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Sparta Infotech India Private Limited
Schedule XII - Signifi cant Accounting Policies and Notes to
Accounts
Company Overview
Sparta Infotech India Private Limited was incorporated on 25th August, 2007 under the Companies Act,
1956 and is subsidiary of Sparta Consulting Inc., USA.
Sparta Infotech India Private Limited (herein referred to as “Company”) is in the business of providing
software consulting, system design, enterprise application and computer programming services to
its customers from domestic and offshore location and has its development facility located at Special
Economic Zone, Noida.
1. Signifi cant Accounting Policies
Basis for preparation of fi nancial statements
The fi nancial statements are prepared in accordance with Indian Generally Accepted Accounting
Principles (‘GAAP’) under the historical cost convention on accrual basis. All items of income and
expenditure having a material bearing on the fi nancial statements are recognized on the accrual basis.
GAAP comprises mandatory accounting standards as prescribed by the Companies Accounting
Standard Rules, 2006 and the provisions of Companies Act, 1956.
Use of Estimates
The preparation of fi nancial statements requires the management of the Company to make estimates
and assumptions that affect the reported balances of assets and liabilities and disclosures relating to
the contingent liabilities as at the date of fi nancial statements and reported amounts of income and
expenditure during the year.
1.1. Revenue recognition
The Company derives revenues primarily from software related services. Arrangement with
customers for software related services are either on a fi xed price or on time and material
basis.
Revenue on time and material contracts is recognized as the related services are performed
and revenue from the end of the last billing to the balance sheet date is recognized as unbilled
revenues. Revenue from fi xed-price contracts are recognized as per percentage of completion
method which is determined on the basis of time incurred as a proportion of budgeted time.
Costs and earnings in excess of costs and earnings are classifi ed as unearned revenue on
individual contract basis.
1.2. Expenditure
Expenses are accounted on the accrual basis and provisions are made for all known losses and
liabilities.
1.3. Provision for Doubtful Debts
The Company carries out the periodic exercise to evaluate its receivables.
While making such provision, various other factors like probable recovery of the dues,
business risks, economic factors, legal status of the customer / Joint Ventures / Partners are
taken into account.
1.4. Fixed Assets, Intangible Assets and Capital Work-in-Progress
(a) Fixed Assets are stated at the cost of acquisition, less accumulated depreciation and
impairment loss, if any. Direct costs are capitalized till the assets are put to use.
(b) Intangible Assets
If a Company incurs expenditure which meets criteria of intangible asset as mentioned in
Accounting Standard 26, such expenditure is capitalized and is amortized over its useful
life as estimated by the Management.
1.5. Depreciation
Depreciation on fi xed assets is provided using straight-line method based on useful life of
assets as estimated by the Management. Depreciation is charged on all assets purchased and
sold during the year on a proportionate basis. The rates of depreciation are as per or above
minimum rates prescribed under Schedule XIV of the Companies Act, 1956. The Rates of
Depreciation are as follows:
Individual assets costing less than ` 5,000/- are depreciated at the rate of 100%. Permanent
improvements to the leasehold property are depreciated over the lease term or useful life
whichever is shorter.
• Furniture and fi ttings - 20.00%
• Computer Equipments and Software - 33.33%
• Vehicles - 20.00%
• Offi ce Equipments - 20.00%
• Buildings - Over the lease period of land
1.6. Impairment of Assets
The Management periodically assesses using, external and internal sources, whether there is
an indication that an asset may be impaired. Impairment loss is recognised when the carrying
value of an asset exceeds its recoverable amount. The recoverable amount is higher of the
asset’s net selling price and value in use, which means the present value of future cash fl ows
expected to arise from the continuing use of the asset and its eventual disposal.
