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, 15:58
-40.65 (-1.55%)
VOLUME 346,966
May 26, 15:59
-46.35 (-1.77%)
VOLUME 681,217
Mar 15
Accounting Policy Year : Mar '16
 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.
 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 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.
 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 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.
 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,
 government securities and bonds 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
 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
 sheet date.
 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.
 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 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
 flow hedges.
 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.
 m) Inventories
 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.
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