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Tata Consultancy Services

BSE: 532540|NSE: TCS|ISIN: INE467B01029|SECTOR: Computers - Software
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« Mar 14
Notes to Accounts Year End : Mar '15
 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 Solutions.
 As at March 31, 2015, Tata Sons Limited owned 73.69% 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 60 subsidiaries across the globe.
 The Authorised, Issued, Subscribed and Fully paid-up share capital
 comprises of equity shares and redeemable preference shares having a
 par value of Rs. 1 each as follows:
 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 Hon''ble High Court of Judicature
 at Bombay.
 (b) Rights, preferences and restrictions attached to shares Equity
 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, 2015) including equity shares issued pursuant to contract
 without payment being received in cash
 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
 arrangement (the Scheme) sanctioned by the High Court of Judicature
 at Bombay vide their order dated September 6, 2013.
 Unbilled revenue as at March 31, 2015 amounting to Rs. 2439.36 crores
 (March 31, 2014: Rs. 2626.08 crores) primarily includes revenue
 recognised in relation to efforts incurred on turnkey contracts priced
 on a fixed time, fixed price basis.
 Trade receivables (Unsecured) consist of the following:
 5) Current tax includes additional provision (net) of Rs. 61.33 crores
 (March 31, 2014 : additional provision (net) Rs. 467.62 crores) in
 domestic and certain overseas jurisdictions relating to earlier years.
 The impact of MAT entitlement of earlier period is Rs. 8.83 crores (March
 31, 2014 : Rs. 451.92 crores).
 6) AMALGAMATION OF COMPANIES WTI Advanced Technology Limited
 a) Nature of business
 WTI Advanced Technology Limited is engaged in the business of
 Information Technology (IT) and Information Technology Engineering
 Services (ITES). The Company holds 100.00% of the voting power of WTI
 Advanced Technology Limited.
 b) WTI Advanced Technology Limited has been amalgamated with the
 Company with effect from April 1, 2014 (the appointed date) in
 terms of the scheme of amalgamation (Scheme) sanctioned by the High
 Court of Judicature at Bombay vide their Order dated March 27, 2015.
 Pursuant thereto all assets, unbilled revenue, debts, outstandings,
 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), duties and
 obligations of WTI Advanced Technology Limited, have been transferred
 to and vested in the Company retrospectively with effect from April 1,
 Since WTI Advanced Technology Limited, amalgamated as aforesaid, was
 wholly owned by the Company, no shares were exchanged to effect the
 c) The amalgamation has been accounted for under the ''pooling of
 interests'' method as prescribed by Accounting Standard 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 WTI Advanced Technology Limited as at April 1, 2014
 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 WTI Advanced Technology
 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 summarised 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 recognises 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, 2015, the fair value of the assets of the fund and the
 accumulated members'' corpus is Rs. 7939.41 crores and Rs. 7419.41 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 8.75%. The actuarial assumptions include discount
 rate of 8.00% and an average expected future period of 7.35 years.
 The Company recognised Rs. 571.65 crores (March 31, 2014: Rs. 514.91
 crores) for provident fund contributions and Rs. 163.47 crores (March 31,
 2014: Rs. 136.29 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. 267.63 crores (March 31,2014: Rs. 177.75
 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 recognised in the Company''s financial statements as at March
 31, 2015.
 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 unallocable 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 unallocable. 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)
 1. CMC Limited
 II)(B) Subsidiaries (Indirect holding)
 i.   CMC Americas Inc.
 ii.  CMC eBiz Inc.
 2. Tata Consultancy Services Sverige AB
 3. Tata Consultancy Services Asia Pacific Pte Ltd.
 i. Tata Consultancy Services Japan Ltd. (merged with IT Frontier
 Corporation (a susbsidiary of Mitsubishi Corporation) w.e.f 01.07.2014)
 ii. Tata Consultancy Services Malaysia Sdn Bhd
 iii. Tata Consultancy Services (China) Co., Ltd.
 iv. PT Tata Consultancy Services Indonesia
 v. Tata Consultancy Services (Thailand) Limited
 vi. Tata Consultancy Services (Philippines) Inc.
 vii. Nippon TCS Solution Center Limited
 (merged with Tata Consultancy Services Japan Ltd.  w.e.f 01.07.2014)
 viii. Tata Information Technology (Shanghai) Co. Limited (Amalgamated
 with Tata Consultancy services (China) Co., Ltd. w.e.f. 05.11.2013)
 ix. 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)
 4. 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.  vii TATASOLUTION CENTER S.A.
 viii. TCS Uruguay S.A.
 ix. MGDC S.C.
 5. 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.
 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
 6. 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 Solutions Beijing Co., Ltd.
 7. APOnline Limited
 8. Tata America International Corporation
 i. MS CJV Investments Corporation
 9. Tata Consultancy Services Belgium S.A.
 10. Tata Consultancy Services Deutschland GmbH
 11. Tata Consultancy Services Canada Inc.
 12. Diligenta Limited
 i. Diligenta 2 Limited
 8. 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. Effective Date: 01.04.2015.
 Appointed Date: 01.04.2014)
 9. C-Edge Technologies Limited
 10. MP Online Limited
 11. Tata Consultancy Services Morocco SARL AU (liquidated w.e.f.
 30.05.2014 vide court order dated 07.08.2014)
 12. Tata Consultancy Services (Africa)(PTY) Ltd.
 i. Tata Consultancy Services (South Africa) (PTY) Ltd.
