| 1. Background NewgenSoftwareTechnologiesLimited(hereinafterreferredtoas‘Newgen’orthe‘Company’ or the ‘Holding Company’)and its subsidiaries (hereinafter referred to as the ‘group’)isaglobal softwarecompanyandisengagedinthebusinessofsoftware product development including designinganddeliveringend-to-endsoftware solutionscoveringtheentirespectrumofsoftwareservicesfromWorkflowAutomationtoDocument ManagementtoImaging.Groupprovidesacompleterangeofsoftwarethathelpsautomatebusinessprocesses. Newgen’ssolutionsenabledocumentintensiveorganizations /industriessuchasFinanceandBanking,Insurance andGovernmentDepartmentstoimproveproductivitythroughbetterdocumentmanagementandworkflow implementation.2. Significant accounting policies a) Basis of brparation These financial statements are brpared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis. Indian GAAP primarily comprises of mandatory accounting standards as brscribed under Section 133 of the Companies Act, 2013 (‘Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014, and other accounting pronouncement issued by the Institute of Chartered Accountants of India and the provisions of the Act (to the extent notified). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or arevision to an existing accounting standard requires a change in the accounting policy hitherto in use. b) Principles of consolidation The consolidated financial statements have been brpared in accordance withIndian Generally Accepted Accounting Principles (GAAP) including accounting standards specified under section 133 of the Companies Act, 2013, read with rule 7 of the Companies (Accounts) Rules, 2014. The consolidated financial statements include the financial statements of the Company and its following subsidiaries: Name of Subsidiaries | Country of Incorporation | Effective Shareholding (%) | Newgen Software Inc. | U.S.A | 100 | Newgen Software Technologies Canada, Limited | Canada | 100 | Newgen Software Technologies PTE, Limited | Singapore | 100 | Newgen Computer Technologies Limited | India | 100 | Sandeep Import Export Private Limited* | India | 100 |
*Merged with the Holding Company with effect from 1 April 2015. (Refer Note 36) The consolidated financial statements have been brpared on the following basis: The financial statements of the Holding Company and its subsidiary companies are combined on a line-by-line basis by adding the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances/transactions and unrealized profits in full in accordance with Accounting Standard (AS-21)-“Consolidated Financial Statements”. The amounts shown in respect of reserves comprise the amount of the relevant reserves as per the balance sheet of the parent company and its share in the post-acquisition increase/decrease in the reserves of the consolidated entities. The excess/deficit of cost to the parent company of its investment over its portion of net worth in the consolidated entities at the respective dates on which investment in such entities was made is recognized in the consolidated financial statements as goodwill/capital reserve. The parent company’s portion of net worth in such entities is determined on the basis of book values of assets and liabilities as per the financial statements of the entities as on the date of investment and if not available, the financial statements for the immediately brceding period adjusted for the effects of significant changes. The financial statements of the foreign non integral subsidiaries (collectively referred to as the ‘foreign non integral operations’) are translated into Indian rupees as follows:-Share capital and opening reserves and surplus are carried at historical cost.ii. All assets and liabilities, both monetary and non-monetary, (excluding share capital, opening reserves and surplus) are translated using the year-end rates.iii. Profit and loss items are translated at the respective weighted average rates or the exchange rate that approximates the actual exchange rate on date of specific transactions.iv. The resulting net exchange difference is credited or debited to the foreigncurrency translation reserve. c) Current - Non Current classification All assets and liabilities are classified into current and non-current as per Company’s normal accounting cycle. Assets An asset is classified as current when it satisfies any of the following criteria: 1) it is expected to be realised in, or is intended for sale or consumption in, the Company’s normal operating cycle; 2) it is held primarily for the purpose of being traded; 3) it is expected to be realised within 12 months after the reporting date; or 4) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 monthsafter the reporting date. Current assets include the current portion of non-current financial assets. All other assets are classified as non-current. Liabilities A liability is classified as current when it satisfies any of the following criteria: 1) it is expected to be settled in the company’s normal operating cycle; 2) it is held primarily for the purpose of being traded; 3) it is due to be settled within 12 months after the reporting date; or 