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Tata Consultancy Services

BSE: 532540|NSE: TCS|ISIN: INE467B01029|SECTOR: Computers - Software
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« Mar 15
Notes to Accounts Year End : Mar '16
(a) 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.
 (b) Equity shares allotted as fully paid-up (during 5 years preceding
 March 31, 2016) including equity shares issued pursuant to contract
 without payment being received in cash 1,16,99,962 equity shares issued
 to the shareholders of CMC Limited in terms of the scheme of
 amalgamation (''the Scheme'') sanctioned by the High Court of Judicature
 at Bombay vide its Order dated August 14, 2015 and the High Court of
 Judicature at Hyderabad vide its Order dated July 20, 2015.
 15,06,983 equity shares of Rs, 1 each have been issued to the
 shareholders of TCS e-Serve Limited in terms of the composite scheme of
 amalgamation sanctioned by the High Court of Judicature at Bombay vide
 its Order dated September 6, 2013.
 Previous years'' figures are in italics.
 (a) Freehold buildings include Rs, 2.67 crores (March 31, 2015: Rs, 2.67
 crores) being value of investment in shares of Co-operative Housing
 Societies and Limited Companies.
 (b) Net book value of computer equipment of Rs, 6.44 crores (March 31,
 2015: Rs, 18.49 crores) and leasehold improvements of Rs, 46.18 crores
 (March 31, 2015: Rs, 56.65 crores) are under finance lease.
 (c) Legal formalities relating to conveyance of freehold buildings
 having net book value Rs, - * crores (March 31, 2015: Rs, 5.18 crores) are
 pending completion.
 * values less than Rs, 50,000
 * Non-current investments having a value of less than Rs, 50,000.
 The Company has given letter of comfort to various banks for credit and
 / or foreign exchange hedging facilities availed by its subsidiaries
 (a) Tata America International Corporation, (b) Tata Consultancy
 Services Switzerland Ltd, (c) Tata Consultancy Services Sverige AB, (d)
 Tata Consultancy Services Belgium S.A., (e) Tata Consultancy Services
 Deutschland GmbH, (f) Tata Consultancy Services Netherlands BV, (g)
 Tata Consultancy Services Asia Pacific Pte Ltd., (h) TCS Italia SRL,
 (i) Tata Consultancy Services France S.A.S., (j) Tata Consultancy
 Services Malaysia Sdn Bhd and (k) Tata Consultancy Services Luxembourg
 S.A. As per the terms of letter of comfort, the Company undertakes not
 to divest its ownership interest directly or indirectly in the
 subsidiaries and provide such managerial, technical and financial
 assistance to ensure continued successful operations of the
 On July 2, 2015, the Company through its wholly owned subsidiary, Tata
 Consultancy Services Netherlands BV subscribed to 76% share capital of
 Tata Consultancy Services Saudi Arabia.
 On October 30, 2015, the Company through its wholly owned subsidiaries
 TCS Inversiones Chile Limitada and TATA Consultancy Services Chile
 S.A., subscribed 100% share capital of Technology Outsourcing S.A.C, an
 information technology service provider in Peru.
 1.) Current tax includes additional provision (net) of Rs, 31.75 crores
 (March 31, 2015: Rs, 61.33 crores) in domestic and certain overseas
 jurisdictions relating to earlier years. The impact of MAT entitlement
 of earlier period is Rs, 89.24 crores (March 31, 2015: Rs, 8.83 crores).
 a) Nature of business
 CMC Limited is engaged in the design, development and implementation of
 software technologies and applications, providing professional services
 in India and overseas and procurement, installation, commissioning,
 warranty and maintenance of imported / indigenous computer and
 networking systems, and in education and training. The Company holds
 51.12% of the voting power of CMC Limited.
 b) CMC Limited has been amalgamated with the Company with effect from
 April 1, 2015 (''appointed date'') in terms of the scheme of amalgamation
 (''the Scheme'') sanctioned by the High Court of Judicature at Bombay
 vide its Order dated August 14, 2015 and the High Court of Judicature
 at Hyderabad vide its Order dated July 20, 2015. The Scheme came into
 effect on April 1, 2015 and pursuant thereto all assets, unbilled
 revenue, debts, outstanding, credits, liabilities, benefits under
 income tax, service tax, excise, value added tax, sales tax (including
 deferment of sales tax), benefits for and under Software Technology
 Parks of India (''STPI'') and Special Economic Zone (''SEZ''), duties and
 obligations of the CMC Limited, have been transferred to and vested in
 the Company retrospectively with effect from April 1, 2015.
