Technology & IT Services
SaaS, IT services, and global capability centres dealing with revenue, equity, and cross-border complexity.
In technology companies, growth usually runs ahead of the accounting underneath it.
Technology businesses scale faster than their finance functions. Contracts get complicated before the revenue policy catches up, equity is granted before anyone measures its cost, and teams land in three countries before the group has a transfer pricing policy.
The result is a company whose numbers look clean until its first serious due diligence. We work with software, IT services, and captive technology centres on the judgements that decide how that diligence goes.
On the agenda
Multi-element contracts and the timing of revenue
Under IFRS 15 (Ind AS 115 in India), a contract that bundles licences, implementation, customisation, and support has to be split into performance obligations, with the price allocated on stand-alone selling prices. The answer turns on specific questions. Is implementation distinct from the software, or does it significantly modify it? Is a licence a right to use or a right to access? Is the company acting as principal or agent when it resells third-party cloud services?
The errors rarely come from misreading the standard. They come from contracts that finance only sees after signature. A contract review step inside the sales process, backed by a revenue policy that maps standard contract types to their accounting, prevents most of them.
Share-based payments nobody measured
ESOP grants are an expense under IFRS 2 (Ind AS 102), measured at fair value on the grant date and spread over the vesting period, and graded vesting pulls much of that charge into the early years. Early-stage companies often grant first and value later. They end up with an unrecorded expense, a valuation that cannot be reconstructed, and open questions on perquisite tax and withholding when employees exercise.
The fix is a grant register with a valuation at each grant date, a documented model and set of assumptions, and a tax view for both the company and its employees before the first exercise window opens.
Capitalising software, and where research ends
Under IAS 38 (Ind AS 38), internally generated software can be capitalised only in the development phase, and only when the company can show technical feasibility, the intention and ability to complete and use or sell it, probable future economic benefits, adequate resources, and reliable measurement of cost.
A policy that simply capitalises a share of engineering payroll seldom meets that test, and impairment reviews of the amounts capitalised are often missing. Auditors now ask for evidence project by project.
Captives, service exports, and the transfer pricing file
Indian subsidiaries that build software or provide IT-enabled services to a foreign parent are usually paid on a cost-plus basis. The mark-up, the cost base, and the entity’s characterisation as a low-risk service provider all need support prepared at the time. Safe harbour rules can give certainty for eligible transactions, provided their conditions are checked every year.
Service exports also carry FEMA realisation obligations and invoicing requirements, which are easy to overlook when the only customer is the parent.
How we help
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We work with a small number of clients in each sector, which keeps senior attention where it belongs.