1.20 Dividends

Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company's Board of Directors.

1.21 Operating profit

Operating profit for the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.

1.22 Other income

Other income is comprised primarily of interest income and dividend income. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.

1.23 Leases

Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in net profit in the statement of comprehensive income over the lease term.

1.24 Government grants

The Group recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to depreciable fixed assets are treated as deferred income and are recognized in net profit in the statement of comprehensive income on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in net profit in the statement of comprehensive income over the periods necessary to match them with the related costs which they are intended to compensate.

1.25 Recent accounting pronouncements

1.25.1 Standards early adopted by the company

1. IFRS 8, Operating Segments is applicable for annual periods beginning on or after January 1, 2009. This standard was early adopted by the Company as of April 1, 2007. IFRS 8 replaces IAS 14, Segment Reporting. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting provided to the chief operating decision maker. The application of this standard did not result in any change in the number of reportable segments. Allocation of goodwill was not required under Previous GAAP and hence goodwill has been allocated in accordance to the requirements of this Standard.
   
   
2. IFRS 3 (Revised), Business Combinations, as amended, is applicable for annual periods beginning on or after July 1, 2009. This standard was early adopted by the Company as of April 1, 2009. Business combinations consummated after April 1, 2009 will be impacted by this standard. IFRS 3 (Revised) primarily requires the acquisition-related costs to be recognized as period expenses in accordance with the relevant IFRS. Costs incurred to issue debt or equity securities are required to be recognized in accordance with IAS 39. Consideration, after this amendment, will include fair values of all interests previously held by the acquirer. Re-measurement of such interests to fair value would be carried out through net profit in the statement of comprehensive income. Contingent consideration is required to be recognized at fair value even if not deemed probable of payment at the date of acquisition.
   
   IFRS 3 (Revised) provides an explicit option on a transaction-by-transaction basis, to measure any non-controlling interest (NCI) in the entity acquired at fair value of their proportion of identifiable assets and liabilities or at full fair value. The first method will result in a marginal difference in the measurement of goodwill from the existing IFRS 3; however the second approach will require recording goodwill on NCI as well as on the acquired controlling interest. Upon consummating a business transaction in future the Company is likely to adopt the first method for measuring NCI. 
   
   
3. IAS 27 Consolidated and Separate Financial Statements, as amended, is applicable for annual periods beginning on or after July 1, 2009. This standard was early adopted by the Company as of April 1, 2009. It requires a mandatory adoption of economic entity model which treats all providers of equity capital as shareholders of the entity. Consequently, a partial disposal of interest in a subsidiary in which the parent company retains control does not result in a gain or loss but in an increase or decrease in equity. Additionally purchase of some or all of the NCI is treated as treasury transaction and accounted for in equity and a partial disposal of interest in a subsidiary in which the parent company loses control triggers recognition of gain or loss on the entire interest. A gain or loss is recognized on the portion that has been disposed off and a further holding gain is recognized on the interest retained, being the difference between the fair value and carrying value of the interest retained. This Standard requires an entity to attribute their share of net profit and reserves to the NCI even if this results in the NCI having a deficit balance.

1.25.2 Recently adopted accounting pronouncements

1. IAS 1, Presentation of Financial Statements is applicable for annual periods beginning on or after January 1, 2009. This Standard was adopted by the Company as of April 1, 2009. Consequent to the adoption of the standard, the title for cash flows has been changed to ‘Statement of Cash Flow’. Further, the Company has included in its complete set of financial statements, a single ‘Statement of Comprehensive Income’.
   
   
2. IFRIC Interpretation 18, Transfers of Assets from Customers defines the treatment for property, plant and equipment transferred by customers to companies or for cash received to be invested in property, plant and equipment that must be used either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services, or to do both.
   
   The item of property, plant and equipment is to be initially recognized by the Company at fair value with a corresponding credit to revenue. If an ongoing service is identified as a part of the agreement, the period over which revenue shall be recognized for that service would be determined by the terms of the agreement with the customer. If the period is not clearly defined, then revenue should be recognized over a period no longer than the useful life of the transferred asset used to provide the ongoing service. This interpretation is applicable prospectively to transfers of assets from customers received on or after July 1, 2009. The Company has adopted this interpretation prospectively for all assets transferred after July 1, 2009. There has been no material impact on the Company as a result of the adoption of this interpretation.

2 Notes to the consolidated financial statements

2.1 Cash and cash equivalents

Cash and cash equivalents consist of the following:

	As of March 31,
	2010	2009
Cash and bank deposits	10,556	9,695
Deposits with corporations	1,555	1,298
	12,111	10,993

Cash and cash equivalents as of March 31, 2010 include restricted cash and bank balances of Rs. 71 crore. The restricted cash and bank balances as of March 31, 2009 was Rs. 2 crore. The restrictions are primarily on account of cash and bank balances held by irrevocable trusts controlled by the Company and unclaimed dividends.

The deposits maintained by the Group with corporations comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.

