FUTURE OFSS Notes to Accounts

Note: Share application money pending allotment for the year ended March 31, 2017 represents the money received from employees of the Company towards exercise of 480 stock options at the exercise price of Rs, 2,050.00 under Employee Stock Option Plan 2010 Scheme ("Scheme 2010"), 3,053 stock options at the exercise price of Rs, 1,929.95, 2,612 stock options at the exercise price of Rs, 3,076.85 and 3,243 stock options at the exercise price of Rs, 3,126.85 under Employee Stock Option Plan 2011 Scheme ("Scheme 2011") and 2,658 OFSS Stock Units ("OSUs") at the exercise price of Rs, 5 and 338 stock options at the exercise price of Rs, 3,241.25 under Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Each stock option and OSUs will entitle one equity share of Rs, 5 each of the Company.


Note: The Board of Directors have declared an interim dividend on March 29, 2017 of Rs, 170 per share for the year ended March 31, 2017 which was paid subsequent to the date of balance sheet (March 31, 2016 - Rs, Nil). The Board of Directors have proposed a final dividend of Rs, Nil for the year ended March 31, 2017 (March 31, 2016 - Rs, 100 and March 31, 2015 - Rs, 180).


* The identification of Micro and Small Enterprises is based on Management''''s knowledge of their status.


** The Company entered into foreign exchange forward contracts with the intention of reducing the foreign exchange risk of trade receivables; these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.


*** There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.


Terms and conditions of financial liabilities:


- Trade payables are non-interest bearing and are normally settled on 30-day terms


- Other financial liabilities are normally settled quarterly throughout the year


Current tax charge for the year ended March 31, 2016 includes provision made in relation to foreign tax receivable of Rs, 413.03 million.


Deferred tax charge for the year ended March 31, 2017 and March 31, 2016 relates to origination and reversal of temporary differences.


Note : As per the requirements of Section 135 of the Companies Act, 2013 the Company was required to spend an amount of Rs, 335.39 million (March 31, 2016 Rs, 334.48 million) on Corporate Social Responsibility expenditure based on the average net profits of the three immediately preceding financial years. The Company has spent an amount of Rs, 337.18 million (March 31, 2016 Rs, 248.47 million) against Corporate Social Responsibility expenditure.


Note 1: Fair values


The management has assessed that fair value of financial instruments approximates their carrying amounts largely due to the short term maturities of these instruments.


Fair value hierarchy :


The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities.


The following methods and assumptions are used to estimate the fair values:


The Company enters into derivative financial instruments with various banks. Foreign exchange forward contracts are valued using valuation techniques, which employ the use market observable inputs. The most frequently applied valuation techniques include forward pricing using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies.


There have been no transfers between Level 1 and Level 2 during the periods March 31, 2017, March 31, 2016 and April 1, 2015.


Note 2 Significant accounting judgments, estimates and assumptions


The preparation of the Company’s standalone financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.


The key assumptions and estimate at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. These assumptions and estimates are based on available parameters as on the date of preparation of standalone financial statements. These assumptions and estimates, however, may change due to market changes or circumstances arising that are beyond the control of the Company.


- Operating lease


The Company has entered into commercial property leases for its offices. The Company has accounted these contracts as operating leases which have been determined based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property, the fair value of the asset and that the Company does not obtain any significant risks and rewards of ownership of these properties.


- Fair value of investment property


As per the Ind AS, the Company is required to disclose the fair value of the investment property. Accordingly, the Company has engaged an independent valuation specialist to assess the fair values of investment property as at April 1, 2015, March 31, 2016 and March 31, 2017. The investment property was valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the investment property. The key assumptions used to determine fair value of the investment property and sensitivity analysis are provided in note 4.


- Impairment of non-financial assets


Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the projections for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.


- Share based payments


The Company measures share-based payments and transactions at fair value and recognizes over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model used for estimating fair value for share-based payment transactions are disclosed in note 26(b).


