Connected world - KPIT Cummins

KPIT Infosystems Inc., USA
Schedules to Profi t and Loss Account for the year ended
(Pursuant to Section 212 of the Companies Act, 1956)
March 31, 2011 March 31, 2010
USD ` USD `
SCHEDULE - X SOFTWARE
DEVELOPMENT EXPENSES
Salaries and bonus
Consultancy charges 63,247,830 2,883,677,297 54,648,222 2,587,593,332
Visa expenses 1,288,697 58,755,963 771,874 36,548,215
Cost of service delivery 14,014,632 638,973,311 8,952,783 423,914,270
Total 78,551,159 3,581,406,571 64,372,879 3,048,055,817
SCHEDULE - XI SELLING AND
MARKETING EXPENSES
Marketing services expenses 469,208 21,392,745 531,838 25,182,511
Marketing travel expenses 897,544 40,922,003 623,422 29,519,042
Total 1,366,752 62,314,748 1,155,260 54,701,553
SCHEDULE - XII GENERAL AND
ADMINISTRATION EXPENSES
Salaries and bonus
Recruitment and training
5,861,723 267,255,277 4,386,580 207,704,584
expenses 382,247 17,427,890 149,296 7,069,180
Rent, rates and taxes 415,467 18,942,530 531,837 25,182,474
Communication expenses 297,476 13,562,905 234,663 11,111,314
Professional and legal expenses 590,494 26,922,558 472,114 22,354,611
Printing and stationery 31,372 1,430,332 28,718 1,359,802
Repairs to others 470,311 21,443,016 321,267 15,211,990
Insurance charges 198,982 9,072,241 189,576 8,976,420
Audit fees
Provision for bad and doubtful
17,318 789,590 17,008 805,324
debts (9,911) (451,876) 9,911 469,286
Other Offi ce Expenses 356,018 16,232,042 383,396 18,153,778
Total 8,614,491 392,763,093 6,724,367 318,398,762
SCHEDULE - XIII INTEREST,
NET
Financial charges (1,060) (48,332) 32,692 1,547,968
Lease rent - - - -
Less:
(1,061) (48,333) 32,691 1,547,967
Interest income 87,565 3,992,390 - -
Total (88,625) (4,040,722) 32,692 1,547,968
SCHEDULE - XIV OTHER
INCOME
Forex Gain/Loss 52,497 2,393,513 1,772 83,915
Total 52,497 2,393,513 1,772 83,915
SCHEDULE XV - NOTES TO ACCOUNTS
1. Basis of consolidation
The Consolidated Financial Statements relate to KPIT Infosystems Inc. (the Company) and its
subsidiary CPG Solutions LLC.
a) Principles of consolidation:
The Consolidated Financial Statements have been prepared on the following basis:
i. The Financial Statements of the Company and its subsidiary have been combined on a
line-by-line basis by adding together the book value of like items of assets, liabilities,
income and expenses. The intra-group balances and intra-group transactions and
unrealized profi ts or losses have been fully eliminated.
ii. The excess of cost to the Company of its investments in the Subsidiary Companies over
its share of equity of the subsidiary companies, at the dates on which the investment
in the Subsidiary Companies are made, is recognized as ‘Goodwill on Consolidation’
being an asset in the Consolidated Financial Statements. Alternatively, where the share
of equity in the subsidiary companies on the date of investment is in excess of cost of
investment of the Company, it is recognised as ‘Capital Reserve’ and shown under the
head ‘Reserves and Surplus’ in the Consolidated Financial Statements.
b) Following subsidiaries are considered in the Consolidated Financial Statements:
% voting power held
Sr. Name of the Subsidiary Country of As at March 31, As at March 31,
No.
Incorporation
2011
2010
1. CPG Solutions LLC US 100.00 N.A
10
2. Going Concern
KPIT Infosystems Inc. is a company incorporated in the State of New Jersey, USA. On October
1, 2010, the Company has acquired 100% shares of CPG Solutions LLC, USA, a provider of
premium Oracle Consulting services to manufacturing and supply chain companies for an upfront
consideration of USD 6,000,000. The agreement is for a total consideration of USD 13,200,000
which includes an upfront payment of USD 6,000,000 and a milestone based consideration of
USD 7,200,000. The payment of milestone based consideration is based on the achievement of the
performance target set forth in the agreement over the performance period which commences on
October 1, 2010 and ending on October 1, 2012.
