Company Registration No. 07858139 (England and Wales)
Softserve Systems Limited
Annual report and financial statements
for the year ended 31 December 2023
Softserve Systems Limited
Company information
Director
Taras Vervega
Company number
07858139
Registered office
Part Lower Ground Floor
30 Cannon Street
London
EC4M 6XH
Independent auditor
Saffery LLP
St John's Court
Easton Street
High Wycombe
HP11 1JX
Softserve Systems Limited
Contents
Page
Strategic report
1 - 2
Director's report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Statement of financial position
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 24
Softserve Systems Limited
Strategic report
For the year ended 31 December 2023
1

The director presents the strategic report for the year ended 31 December 2023.

Review of the business

During the year under review the company achieved an increased level of turnover and a satisfactory profit for the year as we grew in Sales and Marketing function to support our Parent company.

 

The director continues to adopt the going concern basis of accounting in preparing the financial statements.

Principal risks and uncertainties

SoftServe Systems Limited operates as a limited risk service provider and is remunerated with a targeted percentage of revenue, while all the losses would be compensated by ISV Tech Limited (sister company of the Group).

Financial risks management

The company uses a variety of financial instruments including cash and various items, such as trade debtors that arise directly from its operations. The main purpose of these financial instruments is to provide working capital for the company’s operations.

The directors review and agree policies for managing each of these risks and they are summarised below.

1) Market risk

Considering that SoftServe Systems Limited operates as a limited risk service provider its profitability is not generally sensitive to market conditions, although it could take limited market risk in case the market will be significantly decreased or affected in price terms.

 

As a result, ISV Tech Limited bears majority of the market risks associated with the UK market, while SoftServe Systems Limited bears market risk to a limited extent.

 

2) Credit risk

Credit risk relates to potential failure to pay or delay in payment of receivables by the buyers of services. In case clients will fail to pay SoftServe Systems Limited for the services provided, all losses related to such accident would be borne by ISV Tech Limited, therefore credit risk is mostly attributable to ISV Tech Limited, with minor exposure of SoftServe Systems Limited to this type of risk.

 

3) Risk of quality of services

The risk is associated with unsatisfactory results of research and development or innovation activity.

 

ISV Tech Limited shall indemnify, defend and hold harmless SoftServe Systems Limited according to the Agreement, as mentioned above, against and from, any and all liabilities, obligations etc. given it is economic owner of all the clients contracts and is responsible for the provision of the services.

 

In addition, SoftServe Systems Limited is added as a party to the insurance coverage obtained by ISV Tech Limited. As a result, SoftServe Systems Limited does not bear quality risks, given it is fully attributable to ISV Tech Limited.

 

4) Foreign exchange risk

Forex risks relate to changes in exchange rates with regard to the base currency of settlements of the companies. The risk arises if the amount of profit may be affected by currency fluctuations. The Parties may be faced with this risk if the currency of its expenses is different from the currency of its profits.

 

The functional currency of SoftServe Systems Limited is British Pound Sterling (GBP). SoftServe Systems Limited may bill end clients in currencies other than GBP and therefore SoftServe Systems Limited could be impacted albeit to a relatively small extent, by changes to foreign exchange rates. However, given the remuneration mechanism of SoftServe Systems Limited it is exposed to foreign exchange risk to a very limited extent.

Softserve Systems Limited
Strategic report (continued)
For the year ended 31 December 2023
2
Development and performance

The general industry outlook is expected to reach the same financial result as in 2023.

 

The company continues to receive the support of it’s parent company.

Key performance indicators

The company uses a number of measures to monitor the performance of the company.

Taras Vervega
Director
26 July 2024
Softserve Systems Limited
Director's report
For the year ended 31 December 2023
3

The director presents his annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the company continued to be that of sales, marketing and information technology consultancy.

Results and dividends

The results for the year are set out on page 8.

No ordinary dividends were paid. The director does not recommend payment of a final dividend.

Director

The director who held office during the year and up to the date of signature of the financial statements was as follows:

Taras Vervega
Auditor

Saffery LLP have expressed their willingness to continue in office as auditor of the company.

Statement of director's responsibilities

The director is responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom.

 

Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

 

 

The director is responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Strategic report

The company has chosen to set out in the company's strategic report certain information that is required by the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. This is in accordance with the Companies Act 2006, Section 414C(11). The matters dealt with in the Strategic report include financial instrument risk and future developments.