- Taxes


Deferred tax liability is recognized on the undistributed profits of subsidiaries where it is expected that the earnings of the subsidiary will be distributed in foreseeable future. Significant management judgment is required to determine the amount of deferred tax that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.


- Defined benefit plans (gratuity benefits)


The cost of the defined benefit gratuity plan and other post-employment retirement benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date annually. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. For plans operated outside India, the management considers the interest rates of high quality corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation with at least an ‘AA’ rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.


The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases is based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 27.


- Fair value measurement of financial instruments


When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 21 for further disclosures.


Note 3: Share based compensation / payments


(a) Employee Stock Purchase Scheme ("ESPS")


The Company had adopted the ESPS administered through a Trust with the name i-flex Employee Stock Option Trust (“the Trust”) to provide equity based incentives to key employees of the Company. i-flex Solution Trustee Company Ltd. is the Trustee of this Trust.


No allocation of shares to the employees have been made through the Trust since 2005 and all selected employees under the Trust have exercised their right of purchase of shares prior to March 31, 2014. In this regard, the Trustee Company had filed a petition in the Honorable Bombay High Court to seek directions for utilization of the remaining unallocated shares along with the other assets held by the Trust for the benefit of the employees of the Company. As per the order of the Honorable Bombay High Court dated August 1, 2016, the trust funds would be utilized for the benefit of the employees.


As at March 31, 2017, the Trust is holding 166,142 equity shares (March 31, 2016 - 166,142 equity shares) of Oracle Financial Services Software Limited.


(b) Employee Stock Option Plan ("ESOP")


The Members at their Annual General Meeting held on August 14, 2001 approved grant of ESOPs to the employees / directors of the Company and its subsidiaries up to 7.5% of the issued and paid-up capital of the Company from time to time. This said limit was enhanced and approved up to 12.5% of the issued and paid-up capital of the Company from time to time, by the Members at their Annual General Meeting held on August 18, 2011. This extended limit is an all inclusive limit applicable for stock options granted in the past and in force and those that will be granted by the Company under this authorization.


Pursuant to ESOP scheme approved by the shareholders of the Company on August 14, 2001, the Board of Directors, on March 4, 2002 approved the Employees Stock Option Scheme (“Scheme 2002”) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2002, the Company has granted 4,548,920 options prior to the IPO and 619,000 options at various dates after IPO (including the grants of options out of options forfeited earlier).


On August 25, 2010, the Board of Directors approved the Employees Stock Option Plan 2010 Scheme (“Scheme 2010”) for issue of 618,000 options to the employees and directors of the Company and its subsidiaries. According to the Scheme 2010, the Company has granted 638,000 options (including the grants of options out of options forfeited earlier).


Pursuant to ESOP scheme approved by the shareholders of the Company in their meeting held on August 18, 2011, the Board of Directors approved the Employees Stock Option Plan 2011 Scheme (“Scheme 2011”). Accordingly, the Company has granted 1,950,500 options under the Scheme 2011. Nomination and Remuneration Committee in their meeting held on August 7, 2014 approved Oracle Financial Services Software Limited Stock Plan 2014 (“OFSS Stock Plan 2014”). Accordingly the Company granted 156,795 stock options and 457,601 OFSS Stock Units (‘OSUs’) under OFSS Stock Plan 2014. The issuance terms of OSUs are the same as for stock options, employees may elect to receive 1 OSU in lieu of 4 awarded stock options at their respective exercise price.


As per the Scheme 2002, Scheme 2010 and Scheme 2011, each of 20% of the total options granted will vest on completion of 12, 24, 36, 48 and 60 months from the date of grant and is subject to continued employment of the employee or directorship of the director with the Company or its subsidiaries. Options have an exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of options.


