Financials

Independent Auditors’ report on Consolidated financial statements


To the Members of Infosys Limited

Report on the Consolidated financial statements

We have audited the accompanying Consolidated financial statements of Infosys Limited (‘the Holding Company’) and its subsidiaries and associate (collectively referred to as ‘the Company’ or ‘the Group’), comprising the consolidated balance sheet as at 31 March 2016, the consolidated statement of profit and loss, the consolidated cash flow statement for the year then ended, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as ‘the Consolidated financial statements’).

Management’s responsibility for the Consolidated financial statements

The Holding Company’s Board of Directors is responsible for the preparation of the Consolidated financial statements in terms of the requirements of the Companies Act, 2013 (‘the Act’) that give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Companies Act, 2013 (hereinafter referred to as ‘the Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014. The Board of Directors of the Company is responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the Consolidated financial statements by the Directors of the Holding Company, as aforesaid.

Auditors’ responsibility

Our responsibility is to express an opinion on the Consolidated financial statements based on our audit. While conducting the audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the Consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Holding Company’s preparation of the Consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Holding Company’s Board of Directors, as well as evaluating the overall presentation of the Consolidated financial statements.

We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the Consolidated financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Consolidated financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Company, as at 31 March 2016, and their consolidated profit and their consolidated cash flows for the year ended on that date.

Report on other legal and regulatory requirements

1.

As required by sub-section 3 of Section 143 of the Act, we report, to the extent applicable, that:

a.

We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid Consolidated financial statements.

b.

In our opinion, proper books of account as required by law relating to preparation of the aforesaid Consolidated financial statements have been kept so far as it appears from our examination of those books.

c.

The consolidated balance sheet, the consolidated statement of profit and loss, and the consolidated cash flow statement dealt with by this Report are in agreement with the relevant books of account maintained for the purpose of preparation of the consolidated financial statements.

d.

In our opinion, the aforesaid Consolidated financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e.

On the basis of the written representations received from the directors of the Holding Company as on 31 March 2016 taken on record by the Board of Directors of the Holding Company and the report of the statutory auditors of its subsidiary companies incorporated in India, none of the Directors of the Group companies incorporated in India is disqualified as on 31 March 2016 from being appointed as a Director of that company in terms of sub-section 2 of Section 164 of the Act.

f.

With respect to the adequacy of the internal financial controls over financial reporting of the Group and the operating effectiveness of such controls, refer to our separate report in ‘Annexure A’; and

g.

With respect to the other matters to be included in the Auditors’ Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i.

The Consolidated financial statements disclose the impact of pending litigations on the consolidated financial position of the Group. Refer to Note 2.19 to the Consolidated financial statements;

ii.

Provision has been made in the Consolidated financial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivatives contracts. Refer to Note 2.6 to the Consolidated financial statements; and

iii.

There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Holding Company and subsidiary companies incorporated in India.

for B S R & Co. LLP

Chartered Accountants

Firm’s registration number: 101248W/W-100022

Bangalore

15 April, 2016

Supreet Sachdev

Partner

Membership number: 205385

Annexure to the Auditors' Report

Report on the Internal Financial Controls under Clause (i) of sub-section 3 of Section 143 of the Companies Act, 2013 (‘the Act’)

In conjunction with our audit of the Consolidated financial statements of the Company as of and for the year ended 31 March 2016, we have audited the internal financial controls over financial reporting of Infosys Limited (‘the Holding Company’) and its subsidiary companies which are companies incorporated in India, as of that date.

Management’s Responsibility for Internal Financial Controls

The Respective Board of Directors of the Holding Company and its subsidiary companies, which are companies incorporated in India, are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘ICAI’). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the ‘Guidance Note’) issued by ICAI and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Holding Company and its subsidiary companies, which are companies incorporated in India, have, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.

for B S R & Co. LLP

Chartered Accountants

Firm’s registration number: 101248W/W-100022

Bangalore

15 April, 2016

Supreet Sachdev

Partner

Membership number: 205385

Consolidated Balance Sheet

in crore

Particulars

Note

As at March 31,

2016

2015

EQUITY AND LIABILITIES

SHAREHOLDERS’ FUNDS

Share capital

2.1

1,144

572

Reserves and surplus

2.2

56,682

50,164

57,826

50,736

Minority interests

NON-CURRENT LIABILITIES

Deferred tax liabilities (net)

