2. Summary of Significant Accounting Policies

Principles of consolidation

The consolidated financial statements include the accounts of Syntel, Inc., a Michigan corporation (“Syntel”), its wholly owned subsidiaries and a joint venture and its subsidiary. All significant inter-company balances and transactions have been eliminated.

The wholly owned subsidiaries of Syntel, Inc. are:

•

Syntel Limited, an Indian limited liability company (“Syntel India”);

•

Syntel Europe Limited, a United Kingdom limited liability company (“Syntel Europe”);

•

Syntel Canada Inc., an Ontario limited liability company;

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Syntel Deutschland GmbH, a German limited liability company;

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Syntel (Hong Kong) Limited, a Hong Kong limited liability company;

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Syntel Delaware, LLC, a Delaware limited liability company (“Syntel Delaware”);

•

SkillBay LLC, a Michigan limited liability company (“SkillBay”);

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Syntel (Mauritius) Limited, a Mauritius limited liability company (“Syntel Mauritius”);

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Syntel Consulting Inc., a Michigan corporation (“Syntel Consulting”);

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Syntel Holding (Mauritius) Limited, a Mauritius limited liability company (“SHML”);

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Syntel Worldwide (Mauritius) Limited, a Mauritius limited liability Company (“SWML”); and

•

Syntel (Australia) Pty. Ltd., an Australian limited liability company.

The wholly owned subsidiaries of Syntel Europe are:

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Intellisourcing, SARL, a French limited liability company.

•

Syntel Solutions BV, a Netherlands limited liability company.

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Syntel Switzerland GmbH, a Switzerland limited liability company

The partially owned joint venture of Syntel Delaware is:

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State Street Syntel Services (Mauritius) Limited, a Mauritius limited liability company (“SSSSML”).

The wholly owned subsidiary of SSSSML is:

•

State Street Syntel Services Private Limited, an Indian limited liability company (“SSSSPL”).

The wholly owned subsidiaries of Syntel Mauritius are:

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Syntel International Private Limited, an Indian limited liability company (“SIPL”); and

•

Syntel Global Private Limited, an Indian limited liability company.

The wholly owned subsidiaries of SHML are:

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Syntel Services Private Limited, an Indian limited liability company; and

•

Syntel Solutions (Mauritius) Limited, a Mauritius limited liability company (“SSML”).

The wholly owned subsidiary of SSML is:

•

Syntel Solutions (India) Private Limited, an Indian limited liability company.

The wholly owned subsidiary of SWML is:

•

Syntel (Singapore) PTE Limited, a Singapore limited liability Company (“Syntel Singapore”);

The wholly owned subsidiary of Syntel Singapore is:

•

Syntel Infotech, Inc., a Philippines corporation.

Revenue recognition

The Company recognizes revenues from time-and-materials contracts as the services are performed.

Revenue from fixed-price applications management, maintenance and support engagements is recognized as earned which generally results in straight-line revenue recognition as services are performed continuously over the term of the engagement.

Revenue on fixed price applications development and integration projects are measured using the proportional performance method of accounting. Performance is generally measured based upon the efforts incurred to date in relation to the total estimated efforts to the completion of the contract. The Company monitors estimates of total contract revenues and costs on a routine basis throughout the delivery period. The cumulative impact of any change in estimates of the contract revenues or costs is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss. The Company issues invoices related to fixed price contracts based on either the achievement of milestones during a project or other contractual terms. Differences between the timing of billings and the recognition of revenue based upon the proportional performance method of accounting are recorded as revenue earned in excess of billings or deferred revenue in the accompanying consolidated balance sheets.

Revenues are reported net of sales incentives to customers.

Reimbursements of out-of-pocket expenses are included in revenue in accordance with revenue guidance in the FASB Codification.

Stock-based employee compensation plans

The Company recognizes stock-based compensation expense in the consolidated financial statements for awards of equity instruments to employees and non-employee directors based on the grant-date fair value of those awards on a straight-line basis over the requisite service period of the award, which is generally the vesting term. The benefits of tax deductions in excess of recognized compensation expense is reported as a financing cash flow.

