24.2. Notes on accounts

Amounts in the financial statements are presented in Rupees crore, except for per share data and as otherwise stated. Certain amounts do not appear due to rounding off, and are detailed in Note 24.3. 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.

24.2.1. Aggregate expenses

The aggregate amounts incurred on expenses are as follows :

in Rs. crore
Particulars
Year ended March 31,
2010 2009
Salaries and bonus including overseas staff expenses 11,576 10,913
Overseas group health insurance 157 151
Contribution to provident and other funds 306 265
Staff welfare 46 76
Overseas travel expenses 610 748
Traveling and conveyance 82 97
Technical sub-contractors 372 396
Software packages    
For own use 336 320
For service delivery to clients 17 41
Professional charges 278 259
Telephone charges 139 174
Communication expenses 86 98
Power and fuel 145 147
Office maintenance 165 168
Guesthouse maintenance 4 5
Rent 125 114
Brand building 57 62
Commission charges 16 11
Insurance charges 31 26
Printing and stationery 12 13
Computer maintenance 29 25
Consumables 25 22
Rates and taxes 31 34
Advertisements 3 6
Donations 44 21
Marketing expenses 15 20
Professional membership and seminar participation fees 9 10
Repairs to building 34 33
Repairs to plant and machinery 32 22
Postage and courier 12 11
Provision for post-sales client support and warranties (2) 39
Books and periodicals 4 3
Recruitment and training 2 6
Provision for bad and doubtful debts 75
Provision for doubtful loans and advances 1 1
Commission to non-whole-time directors 6 6
Sales promotion expenses 1 2
Auditor's remuneration    
Statutory audit fees 2 2
Bank charges and commission 2 3
Freight charges 1 1
Research grants 23 20
Miscellaneous expenses 47 52
  14,881 14,498

24.2.2. Capital commitments and contingent liabilities

in Rs. crore
Particulars
As at March 31,
2010 2009
Estimated amount of unexecuted capital contracts (net of advances and deposits)   301   372
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   18   17
Claims against the Company, not acknowledged as debts(1)
[net of amount paid to statutory authorities of Rs. 241 crore (Rs. 200 crore)]
  28   4
  In million in Rs. crore in million in Rs. crore
Forward contracts outstanding        
In USD 267 1,199 278 1,407
In Euro 22 130 27 179
In GBP 11 71 21 149
In AUD 3 12
Options contracts outstanding        
In USD 200 898 173 877
(1) Claims against the Company not acknowledged as debts include demand from the Indian tax authorities for payment of additional tax of Rs. 214 crore (Rs. 197 crore), including interest of Rs. 39 crore (Rs. 43 crore) upon completion of their tax review for fiscal 2005 and fiscal 2006. 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 matter for fiscal 2005 and fiscal 2006 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.

 

24.2.3. Obligations on long-term, non-cancelable operating leases

The lease rentals charged for the years ended March 31, 2010 and March 31, 2009 and maximum obligations on long-term, non-cancelable operating leases payable as per the rentals stated in the respective agreements are as follows :

in Rs. crore
Particulars
Year ended March 31,
2010 2009
Lease rentals recognized during the year 125 114

in Rs. crore
Lease obligations payable
As at March 31,
2010 2009
Within one year of the Balance Sheet date 84 80
Due in a period between one year and five years 249 223
Due after five years 62 72

The operating lease arrangements extend upto a maximum of ten years from their respective dates of inception and relates to rented overseas premises. Some of these lease agreements have price escalation clause.

24.2.4. Related party transactions

During the year ended March 31, 2010, an amount of Rs. 35 crore
(Rs. 20 crore for the year ended March 31, 2009) was donated to Infosys Foundation, a not-for-profit foundation, in which certain directors and officers of the Company are trustees.

Related parties include Infosys Science Foundation and Infosys Technologies Limited Employees' Welfare Trust which are controlled trusts.

24.2.5. Transactions with key management personnel

Particulars of remuneration and other benefits paid to key management personnel during the years ended March 31, 2010 and March 31, 2009 have been detailed in Schedule 24.4

24.2.6. Research and development expenditure

in Rs. crore
Particulars
Year ended March 31,
2010 2009
Capital 3 31
Revenue 435 237

24.2.7. Stock option plans

The Company has two Stock Option Plans that are currently operational.