In respect of the OFSS Stock Plan 2014, each of 25% of the total stock Options/OSUs granted will vest on completion of 12, 24, 36 and 48 months from the date of grant and is subject to continued employment of the employee with the Company or its subsidiaries. Options/OSUs have exercise period of 10 years from the date of grant. The employee pays the exercise price upon exercise of Options/OSUs.


The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.


The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Plan assets are administered by the LIC and invested in lower risk assets, primarily debt securities. The expected rate of return on plan assets is based on the expected average long term rate of return on investments of the fund during the terms of the obligation.


The Company’s contribution to the fund for the year ending March 31, 2018 is expected to be Rs, 111.65 million (March 31, 2017 Rs, 99.56 million).


Note 4: Investment in associate


The Company has a 33% interest in Login S.A; a private company incorporated in France which specializes in trading, risk management and back-office software, dedicated to bank treasury and capital markets activities.


The Company has an investment of Rs, 6.59 million in Login S.A as against total investments of Rs, 7,549.57 million as at March 31, 2017 and accordingly the investment in Login S.A is considered as immaterial as per the guidelines of Ind AS 112.


Note 5: Financial risk management objectives and policies


The Company’s activities expose it to market risks, Liquidity risk and credit risks. The management oversees these risks and is aided by the Risk Management Committee whose scope is to formulate the risk management policy, which will identify elements of risk, if any which may affect the Company.


(a) Market risk


Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of foreign currency risk.


Foreign currency risk


Foreign currency risk is the risk that the fair value or future cash flows of monetary items will fluctuate because of changes in foreign exchange rates. This may have potential impact on the statement of profit and loss and other components of equity, where monetary items are denominated in a foreign currency, which are different from functional currency in which they are measured. As at the balance sheet date, the Company’s net foreign currency exposure expressed in INR that is not hedged is Rs, 4,009.00 million (March 31, 2016 Rs, 427.35 million and April 1, 2015 Rs, (3,521.91) million).


The Company manages its foreign currency risk by a hedging the receivables in the major currencies (USD, EUR and AUD) using hedging instrument as forward contracts. The period of the forward contracts is determined by the expected collection period for invoices which currently ranges between 30 to 120 days.


Foreign currency sensitivity


Below table demonstrates sensitivity impact on Company’s profit after tax and total equity due to change in foreign exchange rates of currencies where it has significant exposure:


The above sensitivity impact gain (loss) is due to every percentage point appreciation or depreciation in the exchange rate of respective currencies, with all other variables held constant. Sensitivity impact is computed based on change in value of monetary assets and liabilities denominated in above respective currency, where the functional currency of the entity is a currency other than above respective currency and entity’s with functional currency as above respective currency where transactions are in foreign currencies. The Company’s exposure to foreign currency changes for all other currencies is not material.


(b) Liquidity risk


Liquidity risk management implies maintaining sufficient availability of funds to meet obligations when due and to close out market positions. The Company monitors rolling forecast of the cash and cash equivalent on the basis of expected cash flows.


The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.


The Company has sufficient liquid funds in cash and cash equivalents to meet obligations towards financial liabilities.


(c) Credit risk


Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including time deposits with banks, foreign exchange transactions and other financial instruments.


Trade receivables


Customer credit risk is managed in line with the established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment.


An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on regional historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7.


Cash and Bank balances


Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with existing Bankers and within credit limits assigned to each banker.


Company follows a conservative philosophy and shall aim to invest surplus funds in India only in time deposits with well-known and highly rated banks. The duration of such time deposits will not exceed 364 days. The Company, on quarterly basis, monitors the credit ratings and total deposit balances of each of its bankers. Further limits are set to minimize the concentration of risks and therefore mitigate financial loss of any potential failure to repay deposits.


Note 30: Capital management


For the purpose of the Company’s capital management, capital includes issued equity share capital, share premium and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company’s capital management is to maximize the equity shareholder value.


The Company manages its capital structure and makes adjustments in light of changes in economic conditions and other financial requirements.


