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E2E Networks Ltd. நிறுவனத்தின் கணக்கியல் கொள்கைகள்

Mar 31, 2018

A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (''the Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistently applied 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.

B. USE OF ESTIMATES

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known or materialise.

C. Current / Non-Current Classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

a. it is expected to be realised in, or is intended for sale or consumption in, the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after the reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets. All other assets are classified as noncurrent.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

a. it is expected to be settled in the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after the reporting date; or

d. the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the above definition and the nature of services provided, the Company has ascertained its operating cycle as 12 months for the purpose of current - non-current classification of assets and liabilities.

D. FIXED ASSETS

Tangible Assets

Fixed Assets have been stated at actual cost inclusive of installation cost, taxes and other incidental expenses. The life of the certain assets has been taken less than as per life prescribed in schedule II of companies act 2013. Eg. The life of Servers in schedule 11 of companies act is prescribed to be 6 years whereas the life of the same has been taken 3 years and life of Temporary Structure as per companies act is 3 years whereas the life of the same has been taken 5 years. This decision is supported by the advice of technical expert.

E. Other Intangible Assets

Other Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortisation/depletion and impairment loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the Other Intangible Assets.

F. Leases

Leases are classified as operating lease when lessor allows for the use of an asset but does not convey rights of ownership of the asset. An operating lease represents an off-balance sheet financing of assets, where a leased asset and associated liabilities of future rent payments are not included on the balance sheet of a company. Company has an operating lease with an IBM India Private Limited For 3 Years, but the lessor may at its option transfer the assets at a nominal cost to E2E Networks Limited. Since the cost of the asset after the expiry of the lease term will almost be nil, so management of the company have treated that lease as an operating lease.

G. DEPRECIATION, AMORTISATION AND DEPLETION

Depreciation on tangible assets is provided on the WDV method over the useful lives of assets as prescribed in Schedule II to the Companies Act, 2013. Depreciation for assets purchased / sold during a period is proportionately charged.

H- IMPAIRMENT OF ASSETS

At each Balance Sheet date, an assessment is done to determine whether there is any indication of impairment to the assets. If any such indication exists, the management estimates the recoverable amount of the asset. If such recoverable amount of the Asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Profit &Loss account. If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is re-assessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost. In the current reporting period, the company didn''t find any such indication requiring impairment or its reassessement.

I. REVENUE RECOGNITION

The Company''s revenue from cloud computing services and managed hosting services are recognised when the said services are rendered to the customers over the period of the contracts or based on actual utilization of such services and when no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale / rendering of services and regarding its collection.

Revenue from sale of traded goods is recognised when property in those goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the traded goods and regarding its collection.

J. INVESTMENTS

Trade Investments are the investments made to enhance the company''s business interests. Investments are classified into current and long term investments. Investments that are readily realizable and intended to be held for not more than an year from the date of acquisition are classified as current investments. All other investments are classified as long term investments.

Current investments are stated at lower of cost or fair value. The comparison of cost and fair value is done separately in respect of each category of investments.

Long term investments are stated at cost. A provision for diminution in the value of long term investments is made only if such a decline is other than temporary in the opinion of management. Investments other than in subsidiary and associates have been accounted as per Accounting Standard (AS) 13 on "Accounting for Investments".

K. INVENTORIES

Raw materials, components, stores and spares are valued at lower of cost and net realizable value. The company being a service company, doesn''t have any stock in trade as on 31st March 2018.

L. TRADE RECEIVABLES

Trade receivables are stated after writing off debts considered as bad, if any. Adequate provision shall be made for debts if considered doubtful.

M. EMPLOYEE BENEFITS

Employee benefit expenses include salary, wages, performance incentives, compensated absences, medical benefits and other perquisites. It also includes post-employment benefits such as provident fund.

Short term employee benefit obligations are estimated and provided for.

The company is registered with The Employees Provident Funds and Miscellaneous Provisions Act 1952 and with Employee State Insurance Act 1948, and both the Employee and the Company make monthly contributions to the provident fund plan and ESIC plan equal to a specified percentage of the covered employee''s salary.