1998 Stock Option Plan ('the 1998 Plan’)

The 1998 Plan was approved by the Board of Directors in December 1997 and by the shareholders in January 1998, and is for issue of 1,17,60,000 ADSs representing 1,17,60,000 equity shares. All options under the 1998 Plan are exercisable for ADSs representing equity shares. A Compensation Committee comprising independent members of the Board of Directors administers the 1998 Plan. All options have been granted at 100% of fair market value. The 1998 Plan lapsed on January 6, 2008, and consequently no further shares will be issued to employees under this plan.

1999 Stock Option Plan ('the 1999 Plan’)

In fiscal 2000, the Company instituted the 1999 Plan. The shareholders and the Board of Directors approved the plan in September 1999, which provides for the issue of 5,28,00,000 equity shares to the employees. The Compensation Committee administers the 1999 Plan. Options will be issued to employees at an exercise price that is not less than the fair market value. The 1999 Plan lapsed on June 11, 2009, and consequently no further shares will be issued to employees under this plan.

The activity in the 1998 Plan and 1999 Plan during the years ended March 31, 2010 and March 31, 2009 is as follows :

in Nos.

Particulars
Year ended March 31,
2010 2009
The 1998 Plan :    
Options outstanding, beginning of year 9,16,759 15,30,447
Less : Exercised 6,14,071 4,55,586
Forfeited 60,424 1,58,102
Options outstanding, end of year 2,42,264 9,16,759
The 1999 Plan :    
Options outstanding, beginning of year 9,25,806 14,94,693
Less : Exercised 3,81,078 3,78,699
Forfeited 3,40,264 1,90,188
Options outstanding, end of year 2,04,464 9,25,806

The weighted average share price of options exercised under the 1998 Plan during the years ended March 31, 2010 and March 31, 2009 was Rs. 2,266 and Rs. 1,683, respectively. The weighted average share price of options exercised under the 1999 Plan during the year ended March 31, 2010 and March 31, 2009 was Rs. 2,221 and Rs. 1,566, respectively.

The following tables summarize information about the 1998 and 1999 share options outstanding as of March 31, 2010 and March 31, 2009 :

Range of exercise prices per share (Rs.)
Year ended March 31, 2010
  Number of shares
arising out of options
Weighted average
remaining
contractual life
Weighted average
exercise price
The 1998 Plan :      
300-700 1,74,404 0.94 551
701-1,400 67,860 1.27 773
  2,42,264 1.03 613
The 1999 Plan :      
300-700 1,52,171 0.91 439
1,401-2,500 52,293 1.44 2,121
2,04,464 1.05 869

Range of exercise prices per share (Rs.)
Year ended March 31, 2009
  Number of shares arising out of options Weighted average
remaining
contractual life
Weighted average
exercise price
The 1998 Plan :      
300-700 3,37,790 1.46 567
701-1,400 4,93,048 1.56 980
1,401-2,100 76,641 0.46 1,693
2,101-2,800 6,880 0.13 2,453
2,801-4,200 2,400 0.02 2,899
  9,16,759 1.41 904
The 1999 Plan :      
300-700 3,00,976 1.55 429
701-1,400 2,23,102 0.60 802
1,401-2,500 4,01,728 1.06 2,121
  9,25,806 1.11 1,253

The aggregate options considered for dilution are set out in Note 24.2.16

Proforma Accounting for Stock Option Grants

Guidance note on 'Accounting for employee share based payments’ issued by Institute of Chartered Accountants of India establishes financial accounting and reporting principles for employee share based payment plans. The guidance note applies to employee share based payment plans, the grant date in respect of which falls on or after April 1, 2005.

As allowed by the guidance note, Infosys has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of the guidance note 'Accounting for employee share based payments’. Had the compensation cost for Infosys's stock-based compensation plan been determined in a manner consistent with the fair value approach described in the guidance note, the Company's net profit and basic and diluted earnings per share as reported would have reduced to the proforma amounts as indicated :

in Rs. crore, except per share data
Particulars
Year ended March 31,
  2010 2009
Net profit after tax, exceptional item and minority interest    
As reported 6,266 5,988
Less : Stock-based employee compensation expense 1 7
Adjusted proforma 6,265 5,981
Basic earnings per share as reported 109.84 104.60
Proforma basic earnings per share 109.83 104.47
Diluted earnings per share as reported 109.72 104.43
Proforma diluted earnings per share 109.71 104.30