MARKET RADAR
SENSEX     NIFTY      Refresh
Moneycontrol.com India | Accounting Policy > Computers - Software > Accounting Policy followed by Tech Mahindra - BSE: 532755, NSE: TECHM
YOU ARE HERE > MONEYCONTROL > MARKETS > COMPUTERS - SOFTWARE > ACCOUNTING POLICY - Tech Mahindra
Tech Mahindra
BSE: 532755|NSE: TECHM|ISIN: INE669C01028|SECTOR: Computers - Software
SET ALERT
|
ADD TO PORTFOLIO
|
WATCHLIST
LIVE
BSE
May 25, 17:00
664.75
-0.75 (-0.11%)
VOLUME 73,740
LIVE
NSE
May 25, 17:00
666.90
0.85 (0.13%)
VOLUME 379,636
« Mar 10
Accounting Policy Year : Mar '11
(a) Basis for preparation of accounts :
 
 The accompanying financial statements have been prepared to comply in
 all material aspects with generally accepted accounting principles
 applicable in India, the Accounting Standards and the relevant
 provisions of the Companies Act, 1956.
 
 (b) Use of Estimates :
 
 The preparation of financial statements, in conformity with the
 generally accepted accounting principles, requires estimates and
 assumptions to be made that affect the reported amounts of assets and
 liabilities on the date of financial statements and the reported
 amounts of revenues and expenses during the reported year. Differences
 between the actual results and estimates are recognised in the year in
 which the results are known / materialised.
 
 (c) Fixed Assets including intangible assets :
 
 Fixed assets are stated at cost less accumulated depreciation. Costs
 comprise of purchase price and attributable costs, if any.
 
 (d) Leases :
 
 Assets taken on lease are accounted for as fixed assets in accordance
 with Accounting Standard 19 on Leases, (AS 19).
 
 (i) Finance lease
 
 Where the Company, as a lessor, leases assets under finance leases such
 amounts are recognized as receivables at an amount equal to the net
 investment in the lease and the finance income is based on constant
 rate of return on the outstanding net investment.
 
 Assets taken on finance lease are accounted for as fixed assets at fair
 value. Lease payments are apportioned between finance charge and
 reduction of outstanding liability.
 
 (ii) Operating lease
 
 Assets taken on lease under which all risks and rewards of ownership
 are effectively retained by the lessor are classified as operating
 lease. Lease payments under operating leases are recognised as expenses
 on straight line basis in accordance with the respective lease
 agreements.
 
 (e) Depreciation / amortisation of fixed assets:
 
 (i) The Company computes depreciation of all fixed assets including for
 assets taken on lease using the straight line method based on estimated
 useful lives. Depreciation is charged on a pro- rata basis for assets
 purchased or sold during the year. Management''s estimate of the useful
 life of fixed assets is as follows:
 
 Buildings 15 years
 
 Computers 3 years
 
 Plant and machinery 5 years
 
 Furniture and fixtures 5 years
 
 Vehicles 3-5 years
 
 (ii) Leasehold land is amortised over the period of lease.
 
 (iii) Leasehold improvements are amortised over the period of lease or
 expected period of occupancy whichever is less.
 
 (iv) Intellectual property rights are amortised over a period of seven
 years.
 
 (v) Assets costing upto Rs.5,000 are fully depreciated in the year of
 purchase.
 
 (f) Impairment of Assets:
 
 At the end of each year, the Company determines whether a provision
 should be made for impairment loss on assets by considering the
 indications that an impairment loss may have occurred in accordance
 with Accounting Standard 28 on ''''Impairment of Assets''''. Where the
 recoverable amount of any asset is lower than its carrying amount, a
 provision for impairment loss on assets is made for the difference.
 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 if any is recognised immediately as income
 in the Profit and Loss Account.
 
 (g) Investments :
 
 Long term investments are carried at cost. Provision is made to
 recognise a decline other than temporary in the carrying amount of long
 term investment.
 
 Current investments are carried at lower of cost and fair value.
 
 (h) Inventories :
 
 Components and parts :
 
 Components and parts are valued at lower of cost or net realizable
 value. Cost is determined on First-In-First Out basis.
 
 Finished Goods :
 
 Valued at the lower of the cost or net realisable value. Cost is
 determined on First-In-First Out basis.
 
 (i) Revenue recognition :
 
 Revenue from software services and business process outsourcing
 services include revenue earned from services rendered on ''time and
 material'' basis, time bound fixed price engagements and system
 integration projects.
 
 All revenues from services, as rendered, are recognised when persuasive
 evidence of an arrangement exists, the sale price is fixed or
 determinable and collectability is reasonably assured and are reported
 net of sales incentives, discounts and indirect taxes.
 
 The Company also performs time bound fixed price engagements, under
 which revenue is recognised using the proportionate completion method
 of accounting, unless work completed cannot be reasonably estimated.
 Provision for estimated losses, if any on uncompleted contracts are
 recorded in the year in which such losses become probable based on the
 current contract estimates.
 
 Revenue from sale of software and hardware products is recognized at
 the point of dispatch to the customers.
 
 Unbilled revenues comprise revenues recognized in relation to efforts
 incurred on fixed-price and time and material contracts not billed as
 of the year end where services are performed in accordance with agreed
 terms.
 
 The Company recognizes unearned income as financing revenue over the
 lease term using the effective interest method.
 
 Dividend income is recognized when the Company''s right to receive
 dividend is established. Interest income is recognized on time
 proportion basis.
 
 (j) Expenditure :
 
 The cost of software purchased for use in software development and
 services is charged to cost of revenues in the year of acquisition.
 