Softserve Systems Limited
Director's report (continued)
For the year ended 31 December 2023
4
Statement of disclosure to auditor

Each director in office at the date of approval of this annual report confirms that:

 

 

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

On behalf of the board
Taras Vervega
Director
26 July 2024
Softserve Systems Limited
Independent auditor's report
To the members of Softserve Systems Limited
5
Opinion

We have audited the financial statements of Softserve Systems Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.

Other information

The director is responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

Softserve Systems Limited
Independent auditor's report (continued)
To the members of Softserve Systems Limited
6
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the director's report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

 

Responsibilities of director

As explained more fully in the director's responsibilities statement, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the director is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.

 

Identifying and assessing risks related to irregularities:

We assessed the susceptibility of the company’s financial statements to material misstatement and how fraud might occur, including through discussions with the director, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the company by discussions with director and by updating our understanding of the sector in which the company operates.

 

Laws and regulations of direct significance in the context of the company include The Companies Act 2006 and UK Tax legislation.

 

Audit response to risks identified

We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We discussed the company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.

Softserve Systems Limited
Independent auditor's report (continued)
To the members of Softserve Systems Limited
7

During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

A further description of our responsibilities is available on the Financial Reporting Council's website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Sheryl Davis (Senior Statutory Auditor)
For and on behalf of Saffery LLP
30 July 2024
Chartered Accountants
Statutory Auditors
St John's Court
Easton Street
High Wycombe
HP11 1JX
Softserve Systems Limited
Statement of comprehensive income
For the year ended 31 December 2023
8
2023
2022
Notes
£
£
Revenue
4
14,306,912
13,515,503
Gross profit
14,306,912
13,515,503
Other operating income
13
574
Administrative expenses
(12,147,327)
(11,187,142)
Operating profit
5
2,159,598
2,328,935
Investment revenues
7
370,613
22,106
Finance costs
8
(32,228)
(9,986)
Profit before taxation
2,497,983
2,341,055
Income tax expense
9
(606,448)
(469,865)
Profit and total comprehensive income for the year
1,891,535
1,871,190

The income statement has been prepared on the basis that all operations are continuing operations.

Softserve Systems Limited
Statement of financial position
As at 31 December 2023
9
2023
2022
Notes
£
£
Non-current assets
Property, plant and equipment
10
604,325
287,125
Investments
11
-
0
-
0
Other receivables
13
9,166,557
6,425,804
9,770,882
6,712,929
Current assets
Trade and other receivables
13
14,928,262
18,668,962
Cash and cash equivalents
3,246,463
3,888,856
18,174,725
22,557,818
Current liabilities
Trade and other payables
15
20,932,739
24,507,428
Current tax liabilities
70,274
46,429
Lease liabilities
16
328,747
132,230
21,331,760
24,686,087
Net current liabilities
(3,157,035)
(2,128,269)
Non-current liabilities
Lease liabilities
16
132,727
-
0
Deferred tax liabilities
17
31,559
26,634
164,286
26,634
Net assets
6,449,561
4,558,026
Equity
Called up share capital
19
1
1
Retained earnings
6,449,560
4,558,025
Total equity
6,449,561
4,558,026
The financial statements were approved and signed by the director and authorised for issue on 26 July 2024.
Taras Vervega
Director
Company Registration No. 07858139
Softserve Systems Limited
Statement of changes in equity
For the year ended 31 December 2023
10
Share capital
Retained earnings
Total
£
£
£
Balance at 1 January 2022
1
2,686,835
2,686,836
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
1,871,190
1,871,190
Balance at 31 December 2022
1
4,558,025
4,558,026
Year ended 31 December 2023:
Profit and total comprehensive income for the year
-
1,891,535
1,891,535
Balance at 31 December 2023
1
6,449,560
6,449,561
Softserve Systems Limited
Statement of cash flows
For the year ended 31 December 2023
11
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
24
2,354,850
6,736,153
Interest paid
(32,228)
(9,986)
Income taxes paid
(577,678)
(458,688)
Net cash inflow from operating activities
1,744,944
6,267,479
Investing activities
Purchase of property, plant and equipment
(58,128)
(82,250)
Proceeds from disposal of property, plant and equipment
1,760
164
Loans made to other entities
(2,032,733)
(6,408,201)
Interest received
15,417
22,106
Net cash used in investing activities
(2,073,684)
(6,468,181)
Financing activities
Payment of lease liabilities
(313,653)
(270,899)
Net cash used in financing activities
(313,653)
(270,899)
Net decrease in cash and cash equivalents
(642,393)
(471,601)
Cash and cash equivalents at beginning of year
3,888,856
4,360,457
Cash and cash equivalents at end of year
3,246,463
3,888,856
Softserve Systems Limited
Notes to the financial statements
For the year ended 31 December 2023
12
1
Accounting policies
Company information

Softserve Systems Limited is a private company limited by shares incorporated in England and Wales. The registered office is Part Lower Ground Floor, 30 Cannon Street, London, EC4M 6XH.