Derivative instruments

The Company enters into foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates, specifically changes between the Indian Rupee currency and US dollar currency. The contracts are adjusted to fair value at each reporting period. Gains and losses on forward contracts are generally recorded in other income, net, unless they are designated as an effective hedge. Although the Company cannot predict fluctuations in foreign currency rates, the Company does not currently anticipate that foreign currency risk will have a significant impact on the financial statements. In order to limit the fluctuations in foreign currency rates, the Company entered into foreign exchange forward contracts where the counter party is a bank, but these contracts do not have a material impact on the financial statements. The Company considers the risks of non-performance by the counter party as not material. The Company utilizes standard counterparty master agreements containing provisions for the netting of certain foreign currency transaction obligations. The Company also mitigates the credit risk of these derivatives by transacting with highly rated counterparties in India which are major banks. The Company evaluates the credit and non-performance risks associated with its derivative counterparties, and believes that the impact of the credit risk associated with the outstanding derivatives was insignificant.

The Company’s Indian subsidiaries, whose functional currency is the Indian Rupee, periodically enter into foreign exchange forward contracts to buy Indian rupees and sell U.S. dollars to mitigate the risk of changes in foreign exchange rates on US dollar denominated assets, primarily comprised of receivables from the parent (Syntel, Inc.), other direct customers and liabilities recorded on the books of the Indian subsidiaries. These forward contracts are denominated in US dollars.

These forward contracts do not qualify for hedge accounting under ASC 815, ‘Derivative and Hedging’. Accordingly, these contracts are carried at a fair value with the resulting gains or losses included in the statement of comprehensive income under ‘other income’. The related cash flow impacts of all of our derivative activities are recorded in cash flows from operating activities.

During the year ended December 31, 2014, the Company entered into foreign exchange forward contracts with a notional amount of $160.0 million with maturity dates of one to six months. During the year ended December 31, 2014, contracts amounting to $160.0 million expired resulting in a gain of $4.56 million, which is recorded in comprehensive income. At December 31, 2014, no foreign exchange forward contracts were outstanding.

During the year ended December 31, 2013, the Company entered into foreign exchange forward contracts with a notional amount of $341.0 million with maturity dates of one to seven months. During the year ended December 31, 2013, contracts amounting to $341.0 million expired resulting in a loss of $18.05 million. The loss for the direct customer related contracts is $11.26 million, which is recorded as an offset to other income, and loss for the intercompany related contracts is $6.79 million which is recorded in other comprehensive loss. At December 31, 2013, no foreign exchange forward contracts were outstanding.

During the year ended December 31, 2012, the Company entered into foreign exchange forward contracts with a notional amount of $255.0 million with maturity dates of one to four months. During the year ended December 31, 2012, contracts amounting to $315.0 million expired resulting in a loss of $4.37 million. The loss for the direct customer related contracts is $2.81 million, which is recorded as an offset to other income and loss for the intercompany related contracts is $1.56 million which is recorded in other comprehensive loss. At December 31, 2012, no foreign exchange forward contracts were outstanding.

No forward contracts were outstanding as of December 31, 2014 and December 31, 2013 respectively.

The following table presents the net gains (losses) recorded in accumulated other comprehensive income (loss) relating to the foreign exchange contracts designated as net investment hedges for the periods ending December 31, 2014, 2013 and 2012.

Gains (Losses) on derivatives


	2014			2013			2012
	(In thousands)

Gains/(losses) recognized in other comprehensive income (loss)	$	724	*	$	(6,796	)	$	(1,558	)

*	For and up to three months ended March 31, 2014

The following table presents the net gains (losses) recorded in other income relating to the foreign exchange contracts not designated as hedges for the periods ending December 31, 2014, 2013 and 2012.

