SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED ACCOUNTS

1. Nature of operations:
Fractal is the leading provider of advanced analytics that helps companies leverage data driven insights in taking considered decisions. The analytics solution of Fractal helps companies to enhance profitability by powering their customer management efforts with scientific decision making.

2. Principles of consolidation:
The Company has 4 subsidiaries of which 2 are newly incorporated in India and 6 step down subsidiaries which are all incorporated outside India.

The Consolidated Financial Statements have been brpared on the following basis:
a) The consolidated financial statements have been brpared in accordance with the principles and procedures required for the brparation of Consolidated Financial Statements as laid down under the Accounting Standard (AS-21) Consolidated Financial Statements.

b) The financial statements of the subsidiaries forming part of the consolidated financial statements are drawn up to the same reporting date as that of the Company, i.e. year ended 31st March 2017.

c) The financial statements of the Parent Company and its subsidiaries have been consolidated on a line-by-line basis by adding together the book values of similar items of assets, liabilities, income and expenses, after eliminating intra-group balances, intra-group transactions and resulting unrealized gains/losses.

d) The consolidated financial statements have been brpared by applying uniform accounting policies for similar transactions except otherwise stated.

e) All employee related benefits including social security have been provided in accordance with the laws of country in which the individual entity is operating.

f) The consolidated Financial Statements brsent the consolidated accounts of Fractal Analytics Private Limited, with its following Subsidiaries:

Name of the subsidiary	Ownership in % either directly or through subsidiaries 2016-17	Country of incorporation
Fractal Analytics Inc	100.00%	USA
Fractal Private Limited	100.00%	Singapore
Fractal Analytics UK Limited (100% Subsidiary of Fractal Analytics Inc USA)	100.00%	UK
Fractal Analytics (Canada) Inc . (100% Subsidiary of Fractal Private Limited)	100.00%	Canada
Fractal Analytics (Italy) S.r.l (100% Subsidiary of Fractal Private Limited)	100% Closed on       3rd November 2016	Italy
Fractal Analytics (Switzerland) GmbH (100% Subsidiary of Fractal Private Limited)	100.00%	Switzerland
Fractal Analytics (Guangzhou) Ltd. 100% Subsidiary of Fractal Private Limited)	100.00%	China
Cuddle Artificial Intelligence Pvt. Ltd.	100.00%	India
Qure.ai Technologies Pvt. Ltd.	100.00%	India
Fractal Analytics Germany GmbH 100% subsidiary of Fractal Private Limited)	100.00%	Germany
Cuddle.ai Inc, USA* (100% Subsidiary of Cuddle Artificial Intelligence Pvt. Ltd.)	100.00%	USA

*  The Board of Directors of the company have approved investment in Cuddle.ai Inc, USA however capital infusion is pending to be made as at March 31, 2017.

3. Significant Accounting Policies:

A. Basis of Preparation of Financial Statements:

The financial statements have been brpared in compliance with the applicable Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and other pronouncement of Institute of Chartered Accountant of India, with relevant provisions of Companies Act, 2013; and generally accepted accounting principles applicable in India (GAAP). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires changes in the accounting policy hitherto in use.

 The financial statements have been brpared under historical cost convention on an accrual basis.

 All the assets and liabilities have been classified as current or non-current as per CompanyRs.s normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of product and time between the acquisition of assets for processing and their realization in cash and cash equivalent, the Company has ascertained its operating cycle to be 12 months for the purpose of current – non-current classification of assets & liabilities.


B. Use of Estimates:

The brparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosure relating to contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debt, future obligations under employee retirement benefit plans, income taxes and the useful life of fixed assets and intangible assets.  Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates.Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.

C. Fixed Assets & Leases:

Fixed Assets are stated at cost less accumulated debrciation and impairment loss, if any. All costs, including financing costs till commencement of commercial usage are capitalized.

Fixed assets acquired under finance leases are recognized at lower of fair value  of lease assets at the time of rchase/acquisition and the brsent value of minimum lease payment. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability.

Leases: Leases are classified as finance leases whenever the terms of lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases and the related lease obligations are recorded in the balance sheet at the fair value of the leased assets at the inception of the leases. The excess of the lease payments over the recorded lease obligations is treated as a finance charge which is amortized over each lease term to give a constant rate of charge on the remaining balance of the obligation.

Rental costs under operating leases are charged to income statement in equal annual amounts over the period of the leases.


D. Intangible Assets:

The intangible assets such as software and intellectual property are stated at cost less accumulated amortization and impairment losses if any. Cost comprises of the acquisition price, and any cost directly attributable and allocable on a reasonable basis to making the asset ready for its intended use.