1.1
Accounting convention

The financial statements have been prepared in accordance with international accounting standards (IAS) in conformity with the requirements of the Companies Act 2006 and with those parts of the Companies Act 2006 applicable to companies reporting under International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom, except as otherwise stated.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

1.2
Going concern

The director has at the time of approving the financial statements, a reasonable expectation that the truecompany has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.

1.3
Revenue

Revenue is measured based on the consideration specified in a contract with a customer. The company recognises revenue under an agency arrangement in accordance with the transfer of promised services to customers. Payment terms are agreed on a contract-by-contract basis.

 

Revenue in respect of sales and marketing services provided to related group companies are calculated as attributable in accordance with contracted intragroup service agreements.

1.4
Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:

Plant and equipment
20-25% on cost
Right of use asset
Over the life of the lease

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.

1.5
Non-current investments

Interests in fellow group companies are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

1.6
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
13
Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

1.7
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

 

A termination benefit liability is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

1.8
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered the service entitling them to the contributions.

1.9
Leases

At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
14

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

1.10
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

2
Adoption of new and revised standards and changes in accounting policies

During the financial year, the Company has adopted the following new IFRSs (including amendments thereto) and IFRIC interpretations, that became effective for the first time.

 

Their adoption has not had any material impact on the disclosures or amounts reported in the financial statements.

IFRS 17
Insurance Contracts
Amendments to IFRS 17
Insurance Contracts and Extension of the Temporary Exemption from Applying IFRS 9
Amendments to IAS 1 and IFRS Practice Statement
Disclosure of Accounting Policies
Amendments to IAS 8
Definition of Accounting Estimates
Amendments to IAS 12
Deferred Tax related to Assets and Liabilities arising from a Single Transaction
Amendments to IAS 12
International Tax Reform – Pillar Two Model Rules
Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
2
Adoption of new and revised standards and changes in accounting policies (continued)
15
Standards which are in issue but not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations relevant to Company and which have not been applied in these financial statements, were in issue but were not yet effective.

Amendments to IFRS 16
Lease Liability in a Sale and Leaseback
Amendments to IAS 1
Classification of Liabilities as Current or Non-Current, Non-current Liabilities with Covenants
Amendments to IAS 7 and IFRS 7
Supplier Finance Arrangements
Amendments to IAS 21 (not yet endorsed by the UK)
Lack of Exchangeability
IFRS 18 (not yet endorsed by the UK)
Presentation and Disclosure in Financial Statements
IFRS 19 (not yet endorsed by the UK)
Subsidiaries without Public Accountability: Disclosures

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Company in future periods.

3
Critical accounting judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The Director believes that there are no critical accounting estimates, judgements and key sources of uncertainty in these financial statements.

4
Revenue
2023
2022
£
£
Revenue analysed by class of business
Sales and marketing agency commissions
14,306,912
13,515,503

Turnover arises entirely on sales made within the United Kingdom.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
16
5
Operating profit
2023
2022
£
£
Operating profit for the year is stated after charging/(crediting):
Exchange losses/(gains)
65,429
(112,062)
Fees payable to the company's auditor for the audit of the company's financial statements
17,750
15,350
Depreciation of plant and equipment, right of use asset
380,942
351,428
Profit on disposal of plant and equipment, right of use asset
1,123
3,832
6
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2023
2022
Number
Number
Sales and administration
66
55

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
8,561,660
7,778,642
Social security costs
1,240,319
1,145,902
Pension costs
239,429
114,977
10,041,408
9,039,521
7
Investment income
2023
2022
£
£
Interest income
Financial instruments measured at amortised cost:
Bank deposits
11,131
2,302
Other interest income on financial assets
359,482
19,804
Total interest revenue
370,613
22,106
Income above relates to assets held at amortised cost, unless stated otherwise.
Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
17
8
Finance costs
2023
2022
£
£
Interest on lease liabilities
32,228
9,986
9
Income tax expense
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
601,523
468,617
Adjustments in respect of prior periods
-
0
(87)
Total UK current tax
601,523
468,530
Deferred tax
Origination and reversal of temporary differences
4,925
1,335
Total tax charge
606,448
469,865

The charge for the year can be reconciled to the profit per the income statement as follows:

