Connected world - KPIT Cummins

KPIT Infosystems Limited, UK
Schedules annexed to and forming a part of Profi t and Loss Account
(Pursuant to Section 212 of the Companies Act, 1956)
March 31, 2011 March 31, 2010
GBP ` GBP `
SCHEDULE- XI SOFTWARE
DEVELOPMENT EXPENSES
Consultancy charges 9,805,177 695,762,514 10,229,549 773,849,675
Visa Expenses
Cost of service delivery
12,070 856,471.40 8,135 615,400.28
Total 9,817,247 696,618,986 10,237,684 774,465,075
SCHEDULE - XII SELLING AND
MARKETING EXPENSES
Marketing Travel Expenses 217,490 15,432,826 151,495 11,460,352
Total 217,490 15,432,826 151,495 11,460,352
SCHEDULE - XIII GENERAL AND
ADMINISTRATION EXPENSES
Salaries and bonus 944,833 67,044,075 916,422 69,325,896
Contribution to Provident and other
funds
114,046 8,092,520 95,754 7,243,629
Recruitment and Training Expenses 19,808 1,405,562 6,731 509,166
Rent, Rates and taxes 78,766 5,589,113 71,926 5,441,066
Communication Expenses 47,189 3,348,500 42,612 3,223,546
Professional and Legal Expenses 52,500 3,725,324 46,565 3,522,601
Printing and stationery 2,260 160,400 1,874 141,787
Repairs to Others 2,961 210,090 3,771 285,231
Power and Fuel 3,242 230,055 1,201 90,886
Insurance Charges 13,793 978,747 10,892 823,925
Audit fees 5,500 390,273 7,000 529,539
Loss (net) on Sale of Assets - - - -
Offi ce Expenses 4,860 344,832 6,317 477,846
Total 1,289,758 91,519,491 1,211,065 91,615,118
SCHEDULE - XIV INTEREST, NET
Financial charges 2,908 206,312 4,123 311,861
Lease Rent - - - -
2,908 206,312 4,123 311,861
Less : Interest income 927 65,752 (4,752) (359,505)
Total 1,981 140,560 8,875 671,366
SCHEDULE - XV DIVIDEND ON
INVESTMENTS
Foreign Exchange Fluctuation Gains - - - -
Other Income (18,484) (1,311,573) (65,289) (4,938,975)
Miscellaneous Income - - - -
Total (18,484) (1,311,573) (65,289) (4,938,975)
SCHEDULE XV - NOTES TO ACCOUNTS
1. Going Concern
KPIT Infosystems Limited is a company incorporated in the UK. The company is the wholly owned
subsidiary of KPIT Cummins Infosystems Ltd (formerly known as KPIT Infosystems Ltd.) the
holding company that is incorporated under the laws of India.
The Company has made a Loss of ` 17,036,227 (GBP 240,088) in the current fi nancial year. The
accumulated losses till March 2011 of Rs 60,159,620 (GBP 883,212) and the Working Capital of
` 7,503,101 (GBP 104,313) as of that date have presently been funded by the holding company,
by way of capital contribution. However, in the opinion of the management, in the coming years,
the company expects to make suffi cient profi ts to absorb the accumulated losses and meet its
operating cash fl ow needs, out of internal accruals.
During the year Kpit Cummins Infosystems has invested further capital of GBP 2,016,170.
2. Signifi cant Accounting Policies
a) Basis for preparation of fi nancial statements
The fi nancial statements have been prepared on historical cost convention 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 the 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
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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. Fixed assets taken on lease are
written off over the lease period.
e) Depreciation
Depreciation on fi xed asset of the Company is provided on expected useful life of the
assets at the following rates:
Class of Asset Rate of Depreciation
Leasehold Buildings Amortized over the period of lease.
Computer Hardware 33.33% - SLM
Plant & Machinery & Offi ce equipment 33.33% - SLM
Furniture, fi ttings and equipments 15% - RBM
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) Foreign Currency Transactions
The transactions with respect to the income and expenditure in foreign currency are
recorded at a monthly average exchange rate, which is near to the actual rate. The
exchange differences arising either on settlement or on translation of foreign currency
transactions are recognized in the profi t and loss account in the year in which they arise.
h) Conversion into Indian Rupees
The transactions, which are in local currency GBP, have been converted for reporting in
Indian Currency 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
of account balances at the year end is transferred to the Translation Reserve
Account and the said account is being treated as “Reserve and Surplus”.
i) 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.
j) 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.