 Pursuant to the Scheme coming into effect, all the equity shares held
 by the Company in CMC Limited shall stand automatically cancelled and
 remaining shareholders of CMC Limited holding fully paid equity shares
 shall be allotted 79 shares of Rs, 1 each in the Company, credited as
 fully paid-up, for every 100 shares of Rs, 10 each fully paid-up held in
 the share capital of CMC Limited by adjusting the General reserve.
 c) The amalgamation has been accounted for under the ''pooling of
 interests'' method as prescribed by Accounting Standard (AS-14)
 specified under Section 133 of the Companies Act, 2013, read with Rule
 7 of the Companies (Accounts) Rules, 2014.  Accordingly, the assets,
 liabilities and reserves of CMC Limited as at April 1, 2015 have been
 taken over at their book values and in the same form.
 The difference between the amounts recorded as investments of the
 Company and the amount of share capital of CMC Limited has been
 adjusted in the General reserve.
 Accordingly, the amalgamation has resulted in transfer of assets,
 liabilities and reserves in accordance with the terms of the Scheme at
 the following summarized values:
 (a) Defined contribution plans
 The Company makes Provident fund, Superannuation fund and foreign
 defined contribution fund contributions to defined contribution
 retirement benefit plans for eligible employees. Under the schemes, the
 Company is required to contribute a specified percentage of the payroll
 costs to fund the benefits. In respect of Provident fund contributions
 to trust set up for this purpose, the Company is generally liable for
 annual contribution and any deficiency in interest cost compared to
 interest computed based on the rate of interest declared by the Central
 Government under the Employees'' Provident Fund Scheme, 1952. In
 addition to such contributions, the Company also recognizes potential
 deficiency in interest, if any, computed as per acturial valuation of
 interest as an expense in the year it is determined.
 As of March 31, 2016, the fair value of the assets of the fund and the
 accumulated members'' corpus is Rs, 9743.90 crores and Rs, 9126.96 crores
 respectively. In accordance with an actuarial valuation, there is no
 deficiency in the interest cost as the present value of the expected
 future earnings on the fund is greater than the expected amount to be
 credited to the individual members based on the expected guaranteed
 rate of interest of 8.80%. The actuarial assumptions include discount
 rate of 7.75% and an average expected future period of 8 years.
 The Company recognized Rs, 658.04 crores (March 31, 2015: Rs, 571.65
 crores) for provident fund contributions and Rs, 193.02 crores (March 31,
 2015: Rs, 163.47 crores) for superannuation contributions in the
 statement of profit and loss. The contributions payable to these plans
 by the Company are at rates specified in the rules of the schemes.
 The Company has contributed Rs, 335.42 crores (March 31, 2015: Rs, 267.63
 crores) towards foreign defined contribution plans.
 (b) Defined benefit plans
 The Company makes annual contributions to the Employees'' Group
 Gratuity-cum-Life Assurance Scheme, a funded defined benefit plan for
 eligible employees. The scheme provides for lump sum payment to vested
 employees at retirement, death while in employment or on termination of
 employment of an amount equivalent to 15 days salary for service less
 than 15 years, three-fourth month''s salary for service of 15 years to
 19 years and one month salary for service of 20 years and more, payable
 for each completed year of service or part thereof in excess of six
 months. Vesting occurs upon completion of five years of service.
 The present value of the defined benefit obligation and the related
 current service cost are measured using the Projected Unit Credit
 Method, with actuarial valuations being carried out at each balance
 sheet date.
 The following table sets out funded status of the gratuity plan and the
 amounts recognized in the Company''s financial statements as at March
 31, 2016.
 The estimate of future salary increase considered in actuarial
 valuation takes account of inflation, seniority, promotion and other
 relevant factors such as supply and demand factors in the employment
 The expected return on plan assets is determined considering several
 applicable factors mainly the composition of the plan assets held,
 assessed risk of asset management, historical results of the return on
 plan assets and the Company''s policy for plan asset management.
 The expected contribution is based on the same assumptions used to
 measure the Company''s gratuity obligations as at March 31, 2016. The
 Company is expected to contribute Rs, 102.51 crores for the year ended
 March 31, 2017.
 The Company has identified business segments (industry practice) as its
 primary segment and geographic segments as its secondary segment.