2.3

Other long-term liabilities

2.4

126

50

126

50

CURRENT LIABILITIES

Trade payables

Total outstanding dues of micro enterprises and small enterprises

2.31

Total outstanding dues of creditors other than micro enterprises and small enterprises

386

140

Other current liabilities

2.5

7,601

6,920

Short-term provisions

2.6

9,202

8,443

17,189

15,503

75,141

66,289

ASSETS

NON-CURRENT ASSETS

Fixed assets

Tangible assets

2.7

8,637

7,685

Intangible assets

2.7

4,543

3,661

Capital work-in-progress

960

776

14,140

12,122

Non-current investments

2.9

1,817

1,398

Deferred tax assets (net)

2.3

533

536

Long-term loans and advances

2.10

6,832

4,906

Other non-current assets

2.11

66

85

23,388

19,047

CURRENT ASSETS

Current investments

2.9

75

872

Trade receivables

2.12

11,330

9,713

Cash and cash equivalents

2.13

32,697

30,367

Short-term loans and advances

2.14

7,651

6,290

51,753

47,242

75,141

66,289

SIGNIFICANT ACCOUNTING POLICIES

1

The accompanying notes form an integral part of the Consolidated financial statements.

As per our report of even date attached

for B S R & Co. LLP

Chartered Accountants

Firm’s registration number:101248W/W-100022

for and on behalf of the Board of Directors of Infosys Limited

Supreet Sachdev

Partner

Membership number: 205385

R. Seshasayee

Chairman

Dr. Vishal Sikka

Chief Executive Officer and
Managing Director

U. B. Pravin Rao

Chief Operating Officer and Whole-time Director

Bangalore

April 15, 2016

Roopa Kudva

Director

M. D. Ranganath

Chief Financial Officer and
Executive Vice President

A. G. S. Manikantha

Company Secretary

Consolidated Statement of Profit and Loss

in crore, except per equity share data

Particulars

Note

For the year ended March 31,

2016

2015

Income from software services and products

2.15

62,441

53,319

Other income

2.16

3,128

3,430

Total revenue

65,569

56,749

Expenses

Employee benefit expenses

2.17

34,418

29,802

Deferred consideration pertaining to acquisition

2.29.1

110

219

Cost of technical sub-contractors

3,531

2,171

Travel expenses

2,263

1,818

Cost of software packages and others

2.17

1,274

1,044

Communication expenses

449

495

Consultancy and professional charges

779

421

Depreciation and amortization expenses

2.7

1,266

1,017

Other expenses

2.17

2,497

2,478

Total expenses

46,587

39,465

PROFIT BEFORE TAX

18,982

17,284

Tax expense

Current tax

2.18

5,315

4,835

Deferred tax

2.18

(14)

76

PROFIT BEFORE MINORITY INTEREST / SHARE IN NET PROFIT /
(LOSS) OF ASSOCIATE

13,681

12,373

Share in net profit / (loss) of associate

2.29.3

(3)

(1)

PROFIT FOR THE YEAR

13,678

12,372

Profit attributable to

Owners of the Company

13,678

12,372

Minority interests

13,678

12,372

EARNINGS PER EQUITY SHARE

Equity shares of par value 5/- each

Basic

59.85

54.13

Diluted

59.84

54.13

Number of shares used in computing earnings per share

2.27

Basic

2,28,56,16,160

2,28,56,10,264

Diluted

2,28,57,11,583

2,28,56,40,948

SIGNIFICANT ACCOUNTING POLICIES

1

The accompanying notes form an integral part of the Consolidated financial statements.

As per our report of even date attached

for B S R & Co. LLP

Chartered Accountants

Firm’s registration number:101248W/W-100022

for and on behalf of the Board of Directors of Infosys Limited

Supreet Sachdev

Partner

Membership number: 205385

R. Seshasayee

Chairman

Dr. Vishal Sikka

Chief Executive Officer and
Managing Director

U. B. Pravin Rao

Chief Operating Officer and Whole-time Director

Bangalore

April 15, 2016

Roopa Kudva

Director

M. D. Ranganath

Chief Financial Officer and
Executive Vice President

A. G. S. Manikantha

Company Secretary

Consolidated Cash Flow Statement

in crore

Particulars

Note

For the year ended March 31,

2016

2015

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax and after share in associate’s profit

18,979

17,283

Adjustments to reconcile profit before tax to cash provided by operating activities