 13. TCS e-Serve International Limited
 i. TCS e-Serve America, Inc.
 14. MahaOnline Limited
 15. Tata Consultancy Services Qatar S.S.C.
 16. Computational Research Laboratories Inc.  (liquidated w.e.f.
 17. 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
 - Panatone Finvest Limited
 - Tata AIG General Insurance Company Limited
 - Tata AIA Life Insurance Company Limited
 - Tata Investment Corporation Limited
 - Tata 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
 - Tata Industries Limited
 - Tata International Limited
 - Tata Autocomp Systems Limited
 - Drive India Enterprise Solutions Limited
 - Tata Advanced Systems Limited
 - Tata Lockheed Martin Aerostructures Limited (formerly Tata
 Aerostructures Limited)
 - Tata Capital Housing Finance Limited
 - TC Travel and Services Limited
 - Tata Securities Limited
 - Tata Capital Forex Limited
 - Tata Capital Financial Services Limited
 - Tata Interactive Systems GmbH
 - TATA Africa Holdings (Kenya) Limited
 - Tata Zambia Limited
 - Tata Sikorsky Aerospace Limited (formerly Tara Aerospace Systems
 - Tata Cleantech Capital Limited
 - Tata Interactive Systems AG
 - Tata Industrial Services Limited
 - Tata Uganda Limited
 - Tata SIA Airlines Limited
 - Tata Africa Holdings (SA) (Proprietary) Limited
 - TRIL Infopark Limited (ceased to be an associate and is a
 subsidiary w.e.f. 23.03.2015)
 - Tata Africa Services (Nigeria) Limited
 IV) Key Management Personnel
 - Mr. N. Chandrasekaran, Chief Executive Officer and Managing
 - Mr. Rajesh Gopinathan, Chief Financial Officer
 - Ms. Aarthi Subramanian, Executive Director (w.e.f. 12.03.2015)
                                                 (Rs. crores)
                                        As at         As at
 Particulars                     March 31, 2015   March 31, 2014
 Claims against the Company not 
 acknowledged as debt                  40.72          29.57
 Income tax demands (See (a) below)  3901.82        3890.20
 Indirect tax demands (See (b) below)  61.01          63.27
 Guarantees given by the Company on 
 behalf of subsidiaries (See (c) and
 (d) below)                          3310.95        4082.31
 a) In respect of income tax demands of Rs. 318.20 crores (March 31, 2014:
 Rs. 318.20 crores), not included above, the Company is entitled to an
 indemnification from the seller of TCS e-Serve Limited.
 b) In respect of indirect tax demands of Rs. 8.53 crores (March 31, 2014:
 Rs. 8.53 crores), not included above, the Company is entitled to an
 indemnification from the seller of TCS e-Serve Limited.
 c) The Company has provided guarantees aggregating Rs. 2694.55 crores
 (GBP 291.30 million) (March 31, 2014: Rs. 3167.02 crores) (GBP 317.20
 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.
 d) The Company has provided guarantees aggregating Rs. 87.42 crores (USD
 13.97 million) (March 31, 2014: Rs. 83.91 crores) (USD 13.97 million) to
 third parties on behalf of its subsidiary Tata America International
 Corporation. 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. 1844.08 crores (March
 31, 2014: Rs. 2811.44 crores).
 b) The Company has a purchase commitment towards India Innovation Fund
 for the uncalled amount of balance Rs. 29618.47 per unit of 1000 units
 aggregating to Rs. 2.96 crores (March 31, 2014: Rs. 3.64 crores).
 The Company, in accordance with its risk management policies and
 procedures, enters into foreign exchange forward, options and future
 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. 150.75 crores recognised in
 Hedging Reserve as at March 31, 2015, is expected to be transferred to
 the statement of profit and loss by March 31, 2016.
 In addition to the above Cash Flow Hedges, the Company has outstanding
 foreign exchange forward, options and future contracts with notional
 amount aggregating Rs. 19949.03 crores (March 31, 2014: Rs. 15774.90
 crores) whose fair value showed a gain of Rs. 159.65 crores as at March
 31, 2015 (March 31, 2014: gain of Rs. 261.23 crores). Exchange gain of Rs.
 1363.87 crores (March 31,2014 : Exchange loss of Rs. 66.60 crores) on
 foreign exchange forward, options and future contracts for the year
 ended March 31, 2015 have been recognised in the statement of profit
 and loss.
 As at March 31, 2015, the Company has net foreign currency exposures
 that are not hedged by derivative instruments or otherwise amounting to
 Rs. 2884.79 crores (March 31, 2014: Rs. 681.53 crores).
 20) Research and development expenditure aggregating Rs. 192.62 crores
 (Previous year: Rs. 176.31 crores), including capital expenditure was
 incurred during the year.
 21) The Company has 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.
 22) At their respective meetings held on October 16, 2014, the Boards
 of the Company and of its subsidiary, CMC Limited have approved a
 Scheme of Amalgamation of CMC Limited with the Company. The appointed
 date for the proposed Scheme is April 1, 2015. The Scheme is subject to
 sanction of the Hon''ble High Courts and all other statutory approvals
 as may be required under law.
 23) During the year, an amount of Rs. 2326.42 crores has been recognised
 in the Statement of Profit and Loss in respect of one-time bonus to
 eligible employees.
 24) During the year, the Company has incurred an amount of Rs. 218.42
 crores towards Corporate Social Responsibility expenditure.
 25) Previous years'' figures have been recast / restated.
Source : Dion Global Solutions Limited
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