a. Change in accounting policy - presentation and disclosure of
The financial statements of the Company have been prepared and
presented for the year ended March 31, 2012, as per the format
prescribed under the revised Schedule VI notified under the Companies
Act, 1956. The adoption of revised Schedule VI does not impact
recognition and measurement principles followed for the preparation of
the financial statements. However, it has significant impact on
presentation and disclosures made in the financial statements. The
Company has also reclassified the previous year figures in accordance
with the requirements applicable in the current year.
b. Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities at the date of
the financial statements and the results of operations during the
reporting year end. Although these estimates are based upon
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets and
liabilities in future periods.
c. Tangible assets
Tangible assets are stated at cost of acquisition and subsequent
improvements thereto, including taxes & duties (net of cenvat credit),
freight and other incidental expenses related to acquisition and
installation. Capital work-in-progress is stated at cost.
Site restoration cost obligations are capitalized when it is probable
that an outflow of resources will be required to settle the obligation
and a reliable estimate of the amount can be made.
Subsequent costs are included in the asset''s carrying amount or
recognized as a separate asset, as appropriate, only when it is
porbable that future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured realiably.
All other repair and maintenance costs are recognized in the statement
of profit and loss as incurred.
Gains and losses arising from retirement or disposal of the tangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in
statement of profit and loss on the date of retirement and disposal.
d. Depreciation on tangible assets
Depreciation on tangible assets is provided on the straight line method
based on useful lives of respective assets as estimated by the
management or at the rates prescribed under Schedule XIV of the
Companies Act, 1956, whichever is higher.
The site restoration cost obligation capitalized is depreciated over
the period of the useful life of the related asset.
Assets costing up to Rs. 5 thousand (other than identified Customer
Premise Equipment) are being fully depreciated within one year from the
date of place in service.
e. Intangible assets
The entry fee paid by the Company for cellular and basic circles, upon
migration to the National Telecom Policy (NTP 1999) and the one time
license fees paid for acquiring new licences (post NTP 1999) (basic,
cellular, national long distance and international long distance
services) has been capitalised as an intangible asset.
The entry fee capitalised is amortised over the period of the license
and the one time licence fee is amortised over the balance period of
licence from the date of commencement of commercial operations.
3G spectrum fees are being amortised over the period of license from
the effective date of launch of 3G services in a circle. Intangible
assets under development are valued at cost.
Bandwidth capacity is amortised on straight line basis over the period
of the agreement subject to a maximum period of 18 years i.e. estimated
useful life of bandwidth.
Software is capitalized at the amounts paid to acquire the respective
license for use and is amortized over the period of license, generally
not exceeding three years. Software up to Rs. 500 thousand is amortized
over a period of one year from the date of place in service.
a) Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Lease rentals with respect to assets taken on
''Operating Lease'' are charged to the statement of profit and loss on a
straight-line basis over the lease term.
Leases which effectively transfer to the Company substantially all the
risks and benefits incidental to ownership of the leased item are
classified as finance lease. Assets acquired on ''Finance Lease'' which
transfer risk and rewards of ownership to the Company are capitalized
as assets by the Company at the lower of fair value of the leased
property or the present value of the minimum lease payments.
Amortization of capitalised leased assets is computed on the straight
line method over the useful life of the assets. Lease rental payable is
apportioned between principal and finance charge using the internal
rate of return method. The finance charge is allocated over the lease
term so as to produce a constant periodic rate of interest on the
remaining balance of liability.
b) Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Lease income in respect of ''Operating Lease'' is
recognised in the statement of profit and loss on a straight-line basis
over the lease term. Assets subject to operating leases are included in
Leases in which the Company transfer substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets leased to others under finance lease are recognized as
receivables at an amount equal to the net investment in the leased
assets. Finance Income is recognized based on a pattern reflecting a
constant periodic rate of return on the net investment of the lessor
outstanding in respect of the lease.
c) Initial direct costs are expensed in the statement of profit and
loss at the inception of the lease.