The table below provides details of cash and cash equivalents:

	As of March 31,
	2010	2009
Current Accounts
ABN Amro Bank, China	33	6
ABN Amro Bank, China (U.S. dollar account)	14	14
ABN Amro Bank, Taiwan	2	1
Bank of America, Mexico	18	2
Bank of America, USA	686	587
Banamex , Mexico	2	–
China Merchants Bank, China	1	–
Citibank NA, Australia	25	33
Citibank NA, Brazil	9	–
Citibank NA, Czech Republic (Euro account)	2	3
Citibank NA, Czech Republic (U.S. dollar account)	–	4
Citibank NA, New Zealand	1	–
Citibank NA, Japan	2	2
Citibank NA, Singapore	–	7
Citibank NA, India	2	–
Citibank NA, Thailand	1	1
Citibank-Unclaimed dividend account	–	1
Deustche Bank	13	13
Deutsche Bank, Belgium	18	6
Deutsche Bank, Poland	2	–
Deutsche Bank, France	1	1
Deutsche Bank, Germany	12	5
Deutsche Bank, Moscow (U.S. dollar account)	1	–
Deutsche Bank, Netherlands	7	1
Deustche Bank, Philiphines	–	1
Deustche Bank, Philiphines (U.S. dollar account)	3	1
Deustche Bank, Poland (Euro account)	1	–
Deutsche Bank, Spain	1	1
Deutsche Bank, Singapore	1	–
Deutsche Bank, Switzerland	10	–
Deutsche Bank, Switzerland (U.S. dollar account)	1	–
Deustche Bank, Thailand	3	2
Deustche Bank, Thailand (U.S. dollar account)	1	–
Deutsche Bank, UK	29	58
Deustche Bank-EEFC (Euro account)	3	27
Deustche Bank-EEFC (Swiss Franc account)	–	3
Deutsche Bank-EEFC (United Kingdom Pound Sterling account)	1	–
Deustche Bank-EEFC (U.S. dollar account)	8	12
HSBC Bank, UK	2	8
HDFC Bank-Unclaimed dividend account	1	-
ICICI Bank	133	18
ICICI Bank, UK	1	–
ICICI Bank-EEFC (Euro account)	1	1
ICICI Bank-EEFC (United Kingdom Pound Sterling account)	2	6
ICICI Bank-EEFC (U.S. dollar account)	10	42
ICICI bank-Unclaimed dividend account	1	1
National Australia Bank Limited, Australia	21	30
National Australia Bank Limited, Australia (U.S. dollar account)	14	7
Nordbanken, Sweden	1	–
Royal Bank of Canada, Canada	20	6
The Bank of Tokyo-Mitsubishi UFJ,Ltd.,Japan	–	1
Wachovia Bank, USA	7	–
	1,128	912
Deposit Accounts
Andhra Bank	99	80
Allahabad Bank	150	–
Bank of Baroda	299	829
Bank of India	881	–
Bank of Maharashtra	500	537
Barclays Bank	100	140
Canara Bank	963	794
Central Bank of India	100	–
Corporation Bank	276	343
Citibank NA, Czech Republic	9	4
Citibank (Euro account)	3	–
Citibank (U.S. dollar account)	4	–
Deustche Bank, Poland	8	–
DBS Bank	49	25
HSBC Bank	483	283
ICICI Bank	1,435	560
IDBI Bank	909	550
ING Vysya Bank	25	53
Indian Overseas Bank	140	–
Jammu and Kashmir Bank	10	–
Kotak Mahindra Bank	61	–
Oriental Bank of Commerce	100	–
Punjab National Bank	994	480
Standard Chartered Bank	–	38
State Bank of Hyderabad	233	200
State Bank of India	126	2,109
State Bank of Mysore	496	500
Syndicate Bank	475	500
The Bank of Nova Scotia	–	350
Union Bank of India	93	85
Vijaya Bank	95	95
National Australia Bank Limited, Australia	312	228
	9,428	8,783
Deposits with corporations
HDFC Limited, India	1,551	1,298
Sundaram BNP Paribus Home Finance Limited	4	–
	1,555	1,298
Total	12,111	10,993

 

2.2 Available-for-sale financial assets

Investments in liquid mutual fund units and unlisted equity instruments are classified as available-for-sale financial assets.

Investment in liquid mutual fund units is as follows:

	As of March 31,
	2010	2009
Cost and fair value	2,518	-

Investment in unlisted equity instruments is as follows:

	As of March 31,
	2010	2009
Cost	4	-
Gross unrealised holding gains	34	-
Fair value	38	-

During February 2010, Infosys sold 3,231,151 shares of OnMobile Systems Inc, U.S.A, at a price of Rs. 166.58 per share, derived from quoted prices of the underlying marketable equity instruments. The total consideration amounted to Rs. 53 crore, net of taxes and transaction costs. The resultant income of Rs. 48 crore is included in other income. Additionally the remaining 2,154,100 shares have been fair valued at Rs. 38 crore and the resultant unrealized gain of Rs. 26 crore, net of taxes of Rs. 8 crore has been recognized in other comprehensive income. The fair value of Rs. 38 crore has been derived based on an agreed upon exchange ratio between these unlisted equity instruments and quoted prices of the underlying marketable equity instruments.