Schedules to the financial statements for the year ended March 31, 2011

23.1.11. Income taxes

Income taxes are accrued in the same period that the related revenue and expenses arise. A provision is made for income tax annually, based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the Company will pay normal tax after the tax holiday period and the resultant asset can be measured reliably. The Company offsets, on a year on year basis, the current tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.

The differences that result between the profit considered for income taxes and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount of timing difference. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on enacted or substantively enacted regulations. Deferred tax assets in situation where unabsorbed depreciation and carry forward business loss exists, are recognized only if there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realized. Deferred tax assets, other than in situation of unabsorbed depreciation and carry forward business loss, are recognized only if there is reasonable certainty that they will be realized. Deferred tax assets are reviewed for the appropriateness of their respective carrying values at each reporting date. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to Profit and Loss account are credited to the share premium account.

23.1.12. Earnings per share

Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value which is the average market value of the outstanding shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.

The number of shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.

23.1.13. Investments

Trade investments are the investments made to enhance the Company’s business interests. Investments are either classified as current or long-term based on Management’s intention at the time of purchase. Current investments are carried at the lower of cost and fair value of each investment individually. Cost for overseas investments comprises the Indian rupee value of the consideration paid for the investment translated at the exchange rate prevalent at the date of investment. Long-term investments are carried at cost less provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.

23.1.14. Cash and cash equivalents

Cash and cash equivalents comprise cash and cash on deposit with banks and corporations. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

23.1.15. Cash Flow statement

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

23.1.16. Leases

Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset 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 the Profit and Loss account over the lease term.

23.2. Notes on accounts

Amounts in the financial statements are presented in rupees crore, except for per share data and as otherwise stated. Certain amounts that are required to be disclosed and do not appear due to rounding off are detailed in note 23.3. All exact amounts are stated with the suffix ‘/-’. One crore equals 10 million.

The previous year figures have been regrouped / reclassified, wherever necessary to conform to the current presentation.

23.2.1. Aggregate expenses

The aggregate amounts incurred on expenses are as follows :

in crore

	Year ended March 31,
	2011	2010
Salaries and bonus including overseas staff expenses	12,459	10,350
Overseas travel expenses	688	493
Traveling and conveyance	83	61
Technical sub-contractors – subsidiaries	1,568	1,210
Technical sub-contractors – others	476	269
Software packages for own use	320	309
Third party items bought for service delivery to clients	139	17
Professional charges	299	242
Telephone charges	130	117
Communication expenses	40	46
Power and fuel	142	122
Office maintenance expenses	188	136
Commission charges	12	16
Brand building	70	55
Rent	68	62
Insurance charges	24	23
Computer maintenance	33	22
Printing and stationery	11	9
Consumables	23	22
Donations	1	43
Advertisements	6	3
Marketing expenses	14	12
Repairs to building	44	33
Repairs to plant and machinery	33	31
Rates and taxes	48	26
Professional membership and seminar participation fees	10	8
Postage and courier	9	8
Provision for post-sales client support and warranties	5	(2)
Freight charges	1	1
Books and periodicals	3	3
Provision for bad and doubtful debts and advances	3	(1)
Commission to non-whole-time directors	5	6
Bank charges and commission	1	2
Auditor’s remuneration	0	0
Statutory audit fees	1	1
Research grants	14	25
	16,971	13,780

23.2.2. Capital commitments and contingent liabilities

in crore

Particulars	As at March 31,
	2011		2010
Estimated amount of unexecuted capital contracts (net of advances and deposits)		742		267
Outstanding guarantees and counter guarantees to various banks, in respect of the guarantees given by those banks in favor of various government authorities and others		3		3
Claims against the Company, not acknowledged as debts (1)		271		28
[Net of amount paid to statutory authorities 469 crore (241 crore)]
	in million	in crore	in million	in crore
Forward contracts outstanding
In U.S. dollar	500	2,230	228	1,024
In Euro	20	127	16	97
In GBP	10	72	7	48
In AUD	10	46	3	12
Options contracts outstanding
In U.S. dollar	–	–	200	898
		2,475		2,079

Note :

(1)

Claims against the Company not acknowledged as debts include demand from the Indian tax authorities for payment of additional tax of 671 crore (214 crore), including interest of 177 crore (39 crore) upon completion of their tax review for fiscal 2005, fiscal 2006 and fiscal 2007. The tax demands are mainly on account of disallowance of a portion of the deduction claimed by the Company under Section 10A of the Income Tax Act. The deductible amount is determined by the ratio of export turnover to total turnover. The disallowance arose from certain expenses incurred in foreign currency being reduced from export turnover but not reduced from total turnover. The tax demand for fiscal 2007 also includes disallowance of portion of profit earned outside India from the STP units and disallowance of profits earned from SEZ units. The matter for fiscal 2005, 2006 and 2007 is pending before the Commissioner of Income Tax (Appeals), Bangalore. 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 1,196 crore (891 crore as at March 31, 2010).

The foreign exchange forward and option contracts mature between 1 to 12 months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as of the Balance Sheet date :

in crore

Particulars	As of March 31,
	2011	2010
Not later than one month	413	242
Later than one month and not later than three months	590	746
Later than three months and not later than one year	1,472	1,091
	2,475	2,079

The Company recognized a net gain on derivative financial instruments of 53 crore and 276 crore during the year ended March 31, 2011 March 31, 2010, respectively, which are included in other income.