g. Borrowing cost
Borrowing cost attributable to the acquisition or construction of fixed
assets which takes substantial period of time to get ready for its
intended use is capitalised as part of the cost of that asset. Other
borrowing costs are recognised as an expense in the year in which they
are incurred. The interest cost incurred for funding a qualifying asset
during the construction period is capitalized based on actual
investment in the asset at the average interest rate for specific
borrowings. All other borrowing cost are expensed in the period they
h. Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognized for the amount by which the assets'' carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of the
assets1 fair value less costs to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows
(cash generating units).
i. Asset retirement obligations (ARO)
Provision for ARO is based on past experience and technical estimates.
Current Investments are valued at lower of cost and fair market value
determined on individual basis.
Non-current investments are valued at cost. Provision is made for
diminution in value to recognise a decline, if any, other than that of
Inventory is valued at the lower of cost and net realisable value. Cost
is determined on First in First out basis. Net realisable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make
The Company provides for obsolete and slow-moving inventory based on
management estimates of the usability of inventory.
l. Revenue recognition and receivables
Service revenue is recognised on completion of provision of services.
Service revenue includes income on roaming commission and an access
charge recovered from other operators, and is net of discounts and
waivers. Revenue, net of discount, is recognised on transfer of all
significant risks and rewards to the customer and when no significant
uncertainty exists regarding realisation of consideration.
Processing fees on recharge is being recognised over the estimated
customer relationship period or voucher validity period, as applicable.
Revenue from prepaid calling cards packs is recognised on the actual
Service revenue is recognised on completion of provision of services.
Revenue is recognised when no significant uncertainty exists regarding
realisation of consideration. Service Revenue includes access charges
recovered from other operators, and is net of discounts and waivers.
Airtel Business (Previously known as Enterprise Services)
Revenue, net of discount, from sale of goods is recognised on transfer
of all significant risks and rewards to the customer and when no
significant uncertainty exists regarding realisation of consideration.
Revenue on account of bandwidth service is recognised on time
proportion basis in accordance with the related contracts.
Service Revenue includes access charges recovered from other operators,
revenues from installation and provision of Internet and Satellite
Services. Installation charges are recognised as revenue on
satisfactory completion of installation of hardware and service revenue
is recognised from the date of satisfactory installation of equipment
and software at the customer site and provisioning of Internet and
Activation revenue and related direct activation costs, not exceeding
the activation revenue, are deferred and amortized over the related
estimated customer relationship period, as derived from the estimated
customer churn period.
Investing and Other Activities
Income on account of interest and other activities are recognised on an
accrual basis. Dividends are accounted for when the right to receive
the payment is established.
Provision for Doubtful Debts
The Company provides for amounts outstanding for more than 90 days in
case of active subscribers, roaming receivables, receivables for data
services and for entire outstanding from deactivated customers net off
security deposits or in specific cases where the management is of the
view that the amounts from certain customers are not recoverable.
For receivables due from the other operators on account of their
National Long Distance (NLD) and International Long Distance (ILD)
traffic for voice and Interconnect Usage Charges (IUC), the Company
provides for amounts outstanding for more than 120 days from the date
of billing, net of any amounts payable to the operators or in specific
cases where management is of the view that the amounts from these
operators are not recoverable.
Accrued Billing Revenue
Accrued billing revenue represent revenue recognized in respect of
Mobile, Broadband and Telephone, and Long Distance services provided
from the bill cycle date to the end of each month. These are billed in
subsequent periods as per the terms of the billing plans.
m. License fees - revenue share
With effect from August 1, 1999, the variable licence fee computed at
prescribed rates of revenue share is charged to the statement of profit
and loss in the year in which the related revenues are recognised.
Revenue for this purpose is identified as adjusted gross revenue as per
the respective license agreements.
n. Foreign currency translation, accounting for forward contracts and
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange differences arising on the settlement of monetary items or on
restatement of the Company''s monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise as mentioned below.