4) the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equityInstruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Operating cycle Operating cycle is the time between the acquisition of assets for processing and theirrealisation in cash or cash equivalents. d) 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, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include relative fair value of goods and services provisions of future obligation under employee retirement benefit plans, estimated useful life of fixed assets, provision for doubtful debts and loans and advances and provision for income-tax. Actual results could differ from these estimates. Any revisions to estimates are recognised prospectively in current and future periods. . e) 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. f) Intangible fixed assets Intangible fixed assets comprising of computer softwares, 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 capitalised in the year in which the software is fully implemented for use. g) Debrciationand amortisation The management has determined the estimated useful lives of the assets based on the consideration of useful lives as brscribed under part C of Schedule II of the Act and the period over which the Company expects to derives estimated economic benefits from the use of such assets. Leasehold land is amortized over lease period i.e. 90 years. The estimated useful lives of asset determined are as follows: Category of fixed assets | Estimated useful life (Years) | Tangible assets Building | 60 | Plant and machinery | 15 | Office equipment* | 10 | Furniture and fixtures | 10 | Vehicles | 8 | Computers hardware | | - Server and networks | 6 | - Computers* | 5 | | | Intangible assets | | Computer software | 4 | | |
*For these class of assets, based on internal assessment and technical evaluation, management believes that the useful lives as given above best rebrsent the period over which management expects to use these assets. Hence the useful lives for these assets is different from the useful lives as brscribed under Part C of Schedule II of the Act. During the brvious year the method of debrciation had been changed from Written down vale (WDV) to straight line method (SLM) for all tangible and intangible assets. The policy had been changed to reflect the pattern in which economic benefits of the assets are consumed based on historical and future expected use and therefore results in brsentation of financial results in a more appropriate manner. Tangible assets and Intangible assets with respect to subsidiaries based outside India are debrciated on straight line basis over the estimated useful lives. h) Impairment of assets ThemanagementassessesateachBalanceSheetdatewhetherthereisanyindicationthatafixedassetmay beimpaired.Ifanysuchindicationexists,themanagementestimatestherecoverableamountoftheasset.If suchrecoverableamountoftheassetortherecoverableamountofthecashgeneratingunittowhichtheasset belongstoislessthanitscarryingamount,thecarryingamountisreducedtoitsrecoverableamount.The reductionistreatedasanimpairmentlossandisrecognizedintheStatement ofProfitandLoss. An impairmentlossisreversediftherehasbeenachangeintheestimatesusedtodeterminetherecoverable amount.Impairmentlossisreversedonlytotheextentthattheasset'scarryingamountdoesnotexceedthe carryingamountthatwouldhavebeendeterminednetofdebrciationoramortisation,ifnoimpairmentloss had been recognised. i) Investments Investmentsthatarereadilyrealisableandintendedtobeheldfornotmorethanayearfromthedateof acquisitionareclassifiedascurrentinvestments.Allotherinvestmentsareclassifiedaslong-term investments.However,thatpartoflongterminvestmentswhichisexpectedtoberealisedwithin12months after the reportingdate is brsentedunder‘currentassets’inconsonancewiththe current/ non-current classification scheme of schedule III of Companies Act, 2013. Non currentinvestments(includingcurrentportionthereof)arecarriedatcostlessanyother-than-temporary diminutioninvalue,determinedseparatelyforeachindividualinvestment.Currentinvestmentsarecarriedat the lower of cost and fair value determined by category of investment. The fair value is determined using quoted market price/market observable information adjusted for cost of disposal. On disposal of the investment, the difference between its carrying amount and net disposal proceeds is charged to profit and loss. j) Inventories Inventories of stock-in-trade have been valued at the lower of cost and net realisable value. Cost of stock-in- trade is determined using the first-in-first-out (FIFO) basis. k) Revenue recognition Revenuefromsaleoflicensesforsoftwareproductsisrecognisedontransferoftitletothecustomer,which generally coincides with delivery of licence to the customer. Whenafixedpricesalesarrangementcontainsmultiple-elements,suchassaleoflicensesforsoftware products,implementationservicesandotherservices,revenueforeachelementisbasedonrevenue arrangementsinwhichacustomermaypurchaseacombinationofitsservices.Revenuefrommultiple- elementarrangementsisrecognized,foreachrespectiveelement,basedon(1)theattainmentofthedelivery criterion;(2)itsfairvalue,whichisdeterminedusingthesellingpricehierarchyofvendor-specificobjective evidence (“VSOE”)offairvalue,third-partyevidence orbestestimatedsellingprice,as applicable,and(3)its allocated selling price, which is based on the relative sales price method except where fair value of delivered component is not determinable residual method is followed. Therevenuesfromfixedpricecontractsforsoftwaredevelopmentisrecognizedbasedonproportionate completion method and foreseeable losses on the completion of contract, if any, are recognised immediately. Revenuewithrespecttotimeandmaterialcontractsisrecognized,asrelatedservicesareperformedonaman month basis. Revenue from digitization services is recognized as services are rendered to the customer. Revenuefromannualtechnicalserviceandmaintenancecontractsisrecognisedonaproratabasisoverthe period in which such services are rendered. Amountsreceivedorbilledinadvanceofservicesperformedarerecordedasadvancefrom customers/unearnedrevenue.Unbilledrevenuerebrsentsamountsrecognizedbasedonservicesperformedin advance of billing in accordance with contract terms. Rentalincomefromofficeequipmentsgivenonoperatingleaseisrecognisedonastraight-linebasisoverthe lease term. l) Other income Interestincomeisrecognisedontimeproportionbasistakingintoaccounttheamountoutstandingandthe rate applicable. Dividendfrominvestmentsisrecognizedwhenrighttoreceivethepaymentisestablishedandwhenno significant uncertainty as to measurability or collectability exists. ProfitonsaleofinvestmentsisrecordedontransferoftitlefromtheCompanyandisdeterminedasthe difference between the sales price and the carrying value of the investment. m) Trade receivables TheCompanymaintains provision for doubtfuldebts forestimatedlossesinherent inits tradereceivable portfolio.Inestablishingtherequiredprovision,managementconsidershistoricallossesadjustedtotakeinto accountcurrentmarketconditionsanditscustomers’financialcondition,theamountoftradereceivablesin disputeandthecurrentageingandcurrentpaymentpatterns.Tradereceivableaccountbalancesarecharged offagainsttheprovisionafterallmeansofcollectionhavebeenexhaustedandthepotentialforrecoveryis considered remote. n) Foreign currency transactions Foreignexchangetransactionsarerecordedusingtheexchangeratebrvailingonthedateofthetransaction. Exchangedifferencesarisingonforeignexchangetransactionssettledduringtheyeararerecognisedinthe Statement ofProfitandLossfortheyear. Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesas atthe BalanceSheet datearetranslated attheexchange ratesonthatdate andthe resultant exchange differencesarerecognisedintheStatementofProfitandLoss.Non-monetaryitemsdenominatedinaforeign currency,i.e.,investments,arecarriedathistoricalcostandarestatedattheexchangerateatthedateof transaction.o) Leases Operating leases Lease arrangements, where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as an operating lease. Operating lease charges are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. p) Provisions, contingent liabilities and contingent assets AprovisionisrecognisedwhentheCompanyhasabrsentobligationasaresultofapasteventanditis probablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation andreliableestimatecanbemadeoftheamountoftheobligation.Acontingentliabilityisdisclosedwhere thereisapossibleobligationorabrsentobligationthatmay,butprobablywillnot,requireanoutflowof resources. The Companydoesnotrecogniseassetswhichareofcontingentnature.However,ifithas becomevirtuallycertainthataninflowofeconomicbenefitswillarise,theassetandrelatedincomeare recognised in the financial statements of the period in which the change occurs. q) Employee benefitsShort term employee benefits Allemployeebenefitspayablewhollywithintwelvemonthsofrenderingtheserviceareclassifiedasshort- termemployeebenefits.Benefitssuchassalaries,wages,bonusetc.arerecognisedintheStatementofProfit and Loss in the period in which the employee renders the related service.Post employment benefits Defined contribution plans The Company makes contributions to provident fund which is a defined contribution plan. Defined benefit plans TheCompany's gratuityplanisadefinedbenefitplan.Presentvalueofobligationsundersuchdefinedbenefit planisdeterminedbasedonanactuarialvaluationcarriedoutbyanindependentactuaryusingtheProjected UnitCreditMethod,whichrecogniseseachperiodofserviceasgivingrisetoadditionalunitofemployee benefitentitlementandmeasureeachunitseparatelytobuildupthefinalobligation. Theobligation is measured at the brsent value of estimated future cash flows. The discount rates used for determining the brsent value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarialgainsandlossesarerecognisedimmediately intheStatementofProfitandLoss.Gainsorlosseson thecurtailmentorsettlementofanydefinedbenefitplanarerecognisedwhenthecurtailmentorsettlement occurs. Other long term benefits Theobligationinrespectofcompensatedabsencesisprovidedonthebasisofactuarialvaluationcarriedout byanindependentactuaryusingtheProjectedUnitCreditMethod,whichrecogniseseachperiodofservice asgivingrisetoadditionalunitofemployeebenefitentitlementandmeasureeachunitseparatelytobuildup thefinalobligation.Theobligationismeasuredatthebrsentvalueofestimatedfuturecashflows.The discountratesusedfordeterminingthebrsentvalueofobligationunderdefinedbenefitplans,isbasedon