Note 6: Derivative instruments


The Company enters into forward foreign exchange contracts where the counter party is a bank. The Company purchases forward foreign exchange contracts to mitigate the risks of change in foreign exchange rate on receivables denominated in certain foreign currencies. The Company considers the risk of non-performance by the counter party as non-material. As at March 31, 2017 the Company has following outstanding derivative instrument:


Note 7: Names of Related Parties and description of relationship:


Relationship Names of related parties


(i) Related parties where control exists


Ultimate Holding Company Oracle Corporation


Holding Company Oracle Global (Mauritius) Limited


Direct Subsidiaries Oracle Financial Services Software B.V.


Oracle Financial Services Software Pte. Ltd.


Oracle Financial Services Software Chile Limited Oracle Financial Services Software (Shanghai) Limited Oracle Financial Services Software America, Inc.


ISP Internet Mauritius Company Oracle (OFSS) Processing Services Limited Oracle (OFSS) ASP Private Limited


Subsidiaries of Subsidiaries Subsidiary of Oracle Financial Services Software B.V.


- Oracle Financial Services Software SA


Subsidiary of Oracle Financial Services Software Pte. Ltd.


- Oracle Financial Services Consulting Pte. Ltd.


Subsidiaries of Oracle Financial Services Software America, Inc.


- Oracle Financial Services Software, Inc.


- Mantas Inc.


Subsidiaries of Mantas Inc.


- Sotas Inc.


Subsidiary of Sotas Inc.


- Mantas India Private Limited


Subsidiaries of ISP Internet Mauritius Company


- Oracle (OFSS) BPO Services Inc.


- Oracle (OFSS) BPO Services Limited


(ii) Associate Login S. A.


(iii) Related parties with whom transactions have taken place during the year


Fellow Subsidiaries Oracle Norge AS


Oracle Egypt Ltd.


Oracle Canada ULC Oracle Taiwan LLC Oracle Romania SRL Oracle Hungary Kft Oracle EMEA Limited Oracle Czech s.r.o.


Oracle America, Inc.


Oracle Nederland B.V.


Oracle Vietnam Pte. Ltd Oracle Italia S.R.L.


Relationship Names of related parties


Oracle Polska, Sp.z.o.o.


Oracle India Private Limited Oracle East Central Europe Limited Oracle Systems Hong Kong Limited Oracle Corporation UK Limited Oracle (Philippines) Corporation Oracle do Brasil Sistemas Limitada Oracle Corporation Malaysia Sdn. Bhd.


Oracle Systems Limited


Oracle Corporation Singapore Pte. Ltd.


Oracle East Central Europe Services BV Oracle Corporation Australia Pty. Limited Oracle Systems Pakistan (Private) Limited Oracle Solution Services (India) Private Ltd.


Oracle Corporation (Thailand) Company Limited Oracle Portugal - Sistemas de Informa^ao Lda.


Oracle Corporation (South Africa) (Pty) Limited Oracle Research & Development Center, Beijing, Ltd.


Oracle Research & Development Center, Shenzhen, Ltd.


Oracle Technology Systems (Kenya) Limited Oracle Luxembourg S.a.r.l.


Oracle de Mexico, S.A. de C.V.


Oracle Korea, Ltd.


Oracle New Zealand PT Oracle Indonesia Oracle (China) Software Systems Co. Ltd.


Oracle Srbija & Crna Gora d.o.o. Beograd Oracle Corporation Japan Oracle Ukraine


(iv) Controlled Trust i-flex ESOP Stock Option Trust


(v) Key Managerial Personnel (KMP'''') Chaitanya Kamat - Managing Director and Chief Executive Officer


Makarand Padalkar - Chief Financial Officer


Onkarnath Banerjee - Company Secretary & Compliance Officer (from June 1, 2015)


Jayant Joshi - Company Secretary & Compliance Officer (from September 29, 2014 till May 31, 2015)


(vi) Independent Directors S Venkatachalam


Richard Jackson


Sridhar Srinivasan (from July 23, 2015)


Note 1: Remuneration includes salary, bonus and perquisites. The bonus is included on payment basis. During the year, 35,500 OSUs under OFSS Stock Plan 2014 (March 31, 2016 — 35,375 OSUs under OFSS Stock Plan 2014) were granted to KMP.