Forward Exchange Contracts covered under AS 11, ''The Effects of Changes
in Foreign Exchange Rates''
Exchange differences on forward exchange contracts and plain vanilla
currency options for establishing the amount of reporting currency and
not intended for trading & speculation purposes, are recognised in the
statement of profit and loss in the year in the which the exchange rate
changes. The premium or discount arising at the inception of forward
exchange contracts is amortised as expense or income over the life of
the contract. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is recognised as income or expense for
Exchange difference on forward contracts which are taken to establish
the amount other than the reporting currency arising due to the
difference between forward rate available at the reporting date for the
remaining maturity period and the contracted forward rate (or the
forward rate last used to measure a gain or loss on the contract for an
earlier period) are recognised in the statement of profit and loss for
Other Derivative Instruments, not in the nature of AS 11, ''The Effects
of Changes in Foreign Exchange Rates''
The Company enters into various foreign currency option contracts and
interest rate swap contracts that are not in the nature of forward
contracts designated under AS 11 as such and contracts that are not
entered to establish the amount of the reporting currency required or
available at the settlement date of a transaction; to hedge its risks
with respect to foreign currency fluctuations and interest rate
exposure arising out of import of capital goods using foreign currency
loan. In accordance with the ICAI announcement, at every year end, all
outstanding derivative contracts are fair valued on a mark-to-market
basis and any loss on valuation is recognised in the statement of
profit and loss, on each contract basis. Any gain on mark-to-market
valuation on respective contracts is not recognized by the Company,
keeping in view the principle of prudence as enunciated in AS 1,
''Disclosure of Accounting Policies''. Any reduction to fair values and
any reversals of such reductions are included in profit and loss
statement of the year.
Embedded Derivative Instruments
The Company occasionally enters into contracts that do not in their
entirety meet the definition of a derivative instrument that may
contain embedded derivative instruments - implicit or explicit terms
that affect some or all of the cash flow or the value of other
exchanges required by the contract in a manner similar to a derivative
instrument. The Company assesses whether the economic characteristics
and risks of the embedded derivative are clearly and closely related to
the economic characteristics and risks of the remaining component of
the host contract and whether a separate, non-embedded instrument with
the same terms as the embedded instrument would meet the definition of
a derivative instrument. When it is determined that (1) the embedded
derivative possesses economic characteristics and risks that are not
clearly and closely related to the economic characteristics and risks
of the host contract and (2) a separate, stand-alone instrument with
the same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract, carried at fair value
as a trading or non-hedging derivative instrument. At every year end,
all outstanding embedded derivative instruments are fair valued on
mark-to-market basis and any loss on valuation is recognized in the
statement of profit and loss for the year. Any reduction in mark to
market valuations and reversals of such reductions are included in
profit and loss statement of the year.
Translation of Integral and Non-Integral Foreign Operation
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
In translating the financial statements of a non-integral foreign
operation for incorporation in financial statements, the assets and
liabilities, both monetary and non-monetary are translated at the
closing rate; income and expense items are translated at exchange rate
at the date of transaction for the year; and all resulting exchange
differences are accumulated in a foreign currency translation reserve
until the disposal of the net investment.
Foreign exchange contracts for trading and speculation purpose
Foreign exchange contracts intended for trading and/or speculation are
fair valued on a mark-to-market basis and any gain or loss on such
valuation is recognised in the statement of profit and loss for the
o. Employee benefits
(a) Short term employee benefits are recognised in the year during
which the services have been rendered.
(b) All employees of the Company are entitled to receive benefits under
the Provident Fund, which is a defined contribution plan. Both the
employee and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees'' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees'' state insurance schemes, which are also
defined contribution schemes recognized and administered by the
Government of India.
The Company''s contributions to both these schemes are expensed in the
statement of profit and loss. The Company has no further obligations
under these plans beyond its monthly contributions.
(c) Some employees of the Company are entitled to superannuation, a
defined contribution plan which is administered through Life Insurance
Corporation of India (LIC). Superannuation benefits are recorded as
an expense as incurred.