1.7. Leases
Assets leased by the Company in the capacity of the Lessee, where the Company has
substantially all the risks and rewards of ownership are classifi ed as Finance Lease. Such
leases are classifi ed at the inception of Lease at lower of the Fair Value or the present value of
minimum lease payments and a liability is created for an equivalent amount. Each lease rental
paid is allocated between the liability and interest cost so as to obtain a constant period rate of
interest on the outstanding liability for each year.
Lease arrangement where the risks and rewards incidental to the ownership of an asset
substantially vest with the lessor, are recognised as Operating Lease. Lease Rentals under
operating lease are recognised in the Profi t and Loss Account on straight line basis.
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1.8. Foreign currency transactions
Foreign currency denominated monetary assets and liabilities are translated at exchange
rates in effect at the Balance Sheet date. The gains or losses resulting from such transactions
are included in the Profi t and Loss Account. Income and expenses denominated in foreign
currencies are translated using exchange rate in effect on the date of transaction. Transaction
gains or losses realized upon settlement of foreign currency transactions are included in
determining the net profi t for the period in which transaction is settled.
1.9. Retirement benefi ts to employees
Contribution to the provident fund is recognized as an expense in the Profi t and Loss account
in the year in which contribution is due.
Gratuity and leave encashment which are defi ned benefi ts are accrued on an actuarial valuation
carried out by an independent actuary at each balance sheet date.
1.10. Accounting for Taxes on Income
Income tax comprises of current tax (i.e. amount of tax for the period determined in accordance
with the income tax law) and deferred tax (refl ecting the tax effects of timing differences
between accounting income and taxable income for the period). The deferred tax charge or
credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates
that they will be realized in future; however where there is unabsorbed depreciation and carry
forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual
certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet
date and written down or written up to refl ect the amount that is reasonably/virtually certain
(as the case may be) to be realized.
Timing differences which reverse within the tax holiday period, do not result in tax consequence
and therefore no deferred taxes are recognized in respect of the same. For this purpose, the
timing differences, which originate fi rst, are considered to reverse fi rst.
1.11. 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.
No Provisions is recognized for –
A. Any possible obligation that arises from past events and the existence of which will be
confi rmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Company; or
B. Any present obligation that arises from past events but is not recognized because-
1) It is not probable that an outfl ow of resources embodying economic benefi ts will
be required to settle the obligation; or
2) A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are assessed
periodically and only that part of the obligation for which an outfl ow of resources
embodying economic benefi ts is probable, is provided for, except in the extremely
rare circumstances where no reliable estimate can be made.
Contingent Assets are not recognized in the fi nancial statements since this may result in the
recognition of income that may never be realized.
1.12. Cash Flow Statement
Cash Flows are reported using the indirect method, whereby net profi ts before tax is adjusted
for the effects of transactions of a non-cash nature and any deferrals or accruals of past or
future cash receipts or payments. The cash fl ows from regular revenue generating, investing
and fi nancing activities of the Company are segregated.
2. Disclosures as required by Schedule VI of the Companies Act, 1956
2.1 Managerial Remuneration:
(` in Lacs)
2011 2010
Salary and allowances 76.80 34.32
Contribution to provident fund 1.54 0.54
Total 78.34 34.86
Information relating to managerial remuneration does not include provision for gratuity
and leave encashment, which is provided on an overall basis. Perquisites are valued by
management at cost/fair values. Computation of net profi ts in accordance with Section 349 of
the Companies Act, 1956 has not been given, as commission by way of percentage of profi ts
for the year is not payable to the key managerial personnel.
2.2 Capital Commitments
(` in Lacs)
2011 2010
Estimated amount of contracts remaining to be
executed on capital account (net of advances) not
provided for 18.86 56.87
2.3 In the opinion of the Board of Directors, Current Assets, Loans and Advances have a value on
realization in ordinary course of business at least equal to the amount at which they are stated
in the Balance sheet.
2.4 Contingent Liabilities not provided for ` Nil. (Previous Year Nil)
2.5 Value of imports on CIF basis:
(` in Lacs)
2011 2010
Capital goods 9.14 Nil