Depreciation and amortization expenses

1,266

1,017

Deferred consideration pertaining to acquisition

110

219

Interest and dividend income

(2,698)

(2,892)

Provision for bad and doubtful debts

(52)

171

Other adjustments

147

82

Effect of exchange differences on translation of assets and liabilities

122

66

Changes in assets and liabilities

Trade receivables

(1,479)

(1,475)

Loans and advances and other assets

(1,523)

(221)

Liabilities and provisions

856

854

15,728

15,104

Income taxes paid (Refer to Note 2.19)

(5,865)

(6,751)

NET CASH GENERATED BY OPERATING ACTIVITIES

9,863

8,353

CASH FLOWS FROM INVESTING ACTIVITIES

Payment towards capital expenditure (including intangible assets), net of sale proceeds

(2,723)

(2,247)

Payment for acquisition of business, net of cash acquired

(747)

(1,282)

Payment for acquisition of interests in associate

(94)

Investments in liquid mutual fund units

(24,171)

(23,892)

Investments in preferred stock

(82)

Investments in other investments

(22)

Disposal of liquid mutual fund units

24,947

25,096

Disposal of certificates of deposit

830

Investments in tax-free bonds

(299)

Investments in government bonds

(3)

(1)

Investment in fixed maturity plan securities

(30)

Redemption of fixed maturity plan securities

33

157

Interest and dividend received

2,381

2,551

NET CASH USED / (PROVIDED) IN INVESTING ACTIVITIES

(686)

1,088

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid net of inter-company dividend (including corporate dividend tax)

(6,813)

(4,935)

NET CASH PROVIDED IN FINANCING ACTIVITIES

(6,813)

(4,935)

Effect of exchange differences on translation of foreign currency cash and cash equivalents

(34)

(89)

NET INCREASE IN CASH AND CASH EQUIVALENTS

2,330

4,417

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

30,367

25,950

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

32,697

30,367

SIGNIFICANT ACCOUNTING POLICIES

1

The accompanying notes form an integral part of the Consolidated financial statements.

As per our report of even date attached

for B S R & Co. LLP

Chartered Accountants

Firm’s registration number:101248W/W-100022

for and on behalf of the Board of Directors of Infosys Limited

Supreet Sachdev

Partner

Membership number: 205385

R. Seshasayee

Chairman

Dr. Vishal Sikka

Chief Executive Officer and
Managing Director

U. B. Pravin Rao

Chief Operating Officer and Whole-time Director

Bangalore

April 15, 2016

Roopa Kudva

Director

M. D. Ranganath

Chief Financial Officer and
Executive Vice President

A. G. S. Manikantha

Company Secretary

Significant accounting policies and notes on accounts

Company overview

Infosys is a global leader in consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides Business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management); consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle®, our banking solution; and offerings in the areas of analytics, cloud, and digital transformation.

Infosys, together with its subsidiaries and controlled trusts, is herein after referred to as ‘the Group’.

The Company is a public limited company incorporated and domiciled in India and has its registered office at Bangalore, Karnataka, India. The Company has its primary listings on the BSE Limited and National Stock Exchange of India Limited in India. The Company’s American Depositary Shares representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.

1. Significant accounting policies

1.1 Basis of preparation of financial statements

These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (‘the Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

The financial statements are prepared in accordance with the principles and procedures required for the preparation and presentation of Consolidated financial statements as laid down under the Accounting Standard (AS) 21, ‘Consolidated financial statements’. The Consolidated financial statements comprise the financial statements of the Company, its controlled trusts and its subsidiaries as disclosed in Note 2.21, combined on a line-by-line basis by adding together book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances and transactions and resulting unrealized gain / loss. The Consolidated financial statements are prepared by applying uniform accounting policies in use at the Group. Minority interests have been excluded. Minority interests represent that part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the Company.

Associates are entities over which the Group has significant influence but not control. Investments in associates are accounted for using the equity method of accounting as laid down under Accounting Standard (AS) 23, ‘Accounting for Investment in Associate in Consolidated financial statements’. The investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the acquisition date. The Group’s investment in associates includes goodwill identified on acquisition.

1.2 Use of estimates

The preparation of the financial statements in conformity with GAAP requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include computation of percentage of completion which requires the Group to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended, provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of tangible assets and intangible assets.

Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the Consolidated financial statements in the period in which the changes are made and, if material, their effects are disclosed in the notes to the Consolidated financial statements.

