Statement of Significant Accounting Policies
a) Basis of preparation
The financial statements have been prepared under the historical cost convention under accrual method of accounting except in case of assets for which provision for impairment is made and revaluation is carried out and as a going concern, in accordance with the Generally Accepted Accounting Principles (GAAP) prevalent in India and to comply in all material respects with the Notified accounting standard by Companies Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act, 1956.
b) Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates.
c) Fixed assets
Fixed assets are stated at cost (or revalued amounts, as the case may be), less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any cost attributed for bringing the asset to its working condition for its intended use. Capital Work in Progress comprises of outstanding advances paid to acquire fixed assets and amount expended on development/ acquisition of fixed assets that are not yet ready for their intended use as on the balance sheet date.
Depreciation is provided using the written down value Method at the rates prescribed under Schedule XIV of the Companies Act, 1956, except for leasehold improvements which is depreciated at over the tenure of lease, which is management’s estimate of the useful lives of the assets. Depreciation on new assets acquired during the year is provided at the rates applicable from the month of acquisition to the year end. Depreciation on assets sold or discarded is provided till the date of disposal.
Intangible Assets are stated at cost of acquisition less accumulated amortization. Application Software is amortized over the license period of the software.
i) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.
ii) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
g) Revenue Recognition
i) Medical Transcription Services Rendered: Income on services rendered is recognized as and when the service is completed and the data is delivered to the client.
h) Prior Period Items and Extraordinary Items
Prior period item and extraordinary item are separately classified, identified and dealt with as required under Accounting Standard 5 on “Net Profit or Loss for the period, prior period items and changes in accounting policies”.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, these are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account.
j) Employee benefits
i. Defined Contribution Plan
Eligible employees receive benefits from a provident fund, which is a defined contribution plan. Aggregate contributions along with interest thereon is paid at retirement The company and employee’s make monthly contributions to provident fund equal to a specified percentage of the covered employee’s salary. The contributions are made to a government administered provident fund. The monthly contributions are charged off to revenue.
ii. Defined benefit plan
The Company accounts its liability for future gratuity benefits based on actuarial valuation as at the balance sheet, using Projected Unit Credit Method.
iii. Short term benefits
Short term employee benefits are benefits like Leave Encashment which are payable within twelve months after the end of the period in which the employees render service and these are measured at cost.
k) Foreign Currency Translation
i) Initial Recognition: Foreign currency transactions other than Forward Contracts are recorded in the reporting currency, by applying a uniform monthly exchange rate. Forward Contract Receivables are recorded at forward rates and Forward Contract Payables at monthly exchange rate.
ii) Conversion: Foreign currency monetary items are reported using the closing rate. Non-monetary items are carried in terms of historical cost denominated in a foreign currency at an exchange rate at the month of the transaction.
iii) Exchange Differences: Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded during the year or reported in previous financial statements, are recognized as profit or loss in the year in which they arise.
l) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average numbers of equity shares outstanding during the period are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split, if any.
m) Income Tax
Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will not be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.