E. Debrciation & Amortization:

The details of debrciation for Fractal Analytics Pvt. Ltd., Fractal Analytics Inc, USA and Fractal Pvt. Ltd., Singapore are as under:

Sr. no.	Name of the company and description of assets	Method	Useful life of assets/Debrciation rates	Proportion to gross block
1	Fractal Analytics Private Limited, India
Property, Plant & Equipment
Furniture & Fittings		WDV	10 years	63.11%
Office equipment		SLM	3 years	81.83%
Computers		WDV	3 years	92.46%
Intangible assets
Intellectual properties		SLM	5 years	100.00%
Leasehold Property		SLM	3 years	93.14%
Computer Software		SLM	3 years	67.36%
2	Fractal Analytics Inc USA
Property, Plant & Equipment
Computers		SLM	5 years	7.51%
Office Equipment		SLM	5 years	18.17%
Furniture & Fixtures		SLM	5 years	36.89%
Leasehold Improvements		SLM	5 years	6.86%
Intangible assets
Computer Software		SLM	3 years	32.64%
Patent		SLM	3 years	100.00%
3	Fractal Private Ltd., Singapore
	Computers	SLM	3 years	0.03%

F. Impairment of Assets:

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount.

The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value at the weighted average cost of capital.

G. Foreign Currency Transactions:

a) Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

b) Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. In case of monetary items the difference between the year end rate and rate on the date of the transaction is recognized as exchange difference.

c) Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of Company at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognized as income or as expenses in the year in which they arise.

d) Forward Contract: The Company uses foreign exchange forward contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward contracts reduces the risk or cost to the Company and the Company does not use those for trading or speculation purpose. Accounting for brmium / discount i.e. the difference between the forward rate and the spot rate at the date of inception of the forward exchange contract is amortized as income or expenses over the life of the forward exchange contract. Accounting for exchange difference on the forward exchange contract entered into for hedging purpose is recognized in the statement of profit and loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or expense.



H. Revenue Recognition:

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

a) Income from Services:
Revenue includes Income from Projects or Consultancy and Services provided during pilot period, adjusted for discounts (net). All the fees/charges received towards Project completed or Consultancy provided is recognised as Revenue as per agreed terms of delivery. Project Advances received from Clients of the Company are carried as Current Liabilities till such delivery is made or till it becomes due. The Company carries on the practice of recognizing “Unbilled Revenue” as income for the year based on progress made on assignments/projects/services underway on the date of the Balance Sheet.

b) Interest:
Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

c) Dividends:
Revenue is recognised when the shareholders’ right to receive payment is  established by the balance sheet date.

I. Employee Benefits:

a) Short term employee benefits are recognized as an expense at the undiscounted amount in the statement of Profit and Loss of the year in which the related service is rendered.

b) Retirement benefits in the form of Provident Fund are a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

c) Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.

d) Actuarial gains/losses are immediately taken to Statement of Profit and Loss and are not deferred.

J. Employee Stock Option:

The Company has issued shares to its employees under the Employee Stock Options Plan. The accounting for ESOP has been done on intrinsic valuation method in accordance with the Guidance note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India and employee compensation expense has been recognized in the Statement of Profit and Loss over the vesting period on a time proportion basis.

K. Borrowing Costs:

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

L. Provision for Current and Deferred Tax:

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with thelocal taxation laws. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. 

M. Earnings Per Share (EPS):

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes) 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 were 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 of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).

For the purpose of calculating diluted EPS, the net profit or loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity share.

N. Provision, Contingent Liabilities & Contingent Assets:

A provision is recognised when an enterprise has a brsent obligation as a result of past event; 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 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 the current best estimates.

Contingent Liability is disclosed in case of a brsent obligation arising from a past event, where it is not probable that an outflow of resources will be required to settle the obligation or where there is a possible obligation, unless the probability of outflow of resources is remote.

Contingent Assets are neither disclosed nor recognised.

O. Cash and Cash Equivalents:

Cash and cash equivalents for the purpose of the Cash Flow Statement comprises cash on hand, cash in bank, fixed deposits and other short term highly liquid investments with an original maturity of three months or less that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value.

P. Cash Flow Statement:

Cash flows are reported using the indirect method as brscribed by Accounting Standard – 3 whereby cash flows from operating, investing and financing activities of the Company are segregated and profit before 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.

With respect to Segment Reporting, the management has identified Business Segment as Primary Segment.  As the company is mainly involved in providing Analytics services, there are no separate Reportable Business Segments.

The Company has identified Geographical segment as the secondary segment. Reporting per Accounting Standard 17 on "Segment Reporting" notified under Companies (Accounts) Rules, 2014 are as follows:

Particulars	USA	Rest of the World	Total
Segment Revenue (3rd Party)	2,437,452,087 (2,095,125,891)	333,952,848 (236,799,154)	2,771,404,935 (2,331,925,045)
Segment Asset (Debtors)	388,520,481 (342,727,015)	95,146,403 (45,116,849)	483,666,885 (387,843,864)