1.3 Revenue recognition

Revenue is primarily derived from software development and related services and from the licensing of software products. Arrangements with customers for software development and related services are either on a fixed-price, fixed-timeframe or on a time-and-material basis.

Revenue on time-and-material contracts is recognized as the related services are performed and revenue from the end of the last billing to the Balance Sheet date is recognized as unbilled revenues. Revenue from fixed-price and fixed-timeframe contracts, where there is no uncertainty about measurement or collectability of consideration, is recognized based on the percentage-of-completion method. When there is uncertainty about measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Cost and earnings in excess of billings are classified as unbilled revenue, while billings in excess of cost and earnings are classified as unearned revenue. Deferred contract costs are amortized over the term of the contract. Provision for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

Annual Technical Services revenue and revenue from fixed-price maintenance contracts are recognized ratably over the period in which services are rendered. Revenue from the sale of user licenses for software applications is recognized on transfer of the title in the user license, except in case of multiple element contracts, which require significant implementation services, where revenue for the entire arrangement is recognized over the implementation period based on the percentage-of-completion method. Revenue from client training, support and other services arising due to the sale of software products is recognized as the related services are performed.

The Group accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discount / incentive amount to each of the underlying revenue transactions that result in progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the Group recognizes the liability based on its estimate of the customer’s future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then the discount is not recognized until the payment is probable and the amount can be estimated reliably. The Group recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.

The Group presents revenues net of indirect taxes in its consolidated Statement of Profit and Loss.

Profit on sale of investments is recorded on transfer of title from the Group and is determined as the difference between the sale price and carrying value of the investment. Lease rentals are recognized ratably on a straight-line basis over the lease term. Interest is recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the Group’s right to receive dividend is established.

1.4 Provisions and contingent liabilities

A provision is recognized if, as a result of a past event, the Group has a present legal obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

1.5 Post-sales client support and warranties

The Group provides its clients with a fixed-period, post-sales support for corrections of errors and support on all its fixed-price, fixed-timeframe contracts. Costs associated with such support services are accrued at the time when related revenues are recorded and included in consolidated Statement of Profit and Loss. The Group estimates such costs based on historical experience and the estimates are reviewed annually for any material changes in assumptions and likelihood of occurrence.

1.6 Onerous contracts

Provisions for onerous contracts are recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract.

1.7 Tangible assets and capital work-in-progress

Tangible assets are stated at cost, less accumulated depreciation and impairment, if any. Direct costs are capitalized until such assets are ready for use. Capital work-in-progress comprises the cost of fixed assets that are not yet ready for their intended use at the reporting date.

1.8 Intangible assets including goodwill

Intangible assets are recorded at the consideration paid for acquisition of such assets and are carried at cost less accumulated amortization and impairment. Goodwill comprises the excess of purchase consideration over the parent’s portion of equity of the subsidiary at the date on which investment in the subsidiary is made. Goodwill arising on consolidation or acquisition is not amortized but is tested for impairment.

Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the Group has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The costs which can be capitalized include the cost of material, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use.

1.9 Depreciation and amortization

Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets estimated by the Management. Depreciation for assets purchased / sold during a period is proportionately charged. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Group for use. Leasehold improvements are written off over the lower of the remaining primary period of lease or the life of the asset. The Management estimates the useful lives for the other fixed assets as follows:

Buildings (1)

22-25 years

Plant and machinery (1)

5 years

Office equipment

5 years

Computer equipment (1)

3-5 years

Furniture and fixtures (1)

5 years

Vehicles (1)

5 years

(1) Based on technical evaluation, the Management believes that the useful lives as given above best represent the period over which the Management expects to use these assets. Hence, the useful lives for these assets are different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.

Depreciation and amortization methods, useful lives and residual values are reviewed periodically, including at each financial year end. (Refer to Note 2.7)

1.10 Impairment

The Management periodically assesses, using external and internal sources, whether there is an indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset’s net selling price or value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. An impairment loss for an asset other than goodwill is reversed if, and only if, the reversal can be related objectively to an event occurring after the impairment loss was recognized. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

1.11 Retirement benefits to employees

Gratuity

The Group provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan’) covering eligible employees of Infosys and its Indian subsidiaries. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment with the Group.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the Infosys Limited Employees’ Gratuity Fund Trust (‘the Trust’). In case of Infosys BPO and EdgeVerve, contributions are made to the Infosys BPO’s Employees’ Gratuity Fund Trust and EdgeVerve Systems Limited Employees’ Gratuity Fund Trust, respectively. Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by Indian law.