Gains (Losses) recognized in other income, net:


	2014		2013			2012
	(In thousands)

Gains/(Losses) recognized in other income, net	$	3,836	$	(11,258	)	$	(2,815	)

Change in Accumulated other comprehensive income (loss) by component (Net of tax expense or benefit)

The change in balances of accumulated comprehensive loss for the year ended December 31, 2014 is as follows:


										(In thousands)
	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Loss

Beginning balance	$	(157,416	)	$	3,808		$	(695	)	$	(154,303	)

Other comprehensive income (loss) before reclassifications		(28,994	)		3,853			(758	)		(25,899	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			(3,061	)		19			(3,042	)
Out-of-period adjustment		(3,000	)		—			—			(3,000	)

Net current-period other comprehensive income (loss)	$	(31,994	)	$	792		$	(739	)	$	(31,941	)

Ending balance	$	(189,410	)	$	4,600		$	(1,434	)	$	(186,244	)

Reclassifications out of accumulated other comprehensive income (loss) for the year ended December 31, 2014 is as follows:


					(In thousands)
Details about Accumulated Other Comprehensive Income (Loss) Components	Affected Line Item in the Statement Where Net Income Is Presented	Before Tax Amount			Tax (Expense) Benefit			Net of Tax
Unrealized gains on available for sale securities realized in current year	Other income	$	(4,555	)	$	1,494		$	(3,061	)
Amortization of prior service cost included in net periodic pension cost	Direct cost	$	29		$	(10	)	$	19

The change in balances of accumulated comprehensive loss for the year ended December 31, 2013 is as follows:


										(In thousands)
	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Loss

Beginning balance	$	(85,979	)	$	846		$	(1000	)	$	(86,133	)

Other comprehensive income (loss) before reclassifications		(71,437	)		3,660			186			(67,591	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			(698	)		119			(579	)

Net current-period other comprehensive income (loss)	$	(71,437	)	$	2,962		$	305		$	(68,170	)

Ending balance	$	(157,416	)	$	3,808		$	(695	)	$	(154,303	)

Reclassifications out of accumulated other comprehensive income (loss) for the year ended December 31, 2013 is as follows:

(In thousands)


Details about Accumulated Other Comprehensive Income (Loss) Components	Affected Line Item in the Statement Where Net Income Is Presented	Before Tax Amount			Tax (Expense) Benefit			Net of Tax
Unrealized gains on available for sale securities realized in the current year	Other income	$	(942	)	$	244		$	(698	)
Amortization of prior service cost included in net periodic pension cost	Direct cost	$	146		$	(27	)	$	119

The change in balances of accumulated comprehensive income (loss) for the year ended December 31, 2012 is as follows:

(In thousands)


	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)

Beginning balance	$	(72,511	)	$	164		$	(87	)	$	(72,434	)

Other comprehensive income (loss) before reclassifications		(13,468	)		776			(939	)		(13,631	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			(94	)		26			(68	)

Net current-period other comprehensive income (loss)	$	(13,468	)	$	682		$	(913	)	$	(13,699	)

Ending balance	$	(85,979	)	$	846		$	(1,000	)	$	(86,133	)

Reclassifications out of accumulated other comprehensive income (loss) for the year ended December 31, 2012 is as follows:

(In thousands)


Details about Accumulated Other Comprehensive Income (Loss) Components	Affected Line Item in the Statement Where Net Income Is Presented	Before Tax Amount			Tax (Expense) Benefit			Net of Tax
Unrealized gains and losses on available for sale securities	Other income	$	(269	)	$	175		$	(94	)
Amortization of prior service cost included in net periodic pension cost	Direct cost	$	32		$	(6	)	$	26

Other income, net

Other income includes interest and dividend income, gains and losses on forward contracts, gains and losses from the sale of securities, other investments, treasury operations and interest expenses on loans and borrowings.