Note 2: Loan given to subsidiaries represents loan to Oracle Financial Services Software America, Inc. amounting to '''' 662.03 million (interest LIBOR 50 basis points), ISP Internet Mauritius Company amounting to '''' 60.41 million (interest LIBOR 50 basis points) and Oracle (OFSS) BPO Services Limited amounting to '''' 30 million; as at March 31, 2016. During the year ended March 31, 2016 impairment has been provided against loan given to ISP Internet Mauritius Company including interest thereon. During the year ended March 31, 2017, all loans given to subsidiaries; including the interest accrued thereon were settled. Interest received on loans represents the interest for the year till the date of settlement of the loan.


Note 3: Terms and conditions of transactions with related parties:


The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''''s length transactions. Outstanding balances at year end are unsecured and interest free and settlement occurs in cash.


Note 8: Litigations


The Company has some litigations in respect of which the Company has aggregate provisions of Rs, 945.50 million as at March 31, 2017 (as at March 31, 2016 - Rs, 945.50 million).


Note9:


Other expenses for the year ended March 31, 2016 include a provision of Rs, 157.77 million against equity investment and loan including interest thereon to a subsidiary company.


Note 10: Exceptional item


(a) During the year ended March 31, 2017, the Company has recorded a charge under the Products segment of Rs, 628.25 million on its receivables from customers in Egypt due to significant devaluation of Egyptian Pound post liberalization of exchange rates by the Egypt Government. The same has been disclosed as an exceptional item.


(b) During the year ended March 31, 2017, the Company has received dividend of Rs, 1,146.73 million, Rs, 1,270.10 million and Rs, 374.01 million from its wholly owned subsidiaries Oracle Financial Services Software B.V., Oracle Financial Services Software Pte. Ltd and Oracle Processing Services Limited respectively. Considering the amount of dividend received, the same has been disclosed as an exceptional item. Tax expenses for the year ended March 31, 2017 includes applicable tax credits on this dividend income.


Note11:


Other income for the year ended March 31, 2017 includes Rs, 245.04 million against liability written-back towards amount due to its wholly owned subsidiary Oracle Financial Services Software, Inc.


Note 12:


Previous year''''s figures have been reclassified, where necessary to conform with current year''''s presentation.


Note13: Recent accounting pronouncements


Standards issued but not yet effective


In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of cash flows’ and Ind AS 102, ‘Share-based payment.’ The amendments are applicable to the Company from April 1, 2017.


(i) Amendment to Ind AS 7 - Statement of Cash Flows


The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.


The Company is evaluating the requirements of the amendment and the effect on the financial statements.


(ii) Amendment to Ind AS 102 - Share-based Payment


The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.


The Company does not have any cash-settled awards as at March 31, 2017.


Note 14: First time adoption of Ind AS


The Company’s date of transition to Ind AS is April 1, 2015. Ind AS 101 - First-time Adoption of Indian Accounting Standards allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following material exemptions:


- Cumulative currency translation differences for all foreign operations are deemed to be zero as at April 1, 2015.


- Ind AS 102 - Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2015.


- Appendix C to Ind AS 17 - Leases requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangements based on conditions in place as at the date of transition.


- The Company has opted to continue with carrying value for all its intangible assets as recognized in its Previous GAAP, as deemed cost at the transition date.


(c) Cash flow statement


There were no significant reconciliation items between cash flows prepared under Previous GAAP and those prepared under Ind AS.


(i) Dividend (including dividend tax)


Under Ind AS, liability for dividend is recognized in the period in which the obligation to pay is established. Under Previous GAAP, dividend payable is recorded as liability in the period to which the dividend relates, even though the dividend may be approved by the shareholders subsequent to the reporting date. This has resulted in an increase in equity.


