Income taxes
The provision for taxation includes tax liabilities in India on the Company’s global income as reduced by exempt incomes and any tax liabilities arising overseas on income sourced from those countries. Infosys’ operations are conducted through Software Technology Parks (‘STPs’) and Special Economic Zones (‘SEZs’). Income from STPs are tax exempt for the earlier of 10 years commencing from the fiscal year in which the unit commences software development, or 31st March, 2011. The tax holiday for all of our STP units has expired as of 31st March, 2011. Income from SEZs is fully tax exempt for the first five years, 50% exempt for the next five years and 50% exempt for another five years subject to fulfilling certain conditions. For Fiscal 2008 and 2009, the Company had calculated its tax liability under Minimum Alternate Tax (MAT). The MAT credit can be carried forward and set-off against the future tax payable. In fiscal 2010, the Company calculated its tax liability under normal provisions of the Income-tax Act and utilised the brought forward MAT Credit.
The Company is contesting the demands and the Management, including its tax advisors, believes that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised. The Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company’s financial position and results of operations.
As of the Balance Sheet date, the Company’s net foreign currency exposures that are not hedged by a derivative instrument or otherwise is Rs.1,024 crore (Rs.1,196 crore as at March 31, 2011).
The foreign exchange forward and option contracts mature between 1 to 12 months. The table below analyses the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date :
The Company recognised a gain on derivative financial instruments of Rs.37 crore and a loss on derivative financial instruments of Rs.69 crore during the quarter ended June 30, 2011 and June 30, 2010, respectively, which is included in other income.
2.22 Quantitative details
The Company is primarily engaged in the development and maintenance of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain information as required under paragraphs 5(viii)(c) of general instructions for preparation of the statement of profit and loss as per revised Schedule VI to the Companies Act, 1956.
2.25 Dividends remitted in foreign currencies
The Company remits the equivalent of the dividends payable to equity shareholders and holders of ADS. For ADS holders the dividend is remitted in Indian rupees to the depository bank, which is the registered shareholder on record for all owners of the Company’s ADSs. The depositary bank purchases the foreign currencies and remits dividends to the ADS holders.
The particulars of dividends remitted are as follows :
Not reproduced.
2.28 Segment reporting
The Company’s operation predominantly relates to providing end-to-end business solutions, thereby enabling clients to enhance business performance, delivered to customers globally operating in various industry segments. Effective this quarter, the company reorganised its business to increase its client focus. Consequent to the internal reorganisation there were changes effected in the reportable segments based on the ‘management approach’, as laid down in AS-17, Segment reporting. The Chief Executive Officer evaluates the company’s performance and allocates resources based on an analysis of various performance indicators by industry classes and geographic segmentation of customers. Accordingly, segment information has been presented both along industry classes and geographic segmentation of customers. Accordingly, segment information has been presented both along industry classes and geographic segmentation of customers, industry being the primary segment. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the significant accounting policies.
Industry segments for the company are primarily financial services and insurance (FSI) comprising enterprises providing banking, finance and insurance services, manufacturing enterprises (MFG), enterprises in the energy, utilities and telecommunication services (ECS) and retail, logistics, consumer product group, life sciences and health care enterprises (RCL). Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and offshore. North America comprises the United States of America, Canada and Mexico, Europe includes continental Europe (both the east and the west), Ireland and the United Kingdom, and the Rest of the World comprising al both places except those mentioned above and India. Consequent to the above change in the composition of reportable segments, the prior year comparatives have been restated.
Revenue and identifiable operating expenses in relation to segments are categorised based on items that are individually identifiable to that segment. Allocated expenses of segments include expenses incurred for rendering services from the company’s offshore software development centers Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying assets are used interchangeably. Management believes that it is not practical to provide segment disclosures relating to those costs and expense, and accordingly theses expenses are separately disclosed as ‘unallocated’ and adjusted against the total income of the company.
Fixed assets used in the Company’s business or liabilities contracted have not been identified to any of the reportable segments, as the fixed assets and services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made. Geographical information on revenue and industry revenue information is collated based on individual customer invoiced or in relation to which the revenue is otherwise recognised.
Industry segments
Not reproduced.
Geographic segments
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2.29 Gratuity plan
The following table set out the status of the Gratuity Plan as required under AS-15 :
Not reproduced.
2.30 Provident fund
The Guidance on Implementing AS-15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the final guidance note from the Actuarial Society of India, the Company’s actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly the Company is unable to exhibit the related information.