Retirement benefit cost and termination benefit categorised as gratuity has been determined and recognised as expense during the year based on Actuarial Valuation Report of Gratuity liability as on 31st March 2018. The Detailed note of such calculation and provision has been set out in Note No 30.

Equity-settled share-based payments to employees of the Company are measured at the fair value of the equity instruments in March 2018. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note No 28. The fair value determined in March 2018 of the equity-settled sharebased payments to employees of the Company is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest.

N. TAXES ON INCOME

Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates. Deferred income tax reflect the current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier years/period. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that sufficient future income will be available except that deferred tax assets, in case there are unabsorbed depreciation or losses, are recognised if there is virtual certainty that sufficient future taxable income will be available to realise the same. Deferred tax assets/liabilities during the year has been calculated considering the WDV of assets instead of depreciation considered in previous reporting period. With the change of method of calculations of deferred tax, the difference of deferred tax which pertains to previous periods has been adjusted with balances of reserve and surplus in the balance sheet. Deferred tax assets and liabilities are measured using the tax rates and tax law that have been enacted or substantively enacted by the Balance Sheet date.

O. OTHER INCOME

Interest income is recognised on a accrual basis.

P. PRIOR PERIOD ITEMS

Prior period items arisen in the current year as a result of errors or omission in the preparation of the financial statements of prior period(s) are separately disclosed in the Statement of Profit and Loss.

Q. BORROWING COST

All borrowing costs are charged to revenue except to the extent they are attributable to qualifying assets which are capitalized. A Qualifying Asset is one that necessarily takes substantial period of time to get ready for its intend use. During the year under review there was no borrowing attributable to qualifying assets and hence no borrowing cost was capitalized.

R. CASH AND CASH EQUIVALENTS

Cash and Cash Equivalents for the purpose of cash flow statement comprise cash in hand, bank balances and deposits.

S. FOREIGN CURRENCY TRANSACTIONS

(a) Initial Recognition

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Statement of Profit and Loss.

(b)Measurement of foreign currency items at the Balance Sheet date

Foreign currency monetary items of the Company are restated at the closing exchange rates. Non-monetary items are recorded at the exchange rate prevailing on the date of the transaction. Exchange differences arising out of these translations are recognized in the Statement of Profit and Loss.

T. CASH FLOW STATEMENT

The Cash Flow Statement are reported using the indirect method, whereby net profit after tax is adjusted for the effects of transactions of non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the company are segregated, if necessary.

U. PROVISIONS AND CONTINGENT LIABLITIES AND CONTINGENT ASSETS

A provision is recognised if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis.

Provision in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc. are recognised when it is probable that a liability has been incurred and the amount can be estimated reliably.

A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed, unless the possibility of outflow of resources is remote.

Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

V. DISCLOSURE OF EVENTS OCCURING AFTER BALANCE SHEET DATE EXPLANATORY

Initial Public Offering & Listing of Equity Shares In the Financial year 2017-18, the Company came out with an IPO of 38,58,000 Equity Shares of Face Value of Rs.10/- each for cash at a price of Rs. 57/- per Equity share (including a share premium of Rs.47/- per Equity Share) aggregating to Rs.2,199.06 Lakh. It comprised of fresh issue of 27,50,000 equity shares and offer for sale of 11,08,000 equity shares.

The said public issue was approved by the Members in their Extra-Ordinary General Meeting of the Company held on 16th February, 2018.

The Public issue opened for subscription on 03rd May, 2018 and closed on 07th May, 2018. The issue has received 12,407 applications for 38,58,000 Equity Shares (after eliminating applications rejected on technical ground) including one Market Maker Application for 1,94,000 Equity Shares. The issue was subscribed to the extent of 69.07 times as per application data (after eliminating applications rejected on Technical grounds).

The Company received In-principal approval from NSE for Public Issue of 38,58,000 equity shares on April 12, 2018.

NSE vide its letter dated May 14,2018, approved the listing and trading of Equity shares on the NSE (Capital Market Segment) EMERGE SME platform w.e.f. May 15,2018 with designated security code symbol "E2E".

Company has complied with all the requirements prescribed by the Companies Act, 2013, various SEBI regulations and stock exchange''s requirement, wherever required.

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