The Company's operations predominantly relate to providing end-to-end business solutions that leverage technology thereby enabling clients to enhance business performance. These solutions are delivered to customers globally operating in various industry segments. Accordingly, revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.
The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the significant accounting policies.
Industry segments at the Company are primarily financial services comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, transportation and logistics companies.
Income and direct expenses in relation to segments is categorized based on items that are individually identifiable to that segment, while the remainder of the costs are categorized in relation to the associated turnover of the segment. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably. The Company believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as ‘unallocated’ and directly charged against total income.
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 is made.
Customer relationships are driven based on the location of the respective client. 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 all other places except, those mentioned above and India.
Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognized.
Year ended March 31, 2010 and March 31, 2009 :
| Financial services | Manufacturing | Telecom | Retail | Others | Total | |
| Revenues | 7,354 | 3,988 | 3,234 | 2,989 | 3,575 | 21,140 |
| 7,020 | 3,876 | 3,450 | 2,699 | 3,219 | 20,264 | |
| Identifiable operating expenses | 3,095 | 1,853 | 1,355 | 1,267 | 1,564 | 9,134 |
| 3,008 | 1,675 | 1,445 | 1,140 | 1,359 | 8,627 | |
| Allocated expenses | 1,615 | 877 | 712 | 657 | 785 | 4,646 |
| 1,638 | 905 | 807 | 630 | 751 | 4,731 | |
| Segmental operating income | 2,644 | 1,258 | 1,167 | 1,065 | 1,226 | 7,360 |
| 2,374 | 1,296 | 1,198 | 929 | 1,109 | 6,906 | |
| Unallocable expenses | 807 | |||||
| 694 | ||||||
| Operating income | 6,553 | |||||
| 6,212 | ||||||
| Other income, net | 910 | |||||
| 504 | ||||||
| Provision for investments | (9) | |||||
| 2 | ||||||
| Net profit before taxes and exceptional item | 7,472 | |||||
| 6,714 | ||||||
| Income taxes | 1,717 | |||||
| 895 | ||||||
| Net profit after taxes before exceptional item | 5,755 | |||||
| 5,819 | ||||||
| Income on sale of investments, net of taxes | 48 | |||||
| – | ||||||
| Net profit after taxes and exceptional item | 5,803 | |||||
| 5,819 | ||||||
Year ended March 31, 2010 and March 31, 2009:
| North America | Europe | India | Rest of the World | Total | |
| Revenues | 14,170 | 4,633 | 269 | 2,068 | 21,140 |
| 13,123 | 5,060 | 260 | 1,821 | 20,264 | |
| Identifiable operating expenses | 6,028 | 1,963 | 77 | 1,066 | 9,134 |
| 5,626 | 2,082 | 63 | 856 | 8,627 | |
| Allocated expenses | 3,114 | 1,020 | 59 | 453 | 4,646 |
| 3,060 | 1,183 | 61 | 427 | 4,731 | |
| Segmental operating income | 5,028 | 1,650 | 133 | 549 | 7,360 |
| 4,437 | 1,795 | 136 | 538 | 6,906 | |
| Unallocable expenses | 807 | ||||
| 694 | |||||
| Operating income | 6,553 | ||||
| 6,212 | |||||
| Other income, net | 910 | ||||
| 504 | |||||
| Provision for investments | (9) | ||||
| 2 | |||||
| Net profit before taxes and exceptional item | 7,472 | ||||
| 6,714 | |||||
| Income taxes | 1,717 | ||||
| 895 | |||||
| Net profit after taxes before exceptional item | 5,755 | ||||
| 5,819 | |||||
| Income on sale of investments, net of taxes | 48 | ||||
| – | |||||
| Net profit after taxes and exceptional item | 5,803 | ||||
| 5,819 | |||||
Periodically, the Company evaluates all customer dues to the Company for collectability. The need for provisions is assessed based on various factors including collectability of specific dues, risk perceptions of the industry in which the customer operates, general economic factors, which could affect the customer's ability to settle. The Company normally provides for debtor dues outstanding for 180 days or longer as at the Balance Sheet date. As at March 31, 2010 the Company has provided for doubtful debts of Rs. 21 crore (Rs. 66 crore as at March 31, 2009) on dues from certain customers although the outstanding amounts were less than 180 days old, since the amounts were considered doubtful of recovery. The Company pursues the recovery of the dues, in part or full.
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 :
| Particulars | Number of shares to which the dividends relate |
Year ended March 31, |
|
| 2010 | 2009 | ||
| Interim dividend for fiscal 2010 | 10,70,15,201 | 107 | – |
| Interim dividend for fiscal 2009 | 10,97,63,357 | – | 110 |
| Final dividend for fiscal 2009 | 10,73,97,313 | 145 | – |
| Final dividend for fiscal 2008 | 10,95,11,049 | – | 79 |
| Special dividend for fiscal 2008 | 10,95,11,049 | – | 219 |
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
| Number of shares considered as basic weighted average shares outstanding | 57,33,09,523 | 57,24,90,211 |
| Add: Effect of dilutive issues of shares/stock options | 6,40,108 | 9,72,970 |
| Number of shares considered as weighted average shares and potential shares outstanding | 57,39,49,631 | 57,34,63,181 |
The movement in the provision for post-sales client support and warranties is as follows :
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
| Balance at the beginning | 75 | 43 |
| Provision recognized/(reversed) | (2) | 39 |
| Provision utilized | – | (7) |
| Balance at the end | 73 | 75 |
Provision for post-sales client support is expected to be utilized over a period of 6 months to 1 year.
