1) CORPORATE INFORMATION
Tata Consultancy Services Limited (referred to as ''TCS Limited'' or ''the
Company'') provides consulting-led integrated portfolio of information
technology (IT) and IT-enabled services delivered through a network of
multiple locations around the globe. The Company''s full services
portfolio consists of IT and Assurance Services, Business Intelligence
and Performance Management, Business Process Services, Cloud Services,
Connected Marketing Solutions, Consulting, Eco-sustainability Services,
Engineering and Industrial Services, Enterprise Security and Risk
Management, Enterprise Solutions, iON-Small and Medium Businesses, IT
Infrastructure Services, Mobility Products and Services and Platform
As at March 31, 2016, Tata Sons Limited owned 73.26% of the Company''s
equity share capital and has the ability to control its operating and
financial policies. The Company''s registered office is in Mumbai and it
has 61 subsidiaries across the globe.
a) Basis of preparation
These financial statements have been prepared in accordance with the
Generally Accepted Accounting Principles in India (''Indian GAAP'') to
comply with the Accounting Standards specified under Section 133 of the
Companies Act, 2013, as applicable. The financial statements have been
prepared under the historical cost convention on accrual basis, except
for certain financial instruments which are measured at fair value.
Comparative figures do not include the figures of erstwhile CMC Limited
which is amalgamated with the Company with effect from April 1, 2015.
Consequently, the comparative figures are not comparable with the
figures for the year ended March 31, 2016.
b) Use of estimates
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of the financial statements and
reported amounts of income and expense during the year. Examples of
such estimates include provisions for doubtful receivables, employee
benefits, provision for income taxes, accounting for contract costs
expected to be incurred, the useful lives of depreciable fixed assets
and provision for impairment. Future results could differ due to
changes in these estimates and the difference between the actual result
and the estimates are recognized in the period in which the results are
known / materialize.
c) Fixed assets
Fixed assets are stated at cost, less accumulated depreciation /
amortization. Costs include all expenses incurred to bring the asset to
its present location and condition.
Fixed assets exclude computers and other assets individually costing Rs,
50,000 or less which are not capitalized except when they are part of a
larger capital investment programme.
d) Depreciation / amortization
In respect of fixed assets (other than freehold land and capital
work-in-progress) acquired during the year, depreciation / amortization
is charged on a straight line basis so as to write-off the cost of the
assets over the useful lives and for the assets acquired prior to April
1, 2014, the carrying amount as on April 1, 2014 is depreciated over
the remaining useful life based on an evaluation.
Assets taken on lease by the Company in its capacity as lessee, where
the Company has substantially all the risks and rewards of ownership
are classified as finance lease. Such a lease is capitalized at the
inception of the lease at lower of the fair value or the present value
of the minimum lease payments and a liability is recognized for an
equivalent amount. Each lease rental paid is allocated between the
liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the less or, are recognized as
operating leases. Lease rentals under operating leases are recognized
in the statement of profit and loss on a straight-line basis.
At each balance sheet date, the management reviews the carrying amounts
of its assets included in each cash generating unit to determine
whether there is any indication that those assets were impaired. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of impairment. Recoverable
amount is the higher of an asset''s net selling price and value in use.
In assessing value in use, the estimated future cash flows expected
from the continuing use of the asset and from its disposal are
discounted to their present value using a pre-tax discount rate that
reflects the current market assessments of time value of money and the
risks specific to the asset.
Reversal of impairment loss is recognized as income in the statement of
profit and loss.
Long-term investments and current maturities of long-term investments
are stated at cost, less provision for other than temporary diminution
in value. Current investments, except for current maturities of
long-term investments, comprising investments in mutual funds,
government securities and bonds are stated at the lower of cost and
h) Employee benefits
(i) Post-employment benefit plans
Contributions to defined contribution retirement benefit schemes are
recognized as expense when employees have rendered services entitling
them to such benefits.
For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the statement of profit and
loss for the period in which they occur. Past service cost is
recognized immediately to the extent that the benefits are already
vested, or amortized on a straight-line basis over the average period
until the benefits become vested.
The retirement benefit obligation recognized in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost, and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to the present value of available refunds and reductions in
future contributions to the scheme.
(ii) Other employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service. These benefits
include compensated absences such as paid annual leave, overseas social
security contributions and performance incentives.
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognized as an actuarially determined liability
at the present value of the defined benefit obligation at the balance
i) Revenue recognition
Revenue from contracts priced on a time and material basis are
recognized when services are rendered and related costs are incurred.
Revenue from turnkey contracts, which are generally time bound fixed
price contracts, are recognized over the life of the contract using the
proportionate completion method, with contract costs determining the
degree of completion. Foreseeable losses on such contracts are
recognized when probable.
Revenue from the sale of equipment are recognized upon delivery, which
is when title passes to the customer.
Revenue from sale of software licenses are recognized upon delivery.
Revenue from maintenance contracts are recognized pro-rata over the
period of the contract.
In respect of Business Process Services, revenue on time and material
and unit priced contracts is recognized as the related services are
rendered, whereas revenue from fixed price contracts is recognized
using the proportionate completion method with contract cost
determining the degree of completion.