 Business segments comprise banking, finance and insurance services,
 manufacturing, retail and consumer packaged goods, telecom, media and
 entertainment and others such as energy, resources and utilities,
 Hi-tech, life science and healthcare, s-Governance, travel,
 transportation and hospitality, products, etc.
 Revenue and expenses directly attributable to segments are reported
 under each reportable segment. Expenses which are not directly
 identifiable to specific segment have been allocated on the basis of
 associated revenue of the segment and manpower efforts. All other
 expenses which are not attributable or allocable to segments have been
 disclosed as unallowable expenses.
 Assets and liabilities that are directly attributable or allocable to
 segments are disclosed under each reportable segment. All other assets
 and liabilities are disclosed as unallowable. Fixed assets that are
 used interchangeably among segments are not allocated to primary and
 secondary segments.
 Geographical revenue is allocated based on the location of the
 customer. Geographic segments of the Company are Americas (including
 Canada and South American countries), Europe, India and Others.
 A) Related parties and their relationship I) Holding Company
 Tata Sons Limited
 II)(A) Subsidiaries (Direct holding) II)(B) Subsidiaries (Indirect
 1.  CMC Limited (amalgamated with Tata Consultancy Services w.e.f.
 2.  CMC Americas Inc.  i.  CMC eBiz Inc.
 3.  Tata Consultancy Services Sverige AB
 4.  Tata Consultancy Services Asia Pacific Pte Ltd.  i.  Tata
 Consultancy Services Malaysia Sdn Bhd
 ii.  Tata Consultancy Services (China) Co., Ltd.
 iii.  PT Tata Consultancy Services Indonesia
 iv.  Tata Consultancy Services (Thailand) Limited
 v.  Tata Consultancy Services (Philippines) Inc.
 vi.  Nippon TCS Solution Center Limited
 (merged with Tata Consultancy Services Japan Ltd. w.e.f 01.07.2014)
 vii.  Tata Consultancy Services Japan Ltd.
 (merged with IT Frontier Corporation (a susbsidiary of Mitsubishi
 Corporation) w.e.f 01.07.2014)
 viii.  Tata Consultancy Services Japan, Ltd.
 (new entity formed w.e.f 1.07.2014 pursuant to the merger of Tata
 Consultancy Services Japan Ltd. and IT Frontier Corporation)
 5.  TCS Iberoamerica SA i.  TCS Solution Center S.A.
 ii.  Tata Consultancy Services Argentina S.A.
 iii.  Tata Consultancy Services De Mexico S.A., De C.V.
 iv.  TCS Inversiones Chile Limitada
 v.  Tata Consultancy Services Do Brasil Ltda
 vi.  Tata Consultancy Services Chile S.A.
 viii.  TCS Uruguay S.A.
 ix.  MGDC S.C.
 x.  Technology Outsourcing S.A.C. (new entity acquired on 30.10.2015)
 6.  Tata Consultancy Services Netherlands BV i.  Tata Consultancy
 Services Luxembourg S.A.
 ii.  Tata Consultancy Services Switzerland Ltd.
 iii.  Tata Consultancy Services France S.A.S.
 iv.  TCS Italia SRL
 v.  Tata Consultancy Services Osterreich GmbH
 vi.  Tata Consultancy Services Danmark ApS
 vii.  Tata Consultancy Services De Espana S.A.
 viii.  Tata Consultancy Services Portugal Unipessoal Limitada
 ix.  Alti S.A.
 A) Related parties and their relationship (contd.)
 II)(A) Subsidiaries (Direct holding) II)(B) Subsidiaries (Indirect
 x.  Planaxis Technologies Inc.
 xi.  Alti HR S.A.S.
 xii.  Alti Infrastructures Systemes & Reseaux S.A.S.
 xiii.  Alti NV
 xiv.  Tescom (France) Software Systems Testing S.A.R.L.
 xv.  Alti Switzerland S.A.
 xvi.  Teamlink
 xvii. Tata Consultancy Services Saudi Arabia (New entity incorporated
 on 02.07.2015)
 7.)  TCS FNS Pty Limited 
 i.  TCS Financial Solutions Australia Holdings Pty Limited
 ii.  TCS Financial Solutions Australia Pty Limited
 iii.  PT Financial Network Services
 iv.  TCS Management Pty Ltd.(liquidated w.e.f 23.03.2015)
 v.  TCS Financial Solution (Beijing) Co. Ltd.