Other comprehensive loss

The other comprehensive loss consists of foreign currency translation adjustments, gains (losses) on net investment hedge derivatives, unrealized gains (losses) on securities and a component of a defined benefit plan. During the year ended December 31, 2014, 2013 and 2012, the other comprehensive loss amounts to $31.9 million, $68.2 million and $13.7 million, respectively, primarily attributable to the foreign currency translation loss adjustments of $32.4 million (which includes an out-of-period adjustment of $3.0 million, which related to the past period cumulative impact, arising out of the modification of the accounting treatment adopted by the Company during the second quarter, around certain foreign currency related balance sheet translations, exchange gains or losses on certain forward contracts and the related tax impacts), $64.7 million and $11.9 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Tax on other comprehensive loss

Total (taxes) benefit on other comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012 is as follows:


	2014			2013			2012
	(In thousands)
(Tax) benefit on Foreign currency translation adjustments	$	(337	)	$	—		$	—
(Taxes) benefit on unrealized gains (losses) on securities		(430	)		(1,556	)		35
(Tax) benefit on defined benefit pension plans		379			(121	)		106

Total (taxes) benefit on other comprehensive income (loss)	$	(388	)	$	(1,677	)	$	141

Cash and cash equivalents

For the purpose of reporting cash and cash equivalents, the Company considers all liquid investments purchased with an original maturity of three months or less to be cash equivalents.

At December 31, 2014 and December 31, 2013, approximately $30.3 million and $33.2 million, respectively, are held in JPMorgan Chase Bank NA through a sweep account. At December 31, 2014, approximately $11.44 million are held in Bank of America. Term deposits with original maturity of three months or less held with Punjab National Bank were $10.0 million and $29.8 million as at year end December 31, 2014 and 2013, respectively. Term deposits with original maturity of three months or less held with Bank of India were $3.0 million and $ Nil as at year end December 31, 2014 and 2013, respectively. The remaining amounts of cash and cash equivalents of $143.0 million were held in bank and fixed deposits with various banking and financial institutions.

Fair value of financial instruments

The fair values of the Company’s current assets and current liabilities approximate their carrying values because of their short maturities. Such financial instruments are classified as current and are expected to be liquidated within the next twelve months.

Concentration of credit risks

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of investments and accounts receivable. Cash on deposit is held with financial institutions with high credit standings. The Company has cash deposited with financial institutions that, at times, may exceed the federally insured limits.

The Company establishes an allowance for doubtful accounts for known and inherent collection risks related to its accounts receivable. The estimation of the allowance is primarily based on the Company’s assessment of the probable collection from specific customer accounts, the aging of the accounts receivable, analysis of credit data, bad debt write-offs and other known factors.

Investments

Short-term investments

The Company’s short-term investments consist of short-term mutual funds, which have been classified as available-for-sale and are carried at estimated fair value. Fair value is determined based on quoted market prices. Unrealized gains and losses, net of taxes, on available-for-sale securities are reported as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity. Net realized gains or losses resulting from the sale of these investments, and losses resulting from decline in fair values of these investments that are other than temporary declines, are included in other income. The cost of securities sold is determined using the weighted-average method.

During the year, the Company has short-term investments in Fixed Maturity Plans (FMPs) of mutual funds, which are classified as held to maturity securities and are reported at cost. As at December 31, 2014 and December 31, 2013, the Company’s Indian subsidiaries invested $15.89 million and $ Nil respectively, in FMPs of mutual funds.

Short-term investments also include term deposits with an original maturity exceeding three months and whose maturity date is within one year from the date of the balance sheet. Term deposits were $466.6 million and $340.3 million at December 31, 2014 and 2013, respectively.

Non-current term deposits with banks

Non-current term deposits with banks include deposits with maturity exceeding one year from the date of the balance sheet. As at December 31, 2014 and 2013 non-current term deposits with banks were at $ 0.11 million and $0.16 million, respectively. Term deposits with banks include restricted deposits of $ 0.53 million and $ 0.41 million as at December 31, 2014 and December 31, 2013 respectively, placed as security towards performance guarantees issued by the company’s bankers on the Company’s behalf.

Property and equipment

Property and equipment are stated at cost. Maintenance and repairs are charged to expense when incurred. Depreciation is computed primarily using the straight-line method over the estimated useful lives as follows:


		Years
Office building		30
Residential property		20
Computer equipment and software		3
Furniture, fixtures and other equipment		5-7
Vehicles		3-5
Leasehold improvements		Shorter of economic life or life of lease
Leasehold land		Shorter of economic life or life of lease

Depreciation and amortization expense for the years ended December 31, 2014, 2013 and 2012 was $16.2 million, $14.5 million and $14.4 million, respectively.