The Company after consolidating CPG LLC, has made a profi t of ` 14,449,915, (USD 316,931) in
the current fi nancial year. The company’s accumulated Profi t till March 2011 of ` 104,563,651,
(USD 1,525,248) and the Working Capital of ` 331,926,417 (USD 7,433,960) as of that date, have
presently been funded by the holding company, by way of capital contribution. During the year KPIT
Cummins Infosystems Ltd. has invested further capital of USD 6,000,000.
3. Signifi cant Accounting Policies
a) Basis for preparation of fi nancial statements
The fi nancial statements have been prepared on historical cost convention and on accrual
basis, in accordance with Generally Accepted Accounting Principles (GAAP) as applicable in
India and the provisions of the Companies Act, 1956. The accounting standards issued by the
Institute of Chartered Accountants of India have been complied with to the extent applicable to
the Company.
All income and expenditure having a material bearing on the fi nancial statements are
recognised on an accrual basis.
b) Revenue recognition
Revenue from software development and services on time and material basis is recognized
based on software development, services rendered and billed to clients as per the contractual
obligations. In case of fi xed price contracts, revenue is recognized based on the milestone/s
achieved as agreed upon in the contract on proportionate completion basis.
c) Expenditure
Expenses are accounted on an accrual basis and provisions are made for all known losses and
liabilities.
d) Fixed Assets
Fixed assets are stated at the cost of acquisition, less accumulated depreciation. Direct costs
are capitalized till the assets are ready to put to use.
e) Depreciation
Depreciation on fi xed asset of the Company is provided based on expected useful life of the
assets at the following rates on straight-line method (SLM):
Class of Asset Rates of Depreciation
KPIT Infosystems Inc CPG Solutions LLC
Computer Hardware 20% - SLM 25% - SLM
Offi ce Equipments 20% - SLM
Furniture and Fixtures 20% - SLM 25% - SLM
Electrical Equipments 10% - SLM
Goodwill Amortized over 3 years
f) Impairment of Assets
Management periodically assesses using, external and internal sources, whether there is
an indication that an asset may be impaired. Impairment occurs where the carrying value
exceeds the present value of future cash fl ows expected to arise from the continuing use of
the asset and its eventual disposal. The impairment loss to be expensed is determined as the
excess of the carrying amount over the higher of the asset's net sales price or present value as
determined above.
During the year under consideration, there was no indication, either internal or external as to
the impairment of any of the assets.
g) Conversion into Indian Rupees
The transaction in reporting currency, i.e. USD, have been converted for reporting in Indian
Currency, i.e. INR on the following basis.
• For the purpose of preparation of the accounts during the year, all income and expense
items are converted at the average rate of exchange applicable for the year. All assets and
liabilities are translated at the closing rate as on the balance sheet date except for fi xed
assets which are converted at the exchange rate prevailing at the time of acquisition of
these assets.
• The Share Capital is carried forward at the rate of exchange prevailing on the transaction
date. The resulting exchange difference on account of translation at the year end is
transferred to the Translation Reserve Account and the said account is being treated as
“Reserve and Surplus”.
h) Investments
Long-term Investments are stated at Cost, less any provision for permanent diminution in
value. Such costs are inclusive of acquisition costs directly attributable to the Investments
such as legal expenses, professional fees etc. incurred during the course of such acquisition.
Overseas investments are carried at their original rupee cost.
i) Provisions, Contingent Liabilities and Contingent Assets
As per Accounting Standard 29, ‘Provisions, Contingent Liabilities and Contingent Assets’,
the Company recognizes provisions only when it has a present obligation as a result of a past
event, it is probable that an outfl ow of resources embodying economic benefi ts will be required
to settle the obligation and when a reliable estimate of the amount of the obligation can be
made.