SENSEX NIFTY India | Accounting Policy > Computers - Software > Accounting Policy followed by Tata Consultancy Services - BSE: 532540, NSE: TCS
Tata Consultancy Services
BSE: 532540|NSE: TCS|ISIN: INE467B01029|SECTOR: Computers - Software
May 26, 16:00
-0.2 (-0.01%)
VOLUME 26,914
May 26, 17:00
7.85 (0.3%)
VOLUME 980,870
« Mar 13
Accounting Policy Year : Mar '14
 Tata Consultancy Services Limited (referred to as TCS Limited or the
 Company) provide consulting-led integrated portfolio of information
 technology (IT) and IT-enabled services delivered through a network of
 multiple locations around the globe.  The Companys 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 of March 31, 2014, Tata Sons Limited owned 73.69% of the Companys
 equity share capital and has the ability to control its operating and
 financial policies. The Companys registered office is in Mumbai and it
 has 64 subsidiaries across the globe.
 a) Basis of preparation
 These financial statements have been prepared in accordance with the
 generally accepted accounting principles in India under the historical
 cost convention on accrual basis, except for certain financial
 instruments which are measured at fair value. These financial
 statements have been prepared to comply in all material aspects with
 the accounting standards notified under Section 211(3C) (which
 continues to be applicable in terms of General circular 15/2013 dated
 September 13, 2013 of the Ministry of Corporate Affairs in respect of
 Section 133 of the Companies Act, 2013) and other relevant provisions
 of the Companies Act,1956.
 Comparative figures do not include the figures of erstwhile TCS e-Serve
 Limited and the discontinued operations of e-Serve International
 Limited which is amalgamated with the Company effective April 1, 2013.
 Consequently, the comparative figures are not comparable with the
 figures for the year ended March 31, 2014.
 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 provisions for impairment. Future results could differ due to
 changes in these estimates and the difference between the actual
 results and the estimates are recognised in the period in which the
 results are known/materialise.
 c) Fixed Assets
 Fixed assets are stated at cost, less accumulated depreciation /
 amortisation. 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 capitalised except when they are part of a
 larger capital investment programme.
 d) Depreciation / Amortisation
 Depreciation / amortisation on fixed assets, other than freehold land
 and capital work-in-progress is charged so as to write-off the cost of
 assets, on the following basis:
 e) Leases
 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 capitalised 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 recognised 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 lessor, are recognised as
 operating leases. Lease rentals under operating leases are recognised
 in the statement of profit and loss on a straight-line basis.
 f) Impairment
 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 assets 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 recognised as income in the statement of
 profit and loss.
 g) Investments
 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 are
 stated at the lower of cost and fair value.
 h) Employee benefits
 (i) Post-employment benefit plans
 Contributions to defined contribution retirement benefit schemes are
 recognised as an 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 recognised in full in the statement of profit and
 loss for the period in which they occur. Past service cost is
 recognised immediately to the extent that the benefits are already
 vested, or amortised on a straight-line basis over the average period
 until the benefits become vested.
 The retirement benefit obligation recognised in the balance sheet
 represents the present value of the defined benefit obligation as
 adjusted for unrecognised 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 recognised
 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 recognised as an actuarially determined liability
 at the present value of the defined benefit obligation at the balance
 sheet date.
 i) Revenue recognition
 Revenues from contracts priced on a time and material basis are
 recognised when services are rendered and related costs are incurred.
 Revenues from turnkey contracts, which are generally time bound fixed
 price contracts, are recognised 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
 recognised when probable.
 Revenues from the sale of equipment are recognised upon delivery, which
 is when title passes to the customer.
 Revenues from sale of software licences are recognised upon delivery.
 Revenues from maintenance contracts are recognised pro-rata over the
 period of the contract.
 In respect of Business Process Outsourcing (BPO) services, revenue on
 time and material and unit priced contracts is recognised as the
 related services are rendered, whereas revenue from fixed price
 contracts is recognised as per the proportionate completion method with
 contract cost determining the degree of completion.
 Revenues are reported net of discounts.
 Dividends are recorded when the right to receive payment is
 established. Interest income is recognised on time proportion basis
 taking into account the amount outstanding and the rate applicable.
 j) Taxation
 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
 are domiciled.
 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 recognised 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 recognised 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 recognised only to the extent that there is
 virtual certainty supported by convincing evidence that sufficient
 future taxable income will be available to realise such assets. In
 other situations, deferred tax assets are recognised only to the extent
 that there is reasonable certainty that sufficient future taxable
 income will be available to realise these assets.