Long-lived assets (other than goodwill)

In accordance with guidance on “Accounting for the Impairment or Disposal of Long-Lived Assets” in the FASB Codification, the Company reviews its long-lived assets (other than goodwill) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When factors indicate that such costs should be evaluated for possible impairment, the Company assesses the recoverability of the long-lived assets (other than goodwill) by comparing the estimated undiscounted cash flows associated with the related asset or group of assets against their respective carrying amounts. The amount of an impairment charge, if any, is calculated based on the excess of the carrying amount over the fair value of those assets. Management believes assets were not impaired at December 31, 2014 and 2013.

Goodwill

During the first quarter of 2014, as a result of the completion of organizational changes, the Company changed its basis of segmentation to vertical segments. The company reassigned goodwill to the new reportable segment Healthcare and Life Sciences. In accordance with guidance on goodwill impairment in the FASB Codification, goodwill is evaluated for impairment at least annually. Management believes goodwill was not impaired at December 31, 2014 or 2013. The Company evaluated goodwill for impairment in the third quarter of each of 2014 and 2013.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to allowance for doubtful accounts, impairment of long-lived assets and goodwill, contingencies and litigation, the recognition of revenues and profits based on the proportional performance method and potential tax liabilities and bonus accrual. Actual results could differ from those estimates and assumptions used in the preparation of the accompanying financial statements.

The tax rate for the year ended December 31, 2014 was impacted by a favorable adjustment of $1.20 million, which related to the true up of tax provisions, pursuant to finalization of the tax computation of Syntel Limited, which had arisen on account of setoff of inter units’ unabsorbed expenses. Further, a $0.86 million tax charge has arisen on account of a particular tax dispute raised during the year. The Company has provided tax charges of $1.63 million and $0.88 million on account of valuation allowances against deferred tax assets recognized on investments and the minimum alternative tax, respectively. Without the above, the effective tax rate for the year ended December 31, 2014 would have been 21.1%.

The tax rate for the year ended December 31, 2013 was impacted by a favorable adjustment of $1.09 million which related to the true up of tax provisions, pursuant to finalization of the tax computation for filing tax returns of Syntel Limited, which had arisen on account of finalization of the actual numbers of expenses apportionment, wage reconciliations, meal disallowances etc., compared with the amounts estimated earlier for the tax provisions. The Government of India published notice of a Cost Inflation Index of 939 for the financial year 2013-14, to be used in the calculation of long term capital gains. In general, Cost Inflation Indexes (“CII”) are being published with an increase in the range of 4%-11%. Before the aforesaid notification, Syntel had factored the CII of 886 for financial year 2013-14, which was based on a 4% increase in inflation index from the published Index of 852 for the financial year 2012-13. Accordingly, the higher CII has resulted in recognition of additional deferred tax assets and credit to the tax expenses of $0.55 million as a discrete tax item for the quarter ended June 30, 2013. Further, a $0.43 million reversal of the tax reserve has arisen on account of the reversal of a valuation allowance, created in the past, and against deferred tax assets recognized on the allowance on the accumulated losses. During the year ended December 31, 2013, the Company reviewed the filing requirements for certain U.S. State and City income tax returns. The Company has updated the profit apportionment method in those certain states and cities. Accordingly, the Company had provided $1.59 million, out of which $0.6 million relates to the prior years. Without the above, the effective tax rate for the year ended December 31, 2013 would have been 23.5%.

These revisions in the above estimates during 2013 had an after-tax impact of decreasing both the basic and diluted earnings per share for the year ended December 31, 2013 by $0.04 per share.

During 2012, the Company had a favorable adjustment of $0.24 million as a result of the Company’s review of its global uncertain tax liabilities provided on the “more likely than not” concept and other tax positions, which is based on completion of certain Appeals. These revisions in the above estimates during 2012 had no impact on the basic and diluted earnings per share for the year ended December 31, 2012.