(ii) Tax adjustments


Tax adjustments include deferred tax impact on account of differences between Ind AS and Previous GAAP. This has resulted reduction in equity.


(iii) Stock compensation adjustments


(a) Under Ind AS, the Company followed ''''Fair Value'''' method using an appropriate valuation model to determine Fair Value of stock Options/OSU as on the date of the grant as against ''''intrinsic value'''' method in the Previous GAAP. This has resulted in additional stock compensation charge considered under comprehensive income to the statement of profit and loss.


(b) Equity Contribution for stock Options/OSU granted to employees of subsidiaries of the Company.


(iv) Fair Valuation


Under Ind AS, financial assets and financial liabilities designated at fair value through profit and loss (FVTPL) are fair valued at each reporting date with changes in fair value recognized in the statement of profit and loss, while financial assets and financial liabilities which are measured at amortized cost are fair valued on the date when they are recognized initially and subsequently amortized using effective interest method. Under Previous GAAP, they were measured at cost.


This has also resulted into reclass of:


- Deposit for premises which are measured at fair value on initial recognition under Ind AS. The same were recorded at cost under Previous GAAP and accordingly, the resultant impact of Rs, 503.69 million and Rs, 389.43 million has been reclosed to prepaid expenses as at April 1, 2015 and March 31, 2016 respectively.


- Loans to subsidiaries which are measured at fair value on initial recognition under Ind AS. The same were recorded at cost under Previous GAAP and accordingly, the resultant impact of Rs, 160.58 & Rs, 181.09 million has been reclassed to investment in subsidiaries as at April 1, 2015 and March 31, 2016 respectively.


(v) Deferral of Revenue


As per Ind AS 18, when the product / services are delivered but the billing is on an extended term then all the payments (including tax) shall be discounted back to their Net Present Value (NPV) with this amount recorded as a reduction to revenue. Further revenue has been adjusted to meet revenue recognition principles of Ind AS 18. This has resulted reduction in equity.


(vi) Actuarial gain / (loss) on gratuity fund


Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability / asset which is recognized in other comprehensive income. Under Previous GAAP, actuarial gains and losses were recognized in the statement of profit and loss. Consequently, impact along with tax effect of the same has been recognized in other comprehensive income under Ind AS.


(vii) Exchange differences


Primarily on account of translation of the functional currency of foreign operations in to presentation currency as per the provisions of Ind AS 21.


Note 15: Segment information


Business segments are defined as a distinguishable component of an enterprise that is engaged in providing a group of related products or services and that is subject to differing risks and returns and about which separate financial information is available. This information is reviewed and evaluated regularly by the management in deciding how to allocate resources and in assessing the performance.


The Company is organized by business segment and geographically. For management purposes the Company is primarily organized on a worldwide basis into two business segments:


a) Product licenses and related activities (Products'''') and


b) IT solutions and consulting services (Services'''')


The business segments are the basis on which the Company reports its primary operational information to management. Product licenses and related activities segment deals with various banking software products. The related activities include enhancements, implementation and maintenance activities.


Segment revenue and expense:


Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services. The expenses which are not directly attributable to a business segment are classified as unallocable expenses.


Segment assets and liabilities:


Segment assets include all operating assets used by a segment and consist principally of trade receivables, net of allowances, unbilled revenue, deposits for premises and property, plant and equipment. Segment liabilities primarily includes trade payables, deferred revenues, advance from customer, employee benefit obligations and other current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown as part of unallocable assets and liabilities.


Non-current assets for this purpose consist of property, plant and equipment, capital work-in-progress, intangible assets, investment property, income tax assets (net) and other non-current assets.


The accompanying notes form an integral part of the financial statements.

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
“2019 © COPYRIGHT DYNAMIC EQUITIES PVT. LTD.”

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

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