themarketyieldsonGovernmentbondsasattheBalanceSheetdate,havingmaturityperiodsapproximating tothetermsofrelatedobligations.ActuarialgainsandlossesarerecognisedimmediatelyintheStatementof Profit and Loss. r) Employee share based compensation TheCompanycalculatestheemployeestockcompensationexpensebasedontheintrinsicvaluemethod whereintheexcessofintrinsicvalueofunderlyingequitysharesasonthedateofthegrantofoptionsover theexercisepriceoftheoptions giventoemployeesundertheEmployeeStockOptionSchemeofthe Company,isregardedasemployeecompensationexpenseandrecognisedonagradedvestingbasisoverthe vestingperiodinaccordancewiththe"GuidanceNoteonAccountingforEmployeeShare-basedPayments", issuedbytheInstituteofCharteredAccountantsofIndia.TheCompanyhassetupatrusttoadministerthe ESOP Plan under which options have been granted to employees. s) Segment accounting policies Theaccountingprinciplesconsistentlyusedinthebrparationofthefinancialstatementsareconsistently appliedtorecordrevenueandexpenditureinindividualsegments.Theaccountingpoliciesinrelationto segment accounting are as under:i) Segment assets and liabilities Allsegmentassetsandliabilitieshavebeenallocatedtothevarioussegmentson thebasisof specific identification.Segmentassetsconsistprincipallyoffixedassets,capitalworkinprogress,tradereceivables, loansandadvancesandserviceincomeaccruedbutnotbilled.Segmentassetsdonotincludeunallocated advance tax, deferred tax assets and other assets not specifically identifiable with a segment. Segmentliabilitiesincludesundrycreditors,otherliabilitiesandstaffbenefits.Segmentliabilitiesdonot includesharecapital,reservesandsurplus,provisionforincometaxandotherliabilitiesnotspecifically identifiable with a segment.ii) Segment revenue and expenses Segmentrevenueandexpensesaredirectlyattributabletothesegmentandhavebeenallocatedtovarious segmentsonthebasisofspecificidentification.Segmentrevenuedoesnotincludeinterestincomeand miscellaneousincomeinrespectofnon-segmentalactivities.Segmentexpensesdonotincludedebrciation onunallocatedcorporatefixedassets, financecosts,taxexpense andotherexpenseinrespectof non- segmental activities.iii) Unallocated assets, liabilities, revenue and expenses Certainassets,liabilities,revenueandexpensesarenotspecificallyallocabletoindividualsegmentsasthe underlyingservicesareusedinterchangeably.TheCompanybelievesthatitisnotpracticabletoprovide segmentdisclosuresrelatingtosuchassets,liabilities,revenueandexpensesandaccordinglysuchassets, liabilities, revenue and expenses are separately disclosed as ‘unallocated’. t) Taxation Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). Income tax expense is recognised in the Consolidated Statement of Profit and Loss except that tax expense related to items recognised directly in reserves is also recognised in those reserves. Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws. Deferred tax is recognised in respect of timing differences between taxable income and accounting income i.e. differences that originate in one period and are capable of reversal in one or more subsequent periods of each entity in the Group. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed debrciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised. Deferred tax consequences of timing differences that originate in the tax holiday period and reverse after the tax holiday period are recognised in the period in which the timing differences originate. Timing differences that originate and reverse within the tax holiday period are not considered for deferred tax purposes. The break-up of the major components of the deferred tax assets and liabilities as at Balance Sheet date has been arrived at after setting off deferred tax assets and liabilities where the entity has a legally enforceable right to set-off assets against liabilities and where such assets and liabilities relate to taxes on income levied by the same governing taxation laws. For Indian entities, Minimum Alternate Tax (‘MAT’) under the provisions of the Income-tax Act, 1961 is recognised as current tax in the Consolidated Statement of Profit and Loss. The credit available under the Income tax Act, 1961 in respect of MAT paid is recognised as an asset only when and to the extent there is convincing evidence that the respective entities will pay normal income tax during the period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid convincing evidence no longer exists. u) Earnings per share TheCompanyreportsbasicanddilutedearnings/(loss)perequityshareinaccordancewithAccounting Standard20,"EarningsPerShare" specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts)Rules,2014.Thebasic earnings/(loss)pershareiscomputedbydividingthenetprofit/(loss)attributabletoequityshareholdersfor theyearbytheweightedaveragenumberofequitysharesoutstandingduringtheyear.Dilutiveearningsper shareiscomputed anddisclosedafter adjustingtheeffects ofall dilutivepotentialequityshares,ifany, except when the results will be anti-dilutive. v) Cash and cash equivalents Cashandcashequivalentsincludecashonhand,demanddepositswithbanks,othershort-termhighlyliquid investments with original maturities of three months or less. |