2023
2022
£
£
Profit before taxation
2,497,983
2,341,055
Expected tax charge based on a corporation tax rate of 23.50% (2022: 19.00%)
587,026
444,800
Effect of expenses not deductible in determining taxable profit
19,422
25,152
Under/(over) provided in prior years
-
0
(87)
Taxation charge for the year
606,448
469,865
Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
18
10
Property, plant and equipment
Plant and equipment
Right of use asset
Total
£
£
£
Cost
At 1 January 2022
269,493
554,260
823,753
Additions
82,250
11,488
93,738
Disposals
(14,395)
-
0
(14,395)
At 31 December 2022
337,348
565,748
903,096
Additions
58,128
642,897
701,025
Disposals
(30,042)
(4,378)
(34,420)
At 31 December 2023
365,434
1,204,267
1,569,701
Accumulated depreciation and impairment
At 1 January 2022
136,340
138,602
274,942
Charge for the year
71,229
280,199
351,428
Eliminated on disposal
(10,399)
-
0
(10,399)
At 31 December 2022
197,170
418,801
615,971
Charge for the year
69,188
311,754
380,942
Eliminated on disposal
(27,159)
(4,378)
(31,537)
At 31 December 2023
239,199
726,177
965,376
Carrying amount
At 31 December 2023
126,235
478,090
604,325
At 31 December 2022
140,178
146,947
287,125
At 31 December 2021
133,153
415,658
548,811
11
Investments
Current
Non-current
2023
2022
2023
2022
£
£
£
£
Other investments
-
-
-
-

On the 28 October 2021 Softserve Systems Limited acquired a minority shareholding in fellow group undertaking Softserve Technology Services Mexico S.A. de C.V. for 1 MXN (£0.04).

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
19
12
Contracts with customers
2023
2022
2021
£
£
£
Contracts in progress
Contract assets
2,204,155
3,126,608
2,612,548
Contract liabilities
(2,278,689)
(2,939,810)
(2,755,063)
Significant changes in the period
2023
2022
Contract assets
Contract liabilities
Contract assets
Contract liabilities
£
£
£
£
Revenue recognised in the reporting period that was included in the contract liability balance at the beginning of the period
-
2,177,492
-
1,885,491
13
Trade and other receivables
Current
Non-current
2023
2022
2023
2022
£
£
£
£
Trade receivables
12,543,429
15,244,132
-
-
Contract assets (note 12)
2,204,155
3,126,608
-
-
Amounts owed by fellow group undertakings
-
0
-
0
9,166,557
6,425,804
Other receivables
41,481
21,028
-
-
Prepayments
139,197
277,194
-
-
14,928,262
18,668,962
9,166,557
6,425,804

Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.

14
Trade receivables - credit risk
Fair value of trade receivables

The director considers that the carrying amount of trade and other receivables is approximately equal to their fair value.

In the view of the director the expected credit loss at the reporting end date is negligible and therefore has not been recognised.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
20
15
Trade and other payables
2023
2022
£
£
Trade payables
16,971,256
19,638,040
Contract liabilities (note 12)
2,278,689
2,939,810
Accruals
191,516
177,007
Social security and other taxation
1,476,038
1,740,034
Other payables
15,240
12,537
20,932,739
24,507,428
16
Lease liabilities
2023
2022
Maturity analysis
£
£
Within one year
344,500
132,230
In two to five years
143,542
-
Total undiscounted liabilities
488,042
132,230
Future finance charges and other adjustments
(26,568)
-
Lease liabilities in the financial statements
461,474
132,230

Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

2023
2022
£
£
Current liabilities
328,747
132,230
Non-current liabilities
132,727
-
0
461,474
132,230
2023
2022
Amounts recognised in profit or loss include the following:
£
£
Interest on lease liabilities
32,228
9,986

Lease liabilities relate solely to the capitalisation of leases of land and buildings as "Right of use assets" under IFRS 16.

 

The company's leasing activities relates to the rental of their registered office. The directors have assessed the companies incremental borrowing rate to be 7.55% when discounting the cash flows associated with the lease agreements.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
16
Lease liabilities (continued)
21
Other leasing information is included in note 20.
17
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.

Accelerated capital allowances
£
Liability at 1 January 2022
25,299
Deferred tax movements in prior year
Charge/(credit) to profit or loss
1,335
Liability at 1 January 2023
26,634
Deferred tax movements in current year
Charge/(credit) to profit or loss
4,925
Liability at 31 December 2023
31,559

Deferred tax assets and liabilities are offset in the financial statements only where the company has a legally enforceable right to do so.