 8.  APTOnline Limited (formerly APOnline Limited)
 9.  Tata America International Corporation i.  MS CJV Investments
 10.  Tata Consultancy Services Belgium S.A.
 11.  Tata Consultancy Services Deutschland GmbH
 12.  WTI Advanced Technology Limited (Amalgamated with Tata Consultancy
 Services Limited pursuant to the order dated 27.03.2015 of the Hon''ble
 High Court of Judicature at Bombay)
 13.  Tata Consultancy Services Canada Inc.
 14.  Diligenta Limited i.  Diligenta 2 Limited
 15.  C-Edge Technologies Limited
 16.  MP Online Limited
 17.  Tata Consultancy Services Morocco SARL AU (liquidated w.e.f.
 30.05.2014 vide court order dated 07.08.2014)
 18.  Tata Consultancy Services (Africa)(PTY) Ltd.  i.  Tata Consultancy
 Services (South Africa) (PTY) Ltd.
 19.  TCS e-Serve International Limited i.  TCS e-Serve America, Inc.
 20.  MahaOnline Limited
 21.  Tata Consultancy Services Qatar S. S. C.
 22.  Computational Research Laboratories Inc.  (liquidated w.e.f.
 18.02. 2015)
 23.  TCS Foundation (entity incorporated on 13.03.2015 under Section 8
 of the Companies Act, 2013)
 III) Fellow Subsidiaries with whom the Company has transactions
 - Infiniti Retail Limited
 - Tata AIG General Insurance Company Limited
 - Tata AIA Life Insurance Company Limited
 - Tata Investment Corporation Limited
 A) Related parties and their relationship (contd.)
 - Tata Limited
 - Tata Advanced Systems Limited
 - Tata Asset Management Limited
 - Tata Business Support Services Limited
 - Tata Capital Limited
 - Tata Housing Development Company Limited
 - Tata Consulting Engineers Limited
 - Tata Sky Limited
 - Tata Realty And Infrastructure Limited
 - e-Nxt Financials Limited (merged with Tata Business Support Services
 Limited w.e.f. 01.07.2015)
 - Tata Industries Limited
 - Tata International Limited
 - Drive India Enterprise Solutions Limited (ceased w.e.f. 01.09.2015)
 - Nova Integrated System Limited
 - Tata Sikorsky Aerospace Limited (formerly Tara Aerospace Systems
 - TBSS Healthcare TPA Services Limited
 - Tata Capital Housing Finance Limited
 - TC Travel And Services Limited
 - Tata Securities Limited
 - Tata Capital Forex Limited
 - Tata Capital Financial Services Limited
 - Tata Cleantech Capital Limited
 - Tata Value Homes Limited (formerly Smart Value Homes Limited)
 - Tata Interactive Systems GmbH
 - Tata Interactive Systems AG
 - Tata Unistore Limited (named changed w.e.f. 13.05.2015) (formerly
 Tata Industrial Services Limited)
 - Tata Africa Holdings (SA) (Proprietary) Limited
 - TATA Africa Holdings (Kenya) Limited
 - TATA Africa Holdings (Tanzania) Limited
 - Tata Africa Services (Nigeria) Limited
 - Tata Uganda Limited
 - Tata Zambia Limited
 - Calsea Footwear Private Limited
 - Tata SIA Airlines Limited
 - Taj Air Limited
 - TRIL Infopark Limited
 - Tata Autocomp Systems Limited
 - Tata Lockheed Martin Aerostructures Limited (formerly Tata
 Aerostructures Limited)
 - Panatone Finvest Limited
 IV) Key Management Personnel
 - Mr. N. Chandrasekaran, Chief Executive Officer and Managing Director
 - Mr. Rajesh Gopinathan, Chief Financial Officer
 - Ms. Aarthi Subramanian, Executive Director (w.e.f. 12.03.2015)
 Rent expense of Rs. 439.19 crores (Previous year: Rs. 550.93 crores) in
 respect of obligations under non-cancellable operating leases and Rs.