The following table set out the status of the Gratuity Plan as required under AS 15.
Reconciliation of opening and closing balances of the present value of the defined benefit obligation and plan assets :
| Particulars | As at March 31, |
|||
| 2010 | 2009 | 2008 | 2007 | |
| Obligations at year beginning | 256 | 217 | 221 | 180 |
| Transfer of obligation | (2) | – | – | – |
| Service cost | 72 | 47 | 47 | 44 |
| Interest cost | 19 | 15 | 16 | 14 |
| Actuarial (gain)/ loss | (4) | – | (9) | – |
| Benefits paid | (33) | (23) | (21) | (17) |
| Amendment in benefit plans | – | – | (37) | – |
| Obligations at year end | 308 | 256 | 217 | 221 |
| Defined benefit obligation liability as at the Balance Sheet date is fully funded by the Company | ||||
| Change in plan assets | ||||
| Plans assets at year beginning, at fair value | 256 | 229 | 221 | 167 |
| Expected return on plan assets | 24 | 16 | 18 | 16 |
| Actuarial gain/ (loss) | 1 | 5 | 2 | 3 |
| Contributions | 62 | 29 | 9 | 52 |
| Benefits paid | (33) | (23) | (21) | (17) |
| Plans assets at year end, at fair value | 310 | 256 | 229 | 221 |
| Reconciliation of present value of the obligation and the fair value of the plan assets: | ||||
| Fair value of plan assets at the end of the year | 310 | 256 | 229 | 221 |
| Present value of the defined benefit obligations at the end of the year | 308 | 256 | 217 | 221 |
| Asset recognized in the Balance Sheet | 2 | – | 12 | – |
| Assumptions | ||||
| Interest rate | 7.82% | 7.01% | 7.92% | 7.99% |
| Estimated rate of return on plan assets | 9.00% | 7.01% | 7.92% | 7.99% |
| Weighted expected rate of salary increase | 7.27% | 5.10% | 5.10% | 5.10% |
Net gratuity cost for the years ended March 31, 2010 and March 31, 2009 comprises of the following components :
Year ended March 31, |
2010 | 2009 |
| Gratuity cost for the year | ||
| Service cost | 72 | 47 |
| Interest cost | 19 | 15 |
| Expected return on plan assets | (24) | (16) |
| Actuarial (gain)/loss | (5) | (5) |
| Plan amendment amortization | (3) | (4) |
| Net gratuity cost | 59 | 37 |
| Actual return on plan assets | 25 | 21 |
Gratuity cost, as disclosed above, is included under salaries and bonus and is segregated between software development expenses, selling and marketing expenses and general and administration expenses on the basis of number of employees.
During the year, a reimbursement obligation of Rs. 2 crore has been recognized towards settlement of gratuity liability of Infosys Consulting India Limited.
As of March 31, 2010 and March 31, 2009, the plan assets have been primarily invested in government securities. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
Effective July 1, 2007, the Company revised the employee death benefits provided under the gratuity plan, and included all eligible employees under a consolidated term insurance cover. Accordingly, the obligations under the gratuity plan reduced by Rs. 37 crore, which is being amortized on a straight line basis to the net Profit and Loss account over 10 years representing the average future service period of the employees. The unamortized liability as at March 31, 2010 and March 31, 2009 amounted to Rs. 26 crore and Rs. 29 crore, respectively and disclosed under ‘Current Liabilities’.
The Company expects to contribute approximately Rs. 50 crore to the gratuity trust for fiscal 2011.
The Guidance on Implementing AS 15, Employee Benefits (revised 2005) issued by the 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.
The Company contributed Rs. 150 crore to the Provident Fund during the year ended March 31, 2010 (Rs. 137 crore during the year ended March 31, 2009).
The Company contributed Rs. 54 crore to the Superannuation Trust during the year ended March 31, 2010 (Rs. 52 crore during the year ended March 31, 2009).
The balance of cash and cash equivalents includes Rs. 2 crore as at March 31, 2010 (Rs. 2 crore as at March 31, 2009) set aside for payment of dividends.
Deposits with financial institutions as at March 31, 2010 include Rs. 281 crore (Rs. 253 crore as at March 31, 2009) deposited with Life Insurance Corporation of India to settle employee-related obligations as and when they arise during the normal course of business. This amount is considered as restricted cash and is hence not considered ‘cash and cash equivalents’.
The Company has no dues to micro and small enterprises during the year ended March 31, 2010 and March 31, 2009 and as at March 31, 2010 and March 31, 2009.
Miscellaneous income of Rs. 38 crore during the year ended March 31, 2009 includes a net amount of Rs. 18 crore consisting of Rs. 33 crore received from Axon Group Plc. towards the inducement fee offset by Rs. 15 crore towards expenses incurred in relation to this transaction.
During the year ended March 31, 2010 the Company sold 32,31,151 shares of On Mobile Systems Inc, USA (OMSI) at a price of Rs. 166.58 per share amounting to a total consideration of Rs. 53 crore, net of taxes and transaction costs. The resultant income of Rs. 48 crore has been appropriated to capital reserve.