 Advance taxes and provisions for current income taxes are presented in
 the balance sheet after off-setting advance taxes paid and income tax
 provisions arising in the same tax jurisdiction for relevant tax paying
 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 expenses 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
 recognised in the statement of profit and loss. Exchange difference
 arising on a monetary item that, in substance, forms part of an
 enterprises 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 amortised and recognised in the statement of profit and
 loss over the period of the contract. Foreign exchange forward, options
 and future contracts outstanding at the balance sheet date, other than
 designated cash flow hedges, are stated at fair values and any gains or
 losses are recognised in the statement of profit and loss.
 l) Derivative instruments and hedge accounting
 The Company uses foreign exchange forward, options and future 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 flow hedges.
 The use of hedging instruments is governed by the Companys policies
 approved by the Board of Directors, which provide written principles on
 the use of such financial derivatives consistent with the Companys
 risk management strategy.
 Hedging instruments are initially measured at fair value, and are
 remeasured at subsequent reporting dates. Changes in the fair value of
 these derivatives that are designated and effective as hedges of future
 cash flows are recognised directly in shareholders funds and the
 ineffective portion is recognised 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, which was previously recognised
 immediately in profit or loss, is now accumulated in hedging reserve, a
 component of shareholders funds and is classified to profit or loss
 when the forecast transaction occurs. This change in accounting for
 time value of an option has resulted in a reduction in profit before
 tax of Rs.  4.76 crores for the year ended March 31, 2014.
 Changes in the fair value of derivative financial instruments that do
 not qualify for hedge accounting are recognised 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
 recognised in shareholders funds is retained there and is classified
 to 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 recognised in shareholders funds is
 transferred to the statement of profit and loss for the period.
 m) Inventories
 Raw materials, sub-assemblies and components are carried at the lower
 of cost and net realisable 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 realisable
 value. Stores and spare parts are carried at lower of cost and net
 realisable value. Finished goods produced or purchased by the Company
 are carried at lower of cost and net realisable value. Cost includes
 direct material and labour cost and a proportion of manufacturing
 n) Provisions, Contingent Liabilities and Contingent Assets
 A provision is recognised 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) 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 recognised
 in the financial statements. A contingent asset is neither recognised
 nor disclosed in the financial statements.
 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 Authorised Share Capital was increased to 420,05,00,000 equity
 shares of Rs.  1 each and 105,02,50,000 redeemable preference shares of
 Rs.  1 each pursuant to the amalgamation of two wholly-owned
 subsidiaries, Retail FullServe Limited and Computational Research
 Laboratories Limited vide Order dated March 22, 2013 and TCS e-Serve
 limited vide Order dated September 6, 2013 of the Honble High Court of
 Judicature at Bombay.
 * 100,00,00,000 Redeemable Preference Shares of Rs.  1 each , held by
 Tata Sons Limited were redeemed on March 28, 2014.  Consequently, an
 amount of Rs. 100 crores has been transferred from the surplus in the
 statement of profit and loss to Capital redemption reserve on that
 date. The fixed cumulative dividend of 1 % per annum and the variable
 non cumulative dividend on the shares so redeemed will be paid
 consequent to the shareholders approval in a general meeting.
 (b) Rights, preferences and restrictions attached to shares
 Equity shares
 The Company has one class of equity shares having a par value of Rs.  1
 each. Each shareholder is eligible for one vote per share held. The
 dividend proposed by the Board of Directors is subject to the approval
 of the shareholders in the ensuing Annual General Meeting, except in
 case of interim dividend. In the event of liquidation, the equity
 shareholders are eligible to receive the remaining assets of the
 Company after distribution of all preferential amounts, in proportion
 to their shareholding.
 Preference shares
 Preference shares carried a fixed cumulative dividend of 1% per annum
 and a variable non-cumulative dividend of 1% of the difference between
 the rate of dividend declared during the year on the equity shares of
 the Company and the average rate of dividend declared on the equity
 shares of the Company for three years preceding the year of issue of
 the redeemable preference shares.
 (e) Equity shares allotted as fully paid up (during 5 years preceding
 March 31, 2014) include equity shares issued:
 (i) Pursuant to contract without payment being received in cash
 15,06,983 equity shares issued to the shareholders of TCS e-Serve
 Limited in terms of the composite scheme of arrangement (Scheme)
 sanctioned by the High Court of Judicature at Bombay vide their Order
 dated September 6, 2013.
 (ii) Bonus shares
 The Company allotted 97,86,10,498 equity shares as fully paid up bonus
 shares by utilisation of Securities premium reserve on June 18, 2009
 pursuant to a shareholders resolution passed by postal ballot on June
 12, 2009.
Source : Dion Global Solutions Limited
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