 619.46 crores (Previous year: Rs. 521.77 crores) in respect of
 cancellable operating leases have been charged to the statement of
 profit and loss.
 a) In October 2014, Epic Systems Corporation (''Epic'') filed a legal
 claim against the Company in the Court of Western District Madison,
 Wisconsin for alleged unauthorized download and misuse of Epic''s
 confidential information and trade secrets. In April 2016, the Company
 received an unfavorable jury verdict awarding damages totaling Rs,
 6227.03 crores (US 0 million) to Epic which the trial judge has
 indicated his intent to reduce. On the basis of legal opinion and legal
 precedence, the Company expects to defend itself against the claim and
 believes that the claim will not sustain.
 b) In respect of income tax demands of Rs, 318.20 crores (March 31, 2015:
 Rs, 318.20 crores), not included above, the Company is entitled to an
 indemnification from the seller of TCS e-Serve Limited.
 c) In respect of indirect tax demands of Rs, 8.53 crores (March 31, 2015:
 Rs, 8.53 crores), not included above, the Company is entitled to an
 indemnification from the seller of TCS e-Serve Limited.
 d) The Company has provided guarantees aggregating Rs, 2716.40 crores
 (GBP 285.08 million) (March 31, 2015: Rs, 2694.55 crores) (GBP 291.30
 million) to third parties on behalf of its subsidiary Diligenta
 Limited. The Company does not expect any outflow of resources in
 respect of the above.
 a) Estimated amount of contracts remaining to be executed on capital
 account and not provided for (net of advances) Rs, 1446.17 crores (March
 31, 2015: Rs, 1844.08 crores).
 b) The Company has a purchase commitment towards India Innovation Fund
 for the uncalled amount of balance Rs, 24,486.94 per unit of 1,000 units
 aggregating to Rs, 2.45 crores (March 31, 2015: Rs, 2.96 crores)
 The Company, in accordance with its risk management policies and
 procedures, enters into foreign exchange forwards, options and futures
 contracts to manage its exposure in foreign exchange rates. The counter
 party is generally a bank. These contracts are for a period between one
 day and eight years.
 Net gain on derivative instruments of Rs, 56.77 crores recognized in
 Hedging Reserve as at March 31, 2016, is expected to be transferred to
 the statement of profit and loss by March 31, 2017.
 In addition to the above Cash Flow Hedges, the Company has outstanding
 foreign exchange forwards, options and future contracts with notional
 amount aggregating Rs, 22143.66 crores (March 31, 2015: Rs, 19949.03
 crores) whose fair value showed a gain of Rs, 284.48 crores as at March
 31, 2016 (March 31, 2015: gain of Rs, 159.65 crores). Exchange gain of Rs,
 180.55 crores (March 31, 2015: Exchange gain of Rs, 1363.87 crores) on
 foreign exchange forwards, options and future contracts for the year
 ended March 31, 2016 have been recognized in the statement of profit
 and loss.
 As at March 31, 2016, the Company has net foreign currency exposures
 that are not hedged by derivative instruments or otherwise amounting to
 Rs, 2119.01 crores (March 31, 2015: Rs, 2884.79 crores)
 Consumption figures shown above are after adjusting excess and
 shortages ascertained on physical count, unserviceable items, etc.
 The Company has remitted Rs, Nil (March 31, 2015: Rs, Nil ) in foreign
 currencies on account of dividends during the year and does not have
 information as to the extent to which remittance, if any, in foreign
 currencies on account of dividends have been made by / on behalf of
 non-resident shareholders. The particulars of dividends declared and
 paid to non-resident shareholders for the year ended March 31, 2015 and
 interim dividends for the year ended March 31, 2016, are as under:
 12.) Research and development expenditure aggregating Rs, 232.22 crores
 (Previous year: Rs,192.62 crores), including capital expenditure was
 incurred during the year.
 13.) During the year, the Company has incurred an amount of Rs, 294.23
 crores (Previous year: Rs,218.42 crores) towards Corporate Social
 Responsibility expenditure.
 14.) The Company revised its policy of providing depreciation on fixed
 assets effective April 1, 2014. Depreciation is now provided on a
 straight line basis for all assets as against the policy of providing
 on written down value basis on some assets and straight line basis on
 others. Further the remaining useful life has also been revised
 wherever appropriate based on an evaluation.  The carrying amount as on
 April 1, 2014 is depreciated over the revised remaining useful life. As
 a result of these changes, the depreciation charge for the year ended
 March 31, 2015 is higher by Rs, 131.16 crores and the effect relating to
 the period prior to April 1, 2014 is a net credit of Rs, 528.38 crores
 (excluding deferred tax of Rs, 129.62 crores) which has been shown as an
 ''Exceptional Item'' in the statement of profit and loss.
 15.) During the year ended March 31, 2015, an amount of Rs, 2326.42 crores
 has been recognized in the statement of profit and loss and accrued
 under Trade Payables in the balance sheet in respect of one-time bonus
 to eligible employees.
 16.) Previous years'' figures have been recast / restated.
Source : Dion Global Solutions Limited
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