18
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
239,429
114,977

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Authorised
Ordinary share of £1 each
1
1
1
1
Issued and fully paid
Ordinary share of £1 each
1
1
1
1

All shares have equal rights in respect to voting, dividends and winding up.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
22
20
Other leasing information
Lessee

Amounts recognised in profit or loss as an expense during the period in respect of lease arrangements are as follows:

2023
2022
£
£
Expense relating to short-term leases
4,681
1,719
Information relating to lease liabilities is included in note 16.
21
Capital risk management

The Company's principal financial instruments comprise of trade receivables and trade payables which arise directly from its operations. The main purpose of these financial instruments is to fund the Company's operation and to manage working capital, liquidity. The Company has also provided a loan to a fellow subsidiary detailed in Note 22.

 

The Company does not enter into any derivative transactions.

 

The main risks arising from the Company's financial instruments are foreign currency risk and credit risk. Liquidity risk is not considered to be a main risk to the Company given the nature of its transactions with intercompany and holding significant cash balances. Interest rate risk is not considered to be a main risk to the Company as it does not have any borrowing and is purely equity financed.

The company is not subject to any externally imposed capital requirements.

Foreign currency risk

 

The Company is exposed to foreign currency risk on sales and purchases that are denominated in currencies other than the functional currency of the Company.

 

Foreign currency risk is managed by holding cash reserves in multiple currencies (GBP, USD and Euro) and transacting in these currencies as appropriate thus reducing the risks associated with fluctuations in foreign currencies.

 

Credit risk

 

The Company trades only with recognised, creditworthy third parties. It is the Company's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the results that the Company's exposure to bad debt is not significant, where a customer does default the expense is recharged to a fellow subsidiary.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
23
22
Related party transactions
Remuneration of key management personnel

No directors or key management personnel were remunerated by Softserve Systems Limited.

Other transactions with related parties

During the year sales were made of £14,306,912 (2022: £13,515,503) to ISV Tech Limited a fellow subsidiary.

 

Purchases of £62,421,523 (2022: £66,052,141) were made from ISV Tech Limited which are netted off against sales to 3rd parties to show net agency commission revenues.

The following amounts were outstanding at the reporting end date:

Included within trade payables is £16,896,044 (2022: £19,551,355) owing to ISV Tech Limited a fellow subsidiary.

 

Included within contract liabilities is £1,584,473 (2022: £2,129,626) owing to ISV Tech Limited a fellow subsidiary.

 

Included within contract assets is £491,715 (2022: £839,125) due from ISV Tech Limited a fellow subsidiary.

 

A long term loan balance is included within non-current assets being £9,166,557 (2022: £6,425,804) owing from ISV Tech Limited a fellow subsidiary. During the year interest has been charged of £355,196 (2022: £17,603) at a rate of 4.5-5.5% per annum. The amounts are repayable between 1.25 to 2 years.

 

No guarantees have been given or received.

23
Controlling party

The immediate and ultimate parent undertaking is Softserve Enterprises Limited, a company registered in Malta.

Softserve Systems Limited
Notes to the financial statements (continued)
For the year ended 31 December 2023
24
24
Cash generated from operations
2023
2022
£
£
Profit for the year before income tax
2,497,983
2,341,055
Adjustments for:
Finance costs
32,228
9,986
Investment income
(370,613)
(22,106)
Loss on disposal of property, plant and equipment
1,123
3,832
Depreciation and impairment of property, plant and equipment
380,942
351,428
Movements in working capital:
Decrease/(increase) in contract assets
922,453
(514,060)
Decrease/(increase) in trade and other receivables
2,465,423
(3,817,375)
(Decrease)/increase in contract liabilities
(661,121)
184,747
(Decrease)/increase in trade and other payables
(2,913,568)
8,198,646
Cash generated from operations
2,354,850
6,736,153
25
Analysis of changes in net funds
1 January 2023
Cash flows
New finance leases
31 December 2023
£
£
£
£
Cash at bank and in hand
3,888,856
(642,393)
-
3,246,463
Obligations under leases
(132,230)
313,653
(642,897)
(461,474)
3,756,626
(328,740)
(642,897)
2,784,989
1 January 2022
Cash flows
New finance leases
31 December 2022
Prior year:
£
£
£
£
Cash at bank and in hand
4,360,457
(471,601)
-
3,888,856
Obligations under leases
(391,641)
270,899
(11,488)
(132,230)
3,968,816
(200,702)
(11,488)
3,756,626
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