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Shaping the future of software driven business
Unconsolidated Financials •
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Notes forming part of financial statements
1.
Nature of operations
Persistent Systems Limited (the “Company”) is a public Company domiciled in India and incorporated under the provisions
of the Companies Act, 1956 (the “Act”). The shares of the Company are listed on Bombay Stock Exchange and National
Stock Exchange. The Company is a global company specializing in software products, services and technology innovation.
The Company offers complete product life cycle services.
2. Basis of preparation
The financial statements of the Company have been prepared on an accrual basis and under the historical cost convention
except for certain financial instruments and equity settled employee stock options which have been measured at fair
value. Historical cost is generally based on the fair value of consideration given in exchange of goods and services. The
accounting policies are consistently applied by the Company during the period and are consistent with those used in
previous year except where a newly issued accounting standard is initially adopted or a revision to an existing accounting
standard requires a change in the accounting policy hitherto in use.
Statement of compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting
Standards (referred to as “Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015.
3. Summary of significant accounting policies
(a) Use of estimates
The preparation of the financial statements in conformity with Ind AS requires the management to make judgments,
estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosure of
contingent liabilities at the end of period. Although these estimates are based on the management’s best knowledge of
current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in future periods.
Critical accounting estimates
i.
Revenue recognition
The Company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the
percentage-of-completion method requires the Company to estimate the efforts or costs expended to date as
a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure
progress towards completion. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the
period in which such losses become probable based on the expected contract estimates at the reporting date.
Further, the Company uses significant judgement while determining the transaction price allocated to performance
obligations using the expected cost plus margin approach.
In respect of the contracts where the transaction price is payable as revenue share at pre-defined percentage of
customer revenue and bearing in mind, the time gap between the close of the accounting period and availability of
the revenue report from the customer, the Company is required to use its judgement to ascertain the income from
revenue share on the basis of historical trends of customer revenue.
ii.
Income taxes
The Company’s major tax jurisdiction is India, though the Company also files tax returns in other overseas jurisdictions.
Significant judgements are involved in determining the provision for income taxes.
iii. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in
respect of depreciation is derived after determining an estimate of an asset’s expected useful life and the expected
residual value at the end of its life. The useful lives and residual values of Company’s assets are determined by
management at the time the asset is acquired and reviewed periodically. The lives are based on historical experience
with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.