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Softsol India Ltd. Notes to Accounts
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You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 369.31 Cr. P/BV 2.51 Book Value (Rs.) 99.48
52 Week High/Low (Rs.) 344/132 FV/ML 10/1 P/E(X) 4,632.41
Bookclosure 30/09/2023 EPS (Rs.) 0.05 Div Yield (%) 0.00
Year End :2018-03 

1. Fair value measurements

(i) Fair value hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: Quoted prices (unadjusted) in active markets for financial instruments.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data rely as little as possible on entity specific estimates.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

28. Financial instruments risk management

“The Company’s principal financial liabilities comprises of trade and other payables. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents and other bank balances that derive directly from its operations. The Company also holds FVTOCI and FVTPL investments.

The Company is exposed to credit risk, market risk and liquidity risk. The Company’s Board of Directors oversees the management of these risks. The Company’s Board of Directors are supported by the senior management that advises on financial risks and the appropriate financial risk governance framework for the Company. The senior management provides assurance to the Company’s Board of Directors that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives.

A. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for credit losses and impairment that represents its estimate of expected losses in respect of trade and other receivables.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Financial assets that are neither past due nor impaired

None of the Company’s cash equivalents, including fixed deposits, were either past due or impaired as at 31 March 2018.

Other than trade receivables, the Company has no significant class of financial assets that is past due but not impaired.

On account of adoption of Ind AS 109, the Company uses Expected Credit Loss (ECL) model for assessing the impairment loss. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers. The management believes that there is no change in allowance for credit losses during the year ended 31 March 2018 and 31 March 2017.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due.

Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company’s liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet obligations, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

The Company’s principal sources of liquidity are the cash flows generated from operations. Further the Company has no long term borrowings and working capital facilities which the management believes are not required considering its present scale of operations.

Maturities of financial liabilities

The tables below analyses the Company’s financial liabilities following into different maturity groupings based on their contractual maturities for all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is insignificant.

Summary of significant accounting policies and other explanatory information

(All amounts in ' lakhs, except share data and where otherwise stated)

C. Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all shortterm and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the Company’s exposure to market risk is a function of revenue generating and operating activities in foreign currencies.

Foreign exchange risk

“The Company’s foreign exchange risk arises from its foreign currency revenues (primarily in US$). Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the company’s functional currency. A significant portion of the Company’s revenues are in US$. As a result, if the value of the Indian rupee appreciates relative to US$, the Company’s revenues measured in Indian rupees may decrease. The following table details non derivative financial instruments which are denominated in US$:”

2. Capital risk management

The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Hence, the Company may adjust any dividend payments, return capital to shareholders or issue new shares. Total capital is the equity as shown in the statement of financial position. Currently the Company does not have any long term borrowings and working capital facilities.

*KMPs are eligible for gratuity and compensated absences along with other employees of the Company. The provision made for gratuity and compensated absences pertaining to the KMPs has not been included in the aforementioned disclosures as these are not determined on an individual basis.

3. Segment reporting

In accordance with Ind AS 108 - ‘Operating segments’, segment information has been given in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

4. Deferred tax assets have been recognized only to the extent of deferred tax liabilities i.e deferred tax assets have been recognized only to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilized against future taxable income of the Company.

5. First time adoption of Ind AS

“These financial statements, for the year ended 31 March 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with Indian GAAP, including accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 (previous GAAP or Indian GAAP). The Company has prepared financial statements which comply with Ind AS applicable for periods ending on or after 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (the Company’s date of transition), as described in the summary of significant accounting policies.

However, these financial statements do not include financial information for the prior period. In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with previous GAAP. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.”

Optional exemptions availed and mandatory exceptions applied

Set out below are the Ind AS 101 optional exemptions availed as applicable and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

(i) Deemed cost for property, plant and equipment, investment property and other intangible assets

On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment, investment property and other intangible assets recognized as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment, investment property and other intangible assets.

(ii) Designation of previously recognized financial instruments

“At the date of transition to Ind AS, Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances of each case. The Company has elected to apply this exemption for its investment in subsidiary and equity units held in venture capital fund.

At the date of transition to Ind AS, Ind AS 101 also allows an entity to designate investments in equity instruments at FVTPL on the basis of the facts and circumstances of each case. The Company has elected to apply this exemption for its investment in mutual funds.”

(iii) Estimates

“As per Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error.

The Company’s estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the previous GAAP are listed below:”

a) Investment in equity instruments carried at FVOCI.

b) Investment in equity instruments carried at FVTPL.

c) Impairment of financial assets based on expected credit loss model.

d) Determination of the discounted value for financial instruments carried at amortized cost.

(iv) Classification and measurement of financial assets and liabilities

“IndAS101requiresanentitytoassessclassificationoffinancialassetsonthebasisoffactsandcircumstancesexisting as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortized cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortized cost has been done retrospectively except where the same is impracticable.”

(v) De-recognition of financial assets and liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after the transition date.

(a) Investments in mutual funds at fair value through profit or loss

Under Indian GAAP, investments in mutual funds are accounted for as short-term investments and accordingly they are carried at lower of cost and fair value. Under Ind AS, the Company has designated such investments measured at FVTPL. At the date of transition to Ind AS, difference between the fair value of mutual funds and Indian GAAP carrying amount has been recognized as a separate component of equity, in the retained earnings.

b) Investments in unquoted equity instruments at fair value through OCI

“Under Indian GAAP, the Company accounted for long-term investments in unquoted equity shares as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, the Company has designated such investments as FVOCI investments. Ind AS requires FVOCI investments to be measured at fair value. At the date of transition to Ind AS, difference between the fair value of shares and Indian GAAP carrying amount has been recognized as a separate component of equity, in the retained earnings.

Furthemore, under Indian GAAP, investments in equity units of venture capital fund are accounted for as short-term investments and accordingly they are carried at lower of cost and fair value. Under Ind AS, the Company has designated such investments measured at FVOCI. At the date of transition to Ind AS, difference between the fair value of equity units and Indian GAAP carrying amount has been recognized as a separate component of equity, in the retained earnings.”

(c) Remeasurement of employee benefits

Under previous GAAP, actuarial gains and losses were recognized in statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of net defined benefit liability / asset which is recognized in other comprehensive income in the respective periods.

(d) Effect of transition to Ind AS on Cash Flow Statement for the year ended 31 March 2017

Ind AS adjustments are either non cash adjustments or are regrouping among the cash flows from operating, investing and financing activities and has no impact on the net cash flow for the year ended 31 March 2017 as compared with the previous GAAP.

(e) Retained earnings

Retained earnings as at 1 April 2016 has been adjusted consequent to the above Ind AS transition adjustments.

This is the summary of significant accounting policies and other explanatory information referred to in our report of even date.


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