Revenue is reported net of discounts.
Dividend is recorded when the right to receive payment is established.
Interest income is recognized on time proportion basis taking into
account the amount outstanding and the rate applicable.
Current income tax expense comprises taxes on income from operations in
India and in foreign jurisdictions. Income tax payable in India is
determined in accordance with the provisions of the Income Tax Act,
1961. Tax expense relating to foreign operations is determined in
accordance with tax laws applicable in countries where such operations
Minimum Alternative Tax (MAT) paid in accordance with the tax laws in
India, which gives rise to future economic benefits in the form of
adjustment of future income tax liability, is considered as an asset if
there is convincing evidence that the Company will pay normal income
tax after the tax holiday period. Accordingly, MAT is recognized as an
asset in the balance sheet when the asset can be measured reliably and
it is probable that the future economic benefit associated with it will
Deferred tax expense or benefit is recognized on timing differences
being the difference between taxable income and accounting income that
originate in one period and is likely to reverse in one or more
subsequent periods. Deferred tax assets and liabilities are measured
using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
In the event of unabsorbed depreciation and carry forward of losses,
deferred tax assets are recognized only to the extent that there is
virtual certainty supported by convincing evidence that sufficient
future taxable income will be available to realize such assets. In
other situations, deferred tax assets are recognized only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available to realize these assets.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance tax paid and income tax
provision arising in the same tax jurisdiction for relevant taxpaying
units and where the Company is able to and intends to settle the asset
and liability on a net basis.
The Company offsets deferred tax assets and deferred tax liabilities if
it has a legally enforceable right and these relate to taxes on income
levied by the same governing taxation laws.
k) Foreign currency transactions
Income and expense in foreign currencies are converted at exchange
rates prevailing on the date of the transaction. Foreign currency
monetary assets and liabilities other than net investments in
non-integral foreign operations are translated at the exchange rate
prevailing on the balance sheet date and exchange gains and losses are
recognized in the statement of profit and loss. Exchange difference
arising on a monetary item that, in substance, forms part of an
enterprise''s net investments in a non-integral foreign operation are
accumulated in a foreign currency translation reserve.
Premium or discount on foreign exchange forward, options and futures
contracts are amortized and recognized in the statement of profit and
loss over the period of the contract. Foreign exchange forward, options
and futures contracts outstanding at the balance sheet date, other than
designated cash flow hedges, are stated at fair values and any gains or
losses are recognized in the statement of profit and loss.
l) Derivative instruments and hedge accounting
The Company uses foreign exchange forward, options and futures
contracts to hedge its risks associated with foreign currency
fluctuations relating to certain firm commitments and forecasted
transactions. The Company designates these hedging instruments as cash
The use of hedging instruments is governed by the Company''s policy
approved by the Board of Directors, which provide written principles on
the use of such financial derivatives consistent with the Company''s
risk management strategy.
Hedging instruments are initially measured at fair value, and are
premeasured at subsequent reporting dates. Changes in the fair value of
these derivatives that are designated and effective as hedges of future
cash flows are recognized directly in shareholders'' funds and the
ineffective portion is recognized immediately in the statement of
profit and loss. The Company separates the intrinsic value and time
value of an option and designates as hedging instruments only the fair
value change in the intrinsic value of the option. The change in fair
values of the time value of option, is accumulated in hedging reserve,
a component of shareholders'' funds and is transferred to the statement
of profit and loss when the forecast transaction occurs.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognized in the statement of
profit and loss as they arise.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. Cumulative gain or loss on the hedging instrument
recognized in shareholders'' funds is retained there and is transferred
to the statement of profit and loss when the forecasted transaction
occurs. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognized in shareholders'' funds is
transferred to the statement of profit and loss.
Raw materials, sub-assemblies and components are carried at the lower
of cost and net realizable value. Cost is determined on a weighted
average basis. Purchased goods-in-transit are carried at cost.
Work-in-progress is carried at the lower of cost and net realizable
value. Stores and spare parts are carried at lower of cost and net
realizable value. Finished goods produced or purchased by the Company
are carried at lower of cost and net realizable value. Cost includes
direct material and labor cost and a proportion of manufacturing
n) Provisions, Contingent liabilities and Contingent assets
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions (excluding retirement benefits and
compensated absences) 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 estimates. Contingent
liabilities are not recognized in the financial statements. A
contingent asset is neither recognized nor disclosed in the financial
o) Cash and cash equivalents
The Company considers all highly liquid financial instruments, which
are readily convertible into known amount of cash that are subject to
an insignificant risk of change in value and having original maturities
of three months or less from the date of purchase, to be cash
The Authorized Equity Share Capital was increased to 460,05,00,000
equity shares of Rs. 1 each pursuant to the amalgamation of its
subsidiaries, WTI Advanced Technology Limited vide the Order dated
March 27, 2015 of the High Court of Judicature at Bombay and CMC
Limited , vide the Order dated August 14, 2015 of the High Court of
Judicature at Bombay and vide the Order dated July 20, 2015 of the High
Court of Judicature at Hyderabad.