, 2013 to which the said Guidance Note is applicable, are accounted under intrinsic value method and accordingly, the difference between the fair value of the underlying shares and the exercise price, if any, is expensed to Statement of Profit and Loss over the period of vesting. l. Leases Assets taken on lease where the company acquires substantially the entire risks and rewards incidental to ownership are classified as finance leases. The amount recorded is the lower of the brsent value of minimum lease rental and other incidental expenses during the lease term or the fair value of the assets taken on lease. The rental obligations, net of interest charges, are reflected as secured loan. Leases that do not transfer substantially all the risks and rewards of ownership are classified as operating leases and lease rentals are expensed to Statement of Profit and Loss on an accrual basis. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight line basis over the lease term. m. Earnings per Share In determining the Earnings per share, the Company considers the net profit after tax. The number of shares used in computing Basic Earnings per share is the weighted average number of equity shares outstanding during the year. The number of shares used in computing Diluted Earnings per share comprises 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 on the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the year unless issued at a later date. n. Income Tax Income tax expense includes Indian and International income taxes. Income tax comprises of the current tax and brvious year tax provision and net change in deferred tax asset or liability in the year. Provision for current tax is made taking into account the admissible deductions/allowances and is subject to revision based on the taxable income for the fiscal year ending 31 March each year. Provision for taxation includes tax liabilities in India on the Company's global income as reduced by exempted income and any tax liabilities arising overseas on income sourced from those countries. Minimum alternate tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax in the future years. Accordingly, MAT is recognised as an asset in the Balance Sheet where it is highly probable that the future economic benefit associated with it will flow to the Company and the asset can be measured reliably. Deferred tax assets and liabilities are recognized for the future tax consequences of timing differences between carrying values of the assets and liabilities and their respective tax bases and are measured using enacted or substantively enacted tax rates applicable on the Balance Sheet date. Deferred Tax assets are recognized subject to management's judgement that realization is reasonably/virtually certain. o. Impairment of Assets "The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired: (a) an intangible asset that is not yet available for use; and (b) an intangible asset that is amortised over a period exceeding ten years from the date when the asset is available for use. If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their brsent value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was brviously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognised." p. Provisions and Contingencies Provision is recognized when an enterprise has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current best estimates. Contingent Liabilities are disclosed in the Notes to the financial statements. Contingent assets are not recognised in the financial statements. q. Operating Cycle Based on the nature of services / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. 1. The Company had made an application to the Central Government for compounding of one of the contracts for a party covered under Section 297 of the Companies Act, 1956, which expired during an earlier year. The total transaction for which compounding application had been filed amounted to Rs. 3.01 Million. The approval from Central Government is awaited. 2. During the year, the Company has completed the divestiture of Voxmobili SA, a step-down subsidiary of the Company. The Company had signed the Share Purchase Agreement (SPA) with Synchronoss Technologies France, a leading player in synchronization technology products, in May 2014. With the closure of this deal, the Company realised an amount of USD 26 Million, subject to escrows and other conditions customarily contracted as part of such deal. 3. During the brvious year ended March 31, 2014, the Company had recognised provision for diminution in value of Investment in its subsidiary OnMobile Europe B.V. which has underlying investment in OnMobile S.A., of Rs. 559.48 Million, which was included under exceptional items in the Statement of Profit and Loss. 4. Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification/ disclosures. |