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• Annual Report 2018-19
Shaping the future of software driven business
Independent Auditors’ Report
To The Members of Persistent Systems Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the accompanying Consolidated Financial statements (“the Consolidated Financial Statements”) of
Persistent Systems Limited
(“the Parent”) and its subsidiaries (the Parent and its subsidiaries together referred to as “the Group”),
and its associate, which comprise the Consolidated Balance Sheet as at 31 March 2019, the Consolidated Statement of Profit and Loss
(including Other Comprehensive Income), the Consolidated Statement of Cash Flows and the Consolidated Statement of Changes in
Equity for the year ended on that date, and a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of
reports of the other auditors on separate financial statements of the subsidiaries, and its associate, referred to in the Other Matters
paragraph below, the aforesaid Consolidated Financial Statements give the information required by the Companies Act, 2013 (“the
Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under
section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended (“Ind AS”) and other accounting
principles generally accepted in India, of the consolidated state of affairs of the Group as at 31 March 2019, their consolidated profit,
their consolidated total comprehensive income, their consolidated cash flows and their consolidated changes in equity for the year
ended on that date.
Basis for Opinion
We conducted our audit of the Consolidated Financial Statements in accordance with the Standards on Auditing specified under section
143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor’s Responsibility for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics
issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of
the Consolidated Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other
ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence obtained
by us is sufficient and appropriate to provide a basis for our opinion on the Consolidated Financial Statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Consolidated
Financial Statements of the current period. These matters were addressed in the context of our audit of the Consolidated Financial
Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have
determined the matters described below to be key audit matters to be communicated in our report.
Sr. No. Key Audit Matter
Auditor’s Response
1
Revenue Recognition – Ind AS 115
Appropriateness of recognition, measurement, presentation
and disclosures of revenues and other related balances in
view of adoption of Ind AS 115 “Revenue from Contracts
with Customers” (new revenue accounting standard)
The application of the new revenue accounting standard
involves certain key judgements relating to identification
of distinct performance obligations, determination of
transaction price of the identified performance obligations,
the appropriateness of the basis used to measure revenue
recognized over a period. Royalty income from one of the
main customers is accrued as a % of total sales made by
the customer during the period. Calculation of total sales for
the period is finalized by the customer post the period end.
Accrual of royalty revenue thereon is therefore, based on the
management’s estimate as of the period end date.
Principal Audit Procedures
We assessed the Group’s process to identify the impact of adoption of the
new revenue accounting standard.
Our audit approach consisted testing of the design and operating
effectiveness of the internal controls and substantive testing as follows:
• Evaluated the design of internal controls relating to implementation of
the new revenue accounting standard.
• Selected a sample of continuing and new contracts, and tested the
operating effectiveness of the internal control, relating to identification
of the distinct performance obligations and determination of
transaction price. We carried out a combination of procedures
involving enquiry and observation, re-performance and inspection of
evidence in respect of operation of these controls.
• Selected a sample of continuing and new contracts and performed the
following procedures:
• Read, analysed and identified the distinct performance obligations
in these contracts.
• Considered the terms of the contracts to determine the transaction
price including any variable consideration to verify the transaction
price used to compute revenue and to test the basis of estimation of
the variable consideration.