The Group recognizes the net obligation of the Gratuity Plan in the Balance Sheet as an asset or liability, in accordance with Accounting Standard (AS) 15, ‘Employee Benefits’. The Group’s overall expected long-term rate-of-return on assets has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the consolidated Statement of Profit and Loss in the period in which they arise.

Superannuation

Certain employees of Infosys, Infosys BPO and EdgeVerve are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.

Provident fund

Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee’s salary. The Company contributes a part of the contributions to the Infosys Limited Employees’ Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The rate at which the annual interest is payable to the beneficiaries by the Trust is being administered by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective Company make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Amounts collected under the provident fund plan are deposited in a government administered provident fund. The Companies have no further obligations under the provident fund plan beyond its monthly contributions.

Compensated absences

The employees of the Group are entitled to compensated absences, which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation using projected unit credit method on the additional amount expected to be paid / availed as a result of the unused entitlement that has accumulated at the Balance Sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.

1.12 Share-based payments

The Group accounts for equity-settled stock options in accordance with the accounting treatment prescribed by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India using the intrinsic value method.

1.13 Foreign currency transactions

Foreign-currency-denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in the Statement of Profit and Loss. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.

Revenue, expense and cash-flow items denominated in foreign currencies are translated using the exchange rate in effect on the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled.

The translation of the financial statements of the foreign subsidiaries from the local currency to the reporting currency of the Company is performed for Balance Sheet accounts using the exchange rate in effect at the Balance Sheet date and for revenue, expense and cash-flow items using a monthly average exchange rate for the respective periods. The resulting difference is presented as foreign currency translation reserve included in ‘Reserves and Surplus’. When a subsidiary is disposed off, in part or in full, the relevant amount is transferred to profit or loss.

1.14 Forward and options contracts in foreign currencies

The Group uses foreign exchange forward and options contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward and options contracts reduces the risk or cost to the Group and the Group does not use those for trading or speculation purposes.

Effective April 1, 2008, the Company adopted AS 30, ‘Financial Instruments: Recognition and Measurement’, to the extent that the adoption did not conflict with existing accounting standards and other authoritative pronouncements of the Company Law and other regulatory requirements.

Forward and options contracts are fair-valued at each reporting date. The Company designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast transactions. The Company records the gain or loss on effective hedges, if any, in the hedging reserve until the transactions are complete. On completion, the gain or loss is transferred to the consolidated Statement of Profit and Loss of that period. To designate a forward or options contract as an effective hedge, the Management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract and subsequently whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. Changes in the fair value relating to the ineffective portion of the hedges and derivative instruments that do not qualify or have not been designated for hedge accounting are recognized in the consolidated Statement of Profit and Loss.

1.15 Income taxes

Income taxes are accrued in the same period in which the related revenue and expenses arise. A provision is made for income tax, 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 Consolidated Balance Sheet if there is convincing evidence that the Group will pay normal tax after the tax holiday period and the resultant asset can be measured reliably. The Group 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 exist, 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 situations 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. Deferred tax assets and deferred tax liabilities have been offset wherever the Group has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to consolidated Statement of Profit and Loss are credited to the securities premium account.

1.16 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 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 share issues including for changes effected prior to the approval of the Consolidated financial statements by the Board of Directors.

1.17 Investments

Trade investments are the investments made to enhance the Group’s business interests. Investments are either classified as current or long-term, based on the Management’s intention. 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.

1.18 Cash and cash equivalents

Cash and cash equivalents comprise cash and cash-on-deposit with banks and financial institutions. The Group 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.

1.19 Cash Flow Statement

Cash flows are reported using the indirect method, whereby 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 Group are segregated.

1.20 Leases

The leases under which the Group 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 consolidated Statement of Profit and Loss over the lease term.

1.21 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 assets are treated as deferred income and are recognized in the consolidated Statement of Profit and Loss 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 the consolidated Statement of Profit and Loss over the periods necessary to match them with the related costs which they are intended to compensate.

2. Notes on accounts for the year ended March 31, 2016

Amounts in the financial statements are presented in crore, except per equity share data and as otherwise stated. All exact amounts are stated with the suffix ‘/-’. One crore equals 10 million.