Foreign currency translation

The financial statements of the Company’s foreign subsidiaries use the currency of the primary economic environment in which they operate as its functional currency. Revenues and expenses of the foreign subsidiaries are translated to U.S. dollars at average period exchange rates. Assets and liabilities are translated to U.S. dollars at period-end exchange rates with the effects of these cumulative translation adjustments being reported as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity. Transaction gains and losses are reflected within selling, general and administrative expenses in the consolidated statements of comprehensive income. During the year ended December 31, 2014, 2013 and 2012, foreign exchange gain of $10.7 million and $9.0 million and $1.3 million was included in selling, general and administrative expenses, respectively. Foreign exchange gain for the year ended December 31, 2014 includes an out-of-period adjustment of $3.0 million related to the past period cumulative impact, arising out of the modification of the accounting treatment adopted by the company during the second quarter, around certain foreign currency related balance sheet translations, exchange gains or losses on certain forward contracts and the related tax impacts, which had previously been reported as other comprehensive income (loss).

Earnings per share

Basic earnings per share are calculated by dividing net income by the weighted average number of shares outstanding during the applicable period. If the number of common shares outstanding increases as a result of a stock dividend or stock split or decreases as a result of a reverse stock split, the computations of basic and diluted earnings per share are adjusted retroactively for all periods presented to reflect that change in capital structure. If such changes occur after the close of the reporting period but before issuance of the financial statements, the per-share computations for that period and any prior-period financial statements presented are based on the new number of shares.

During 2014, the Company’s Board of Directors authorized a two-for-one stock split of its outstanding common shares. On November 3, 2014, an additional common share was issued for each existing common share held by shareholders of record on October 20, 2014. Accordingly, all share and per share amounts for all periods presented in these consolidated financial statements and notes thereto, have been adjusted retroactively, where applicable, to reflect this stock split.

The Company has issued stock options and restricted stock, which are considered to be potentially dilutive to its basic earnings per share. Diluted earnings per share is calculated using the treasury stock method for the dilutive effect of options and restricted stock granted pursuant to the stock option and incentive plan, by dividing the net income by the weighted average number of shares outstanding during the period adjusted for these potentially dilutive options, except when the results would be anti-dilutive. The potential tax benefit on exercise of stock options is considered as additional proceeds while computing dilutive earnings per share using the treasury stock method.

Vacation pay

The accrual for unutilized leave balance is determined for the entire available leave balance standing to the credit of the employees at period-end. The leave balance eligible for carry-forward is valued at gross compensation rates and eligible for compulsory encashment at basic compensation rates.

The gross charge for unutilized earned leave was $5.4 million, $5.1 million and $4.9 million for the years ended December 31, 2014, 2013 and 2012, respectively.

The amounts accrued for unutilized earned leave were $21.5 million and $19.1 million as of December 31, 2014 and 2013, respectively, and are included within accrued payroll and related costs.

Income taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws is recognized in income in the period that includes the enactment date.

Recently issued accounting standards

ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists,” was issued on July 18, 2013. Under this guidance, an unrecognized tax benefit, or a portion of one, must be presented in the statement of financial position as a reduction of a deferred tax asset for a net operating loss (NOL) carry forward or a tax credit carry forward – except to the extent a NOL or tax-credit carry forward at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the entity does not intend to use the deferred tax asset for such purposes. In these situations, the unrecognized tax benefit would be presented as a liability and not combined with deferred tax assets.

The guidance requires no new disclosures and should be applied prospectively for public entities for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The adoption of Accounting Standards Update 2013-11 did not have any significant impact on the Company’s financial statement presentation or disclosures.

ASU 2014-09, Revenue from Contracts with Customers – Issued May 2014; will be effective for Syntel beginning January 1, 2017. The new standard is intended to substantially enhance the quality and consistency of how revenue is reported while also improving the comparability of the financial statements of companies using U.S. generally accepted accounting principles (GAAP) and those using International Financial Reporting Standards (IFRS). The core principle of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The new guidance also addresses the accounting for some costs to obtain or fulfill a customer contract and provides a set of disclosure requirements intended to give financial statement users comprehensive information about the nature, amount, timing, and uncertainty of revenues and cash flows arising from customer contracts. The requirements of this ASU and its impact on the Company are being evaluated.