 (k) (a) Foreign currency transactions :
 
 Transactions in foreign currencies are recorded at the exchange rates
 prevailing on the date of transaction. Monetary items are translated at
 the year end rates. The exchange difference between the rate prevailing
 on the date of transaction and on the date of settlement as also on
 translation of monetary items at the end of the year is recognized as
 income or expense, as the case may be.
 
 Any premium or discount arising at the inception of the forward
 exchange contract is recognized as income or expense over the life of
 the contract, except in the case where the contract is designated as a
 cash flow hedge.
 
 (b) Derivative instruments and hedge accounting:
 
 The Company uses foreign currency forward contracts / options to hedge
 its risks associated with foreign currency fluctuations relating to
 certain forecasted transactions. Effective April 1st 2007 the Company
 designates some of these as cash flow hedges applying the recognition
 and measurement principles set out in the Accounting Standard 30
 Financial Instruments: Recognition and Measurements(AS 30).
 
 The use of foreign currency forward contracts/ options is governed by
 the Company''s policies 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.  The counter
 party to the Company''s foreign currency forward contracts is generally
 a bank.  The Company does not use derivative financial instruments for
 speculative purposes.
 
 Foreign currency forward contract/option derivative instruments are
 initially measured at fair value and are re-measured 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 reserves and the ineffective portion is
 recognized immediately in Profit and Loss Account.
 
 The accumulated gains and losses on the derivatives in reserves are
 transferred to Profit and Loss Account in the same period in which
 gains or losses on the item hedged are recognized in Profit and Loss
 Account.
 
 Changes in the fair value of derivative financial instruments that do
 not qualify for hedge accounting are recognized in the Profit and Loss
 Account 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. When hedge accounting is discontinued for a cash flow
 hedge, the net gain or loss will remain in reserves and be reclassified
 to Profit and Loss Account in the same period or periods during which
 the formerly hedged transaction is reported in Profit and Loss Account.
 If a hedged transaction is no longer expected to occur, the net
 cumulative gain or loss recognized in reserves is transferred to Profit
 and Loss Account.
 
 (l) Employee Retirement Benefits :
 
 (a) Gratuity :
 
 The Company provides for gratuity, a defined retirement benefit plan
 covering eligible employees. The gratuity plan provides for a lumpsum
 payment to employees at retirement, death, incapacitation or
 termination of the employment based on the respective employee''s salary
 and the tenure of the employment.  Liabilities with regard to a
 Gratuity plan are determined based on the actuarial valuation carried
 out by an independent actuary as at the Balance Sheet date.
 
 Actuarial gains and losses are recognized in full in the Profit and
 Loss Account in the year in which they occur. (Refer note 9 below)
 
 (b) Provident Fund :
 
 The eligible employees of the Company are entitled to receive the
 benefits of Provident Fund, a defined contribution plan, in which both
 employees and the Company make monthly contributions at a specified
 percentage of the covered employees'' salary (currently at 12% of the
 basic salary). The contributions as specified under the law are paid to
 the Regional Provident Fund Commissioner by the Company.
 
 (c) Compensated absences :
 
 The Company provides for the encashment of leave subject to certain
 Company''s rules. The employees are entitled to accumulate leave subject
 to certain limits, for future encashment or availment.
 
 The liability is provided based on the number of days of unavailed
 leave at each balance sheet date on the basis of an independent
 actuarial valuation.
 
 Actuarial gains and losses are recognized in full in the Profit and
 Loss Account in the year in which they occur.
 
 The Company also offers a short term benefit in the form of encashment
 of unavailed accumulated leave above certain limit for all of its
 employees and same is being provided for in the books at actual cost.
 
 (m) Borrowing costs :
 
 Borrowing costs that are attributable to the acquisition or
 construction of qualifying assets are capitalized as part of the cost
 of such assets.  A qualifying asset is one that necessarily takes a
 substantial period of time to get ready for its intended use or sale.
 All other borrowing costs are charged to revenue.
 
 (n) Taxation :
 
 Tax expense comprises of current tax and deferred tax. Current tax is
 measured at the amount expected to be paid to/recovered from the tax
 authorities, based on estimated tax liability computed after taking
 credit for allowances and exemption in accordance with the local tax
 laws existing in the respective countries.
 
 Minimum Alternative Tax (MAT) paid in accordance with the tax laws,
 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 tax after the tax
 holiday period. Accordingly, it is recognized as an asset in the
 Balance Sheet when it is probable that the future economic benefit
 associated with it will flow to the Company and the asset can be
 measured reliably.
 
 Deferred tax assets and liabilities are recognized for future tax
 consequences attributable to timing differences between taxable income
 and accounting income that are capable of reversal in one or more
 subsequent years and are measured using relevant enacted tax rates. The
 carrying amount of deferred tax assets at each Balance Sheet date is
 reduced to the extent that it is no longer reasonably certain that
 sufficient future taxable income will be available against which the
 deferred tax asset can be realized.
 
 Tax on distributed profits payable in accordance with the provisions of
 the Income-tax Act, 1961 is disclosed in accordance with the Guidance
 Note on Accounting for Corporate Dividend Tax issued by the ICAI.
 
 (o) Employee Stock Option Plans :
 
 Employees eligible for Employee Stock Option Plan 2010 are granted an
 option to purchase shares of the Company at predetermined exercise
 price. These options vest over a period of three years from the date of
 grant. The stock compensation cost is computed under the intrinsic
 value method and amortised on a straight line basis over the total
 vesting period of three years.
 
 (p) Contingent Liabilities :
 
 These, if any, are disclosed in the notes on accounts. Provision is
 made in the accounts if it becomes probable that any outflow of
 resources embodying economic benefits will be required to settle the
 obligation arising out of past events.
 
 
 
 
 
Source : Dion Global Solutions Limited
Quick Links for techmahindra
Explore Moneycontrol
Stocks     A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | Others
Mutual Funds     A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.