(d) The compensated absences are provided for based on actuarial
valuation. The actuarial valuation is done as per projected unit credit
method at the end of each year.
(e) The Company provides for gratuity obligations through a defined
benefit retirement plan (the ''Gratuity Plan'') covering all employees.
The Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuations as per the
Projected Unit Credit Method at the end of each year in accordance with
Accounting Standard 15, Employee Benefits. The Company makes annual
contributions to the LIC for the Gratuity Plan in respect of employees
at certain circles.
(f) Other long term employee benefits are provided based on actuarial
valuation made at the end of each year. The actuarial valuation is done
as per projected unit credit method.
(g) Actuarial gains and losses are recognized as and when incurred.
p. Pre-operative expenditure
Expenditure incurred by the Company from the date of acquisition of
license for a new circle or from the date of start-up of new venture or
business, up to the date of commencement of commercial operations of
the circle or the new venture or business, not directly attributable to
fixed assets are charged to the statement of profit and loss in the
year in which such expenditure is incurred.
Current Income Tax
Current Income Tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised and reviewed at each balance sheet date, only to the
extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. In situations, where the Company has unabsorbed
depreciation or carry forward tax losses, all deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that they can be realised against future taxable profits. At
each balance sheet date, unrecognised deferred tax assets of earlier
years are re-assessed and recognised to the extent that it has become
reasonably or virtually certain, as the case may be, that future
taxable income will be available against which such deferred tax assets
can be realized.
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the ICAI, the said asset is created by way of a credit to the
statement of profit and loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each balance sheet date
and writes down the carrying amount of MAT Credit Entitlement to the
extent there is no longer convincing evidence to the effect that
Company will pay normal income tax during the specified period.
r. Share based compensation
Employee stock compensation are valued using Black Scholes/Monte
Carlo/Lattice valuation option - pricing model and the fair value is
recognised as an expense over the period in which the options vest. The
difference between the actual purchase cost of shares issued upon
exercise of options and the sum of fair value of the option and
exercise price is adjusted against General Reserve.
s. Segmental reporting
a) Primary Segment
The Company operates in three primary business segments viz. Mobile
Services, Telemedia Services and Airtel Business.
b) Secondary Segment
The Company has operations serving customers within India as well as in
other countries located outside India. The operations in India
constitute the major part, which is the only reportable segment, the
remaining portion being attributable to others.
t. Earnings per share
The earnings considered in ascertaining the Company''s Earnings Per
Share (''EPS'') comprise the net profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the year. The
weighted average number of equity shares outstanding during the year is
adjusted for events of share splits/bonus issue post year end and
accordingly, the EPS is restated for all periods presented in these
financial statements. The diluted EPS is calculated on the same basis
as basic EPS, after adjusting for the effects of potential dilutive
equity shares unless impact is anti dilutive.
The weighted average number of equity shares outstanding during the
year are adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares).
u. Provisions and contingencies
Provisions are recognised when the Company has a present obligation as
a result of past event; it is more likely than not that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted
to its present value and are determined based on best estimate required
to settle the obligation at the balance sheet date. These are reviewed
at each balance sheet date and adjusted to reflect the current best
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company or a present obligation that is not
recognized because it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
or the amount of the obligation cannot be measured with sufficient
reliability. Information on contingent liabilities is disclosed in the
notes to the financial statements, unless the possibility of an outflow
of resources embodying economic benefits is remote.
v. Multiple element contracts with vendors
The Company enters into multiple element contracts with vendors for
supply of goods and rendering of services. The consideration under this
contracts is/may be determined independent of the value of supplies
received and services availed. Accordingly, the supplies and services
are accounted for based on their relative fair values to the overall
consideration. The supplies with finite life under such contracts are
accounted under as Tangible assets or as Intangible assets in view of
the substance of these contracts and existence of economic ownership in
w. Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash in hand and at bank and short-term investments with an
original maturity of three months or less.