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HCL Technologies

BSE: 532281|NSE: HCLTECH|ISIN: INE860A01027|SECTOR: Computers - Software
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Jun 15
Notes to Accounts Year End : Mar '16
1. Leases 
 
 i) Operating lease
 
 The Company leases office space and accommodation for its employees
 under operating lease agreements. The lease rental expense recognized
 in the statement of profit and loss for the year (nine months) is ''
 112.84 crores [Previous year (twelve months) Rs. 211.99 crores]. The
 lease equalization reserve amount for non-cancellable operating lease
 payable in future years and accounted for by the Company is Rs. 85.49
 crores (previous year Rs. 115.20 crores). Future minimum lease payments
 and the payment profile of non-cancellable operating leases are as
 follows:
 
 2. Segment Reporting
 
 Identification of segments
 
 The Company''s operating businesses are organized and managed according
 to the nature of products and services provided, with each segment
 representing a strategic business unit that offers different products
 and services and is subject to risks and returns that are different
 from other strategic business units.
 
 (i) Business segments
 
 The Company''s operations predominantly relate to providing a range of
 IT and Business process outsourcing (BPO) services targeted at Global
 2000 companies spread across USA, Europe and the Rest of the World. IT
 Services include software services and IT infrastructure management
 services. Within software services, the Company provides application
 development and maintenance, enterprise application, next generation
 SAAS (Software As A Service) application services and engineering and
 research and development (R&D) services to several global customers.
 Infrastructure management services involve managing customers'' IT
 assets effectively. Business process outsourcing services include the
 traditional contact centre and help desk services and next generation
 services around platform BPO and BPAAS (Business Process As A Service)
 delivered through a global delivery model.
 
 The Chairman of the Company, who is the Chief Strategy Officer,
 evaluates the Company''s performance and allocates resources based on an
 analysis of various performance indicators by types of services
 provided by the Company and geographic segmentation of customers.
 Accordingly, revenue from service segments comprises the primary basis
 of segmental information set out in these financial statements.
 
 Accordingly, revenue from service segments comprises the primary basis
 of segmental information set out in these financial statements.
 Secondary segmental reporting is performed on the basis of the
 geographical location of customers and assets.
 
 (ii) Geographic segments
 
 Segment revenue from customers by geographical areas is stated based on
 the geographical location of the customer and segment assets by the
 geographical location of the assets.
 
 The principal geographical segments are classified as America, Europe,
 India and Others. Europe comprises business operations conducted by the
 Company in the United Kingdom, Sweden, Germany, Italy, Belgium,
 Netherlands, Northern Ireland, Finland, Poland and Switzerland. Since
 services provided by the Company within these European entities are
 subject to similar risks and returns, their operating results have been
 reported as one segment, namely Europe. India has been identified as a
 separate segment. All other customers, mainly in Japan, Australia, New
 Zealand, Singapore, Malaysia, Israel, South Korea, China, Czech
 Republic, Macau, UAE, Portugal, Russia and Hong Kong are included in
 Others.
 
 (iii) Segment accounting policies
 
 The accounting principles consistently used in the preparation of the
 financial statements and consistently applied to record revenue and
 expenditure in individual segments are as set out in note 1 to the
 financial statements on significant accounting policies. The accounting
 policies in relation to segment accounting are as under:
 
 a) Segment revenue and expenses
 
 Segment revenue is directly attributable to the segment and segment
 expenses have been allocated to various segments on the basis of
 specific identification. However, segment revenue does not include
 other income. Segment expenses do not include, premium amortized on
 bonds, diminution allowance in respect of current and trade
 investments, other than temporary diminution in the value of long term
 investments, and finance cost.
 
 b) Segment assets and liabilities
 
 Assets and liabilities are not identified to any reportable segments,
 since these are increasingly used interchangeably across segments and
 consequently, the management believes that it is not practicable or
 meaningful to provide segment disclosures relating to total assets and
 liabilities.
 
 3. Derivative Financial Instruments
 
 The Company is exposed to foreign currency fluctuations on foreign
 currency assets / liabilities and forecast cash flows denominated in
 foreign currency. The use of derivatives to hedge foreign currency
 forecast cash flows is governed by the Company''s strategy, which
 provides principles on the use of such forward contracts and currency
 options consistent with the Company''s Risk Management Policy. The
 counter parties in these derivative instruments are banks and the
 Company considers the risks of non-performance by the counterparty as
 insignificant. The Company has entered into a series of foreign
 exchange forward contracts that are designated as cash flow hedges and
 the related forecasted transactions extend through April 2018. The
 Company does not use forward contracts and currency options for
 speculative purposes.
 
 4. Employee Benefit Plans
 
 The Company has calculated the various benefits provided to employees
 as shown below:
 
 A. Defined Contribution Plans and State Plans
 
 Superannuation Fund
 
 Employer''s contribution to Employees State Insurance Employer''s
 contribution to Employee Pension Scheme
 
 5. Corporate social responsibility
 
 As required by the Companies Act, 2013, the gross amount required to be
 spent by the Company on CSR activities is Rs. 122.13 crores (Previous
 year Rs. 89.99 crores) and the amount spent during the year is Rs.
 13.04 crores (Previous year Rs. 6.22 crores).
 
 6. Subsequent event
 
 On 1st April 2016, the Company has entered into an agreement for
 acquisition of the IT enabled engineering services, PLM (''Product
 Lifecycle Management'') services and engineering design productivity
 software tools business of Geometric Limited by way of demerger through
 a Court approved scheme of arrangement under Sections 391 to 394 and
 other relevant provisions of the Companies Act, 1956 (including those
 of the Companies Act, 2013) to be effective from 31st March 2016.
 
 The acquisition will be accounted for in the books of the Company on
 approval of the scheme by the Court and simultaneously with the
 acquisition of the demerged business, the Company will issue 10 equity
 shares of Rs. 2 each for every 43 fully paid equity shares of Rs. 2
 each held by equity shareholders of Geometric Limited
 
 7. Previous year comparatives
 
 The current financial year of the Company is for a nine months period
 from 1 July 2015 to 31 March 2016. The figures for the current
 financial year are therefore not comparable with those of the previous
 year. Previous year figures have been rearranged to conform to the
 current year''s classification.
Source :
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