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

2.1 Share capital

in crore, except as otherwise stated

Particulars

As at March 31,

2016

2015

Authorized

Equity shares, 5/- par value

2,40,00,00,000 (1,20,00,00,000) equity shares

1,200

600

Issued, Subscribed and Paid-Up

Equity shares, 5/- par value (1)

1,144

572

2,28,56,21,088 (1,14,28,05,132) equity shares fully paid-up (2)

1,144

572

Notes:

Forfeited shares amounted to 1,500 ( 1,500)

(1) Refer to Note 2.27 for details of basic and diluted shares

(2) Net of treasury shares 1,13,23,576 (56,67,200)

The Company has only one class of shares referred to as equity shares having a par value of 5. Each holder of equity shares is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the period of five years immediately preceding March 31, 2016

The Company has allotted 1,14,84,72,332 fully-paid-up shares of face value 5 each during the quarter ended June 30, 2015, pursuant to a bonus issue approved by the shareholders through a postal ballot. The book closure date fixed by the Board was June 17, 2015.

The Company has allotted 57,42,36,166 fully-paid-up equity shares of face value 5 each during the quarter ended December 31, 2014 pursuant to a bonus issue approved by the shareholders through a postal ballot. The record date fixed by the Board of Directors was December 3, 2014.

For both the bonus issues, a bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Options granted under the restricted stock unit plan have been adjusted for bonus shares.

The Board has increased dividend payout ratio from up to 40% to up to 50% of post-tax consolidated profits effective fiscal 2015.

During the year ended March 31, 2015, the amount of dividend per share recognized as distribution to equity shareholder includes 30 per share of interim dividend (not adjusted for bonus shares of June 17, 2015 and December 3, 2014) and 29.50 per share of final dividend (not adjusted for bonus shares on June 17, 2015). The total dividend appropriation for the year ended March 31, 2015 amounted to 6,145 crore including corporate dividend tax of 1,034 crore.

The Board of Directors, in its meeting on October 12, 2015, declared an interim dividend of 10 per equity share. Further, the Board of Directors, in its meeting on April 15, 2016, has proposed a final dividend of 14.25 per equity share for the financial year ended March 31, 2016. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 18, 2016. The total dividend appropriation for the year ended March 31, 2016 amounted to 6,704 crore including corporate dividend tax of 1,134 crore.

The Central Government, in consultation with National Advisory Committee on Accounting Standards, has amended the Companies (Accounting Standards) Rules, 2006 (‘principal rules’), through a notification issued by the Ministry of Corporate Affairs dated March 30, 2016. The Companies (Accounting Standards) Rules, 2016 is effective March 30, 2016. According to the amended rules, the above-mentioned proposed dividend will not be recorded as a liability as at March 31, 2016. (Refer to Para 8.5 of AS-4 – Contingencies and Events occurring after Balance Sheet date). The Company believes, based on a legal opinion, that the Rule 3(2) of the principal rules has not been withdrawn or replaced and accordingly, the Companies (Accounting Standards) Rule, 2016 will apply to the accounting periods commencing on or after March 30, 2016. Therefore the Company has recorded 3,939 crore as liability for proposed dividends (including corporate dividend tax) as at March 31, 2016.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company in proportion to the number of equity shares held by the shareholders, after distribution of all preferential amounts.

The details of shareholders holding more than 5% shares as at March 31, 2016 and March 31, 2015 are as follows:

Name of the shareholder

As at March 31, 2016

As at March 31, 2015

No. of shares

% held

No. of shares

% held

Deutsche Bank Trust Company Americas
(Depository of ADRs – legal ownership)

38,53,17,937

16.78

18,60,73,981

16.20

Life Insurance Corporation of India

13,22,74,300

5.76

5,52,74,758

4.81

The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2016 and March 31, 2015 are as follows:

Particulars

As at March 31, 2016

As at March 31, 2015

No. of shares

Amount

No. of shares

Amount

Number of shares at the beginning of the year

1,14,28,05,132

572

57,14,02,566

286

Add: Bonus shares issued (including bonus on treasury shares)

1,14,84,72,332

574

57,42,36,166

287

Less: Increase in treasury shares consequent to bonus issue

56,67,200

2

28,33,600

1

Add: Shares issued on exercise of employee stock options

10,824

Number of shares at the end of the year

2,28,56,21,088

1,144

1,14,28,05,132

572

Stock option plan

2015 Stock Incentive Compensation Plan

SEBI issued the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘SEBI Regulations’), which replaced the SEBI ESOP Guidelines, 1999. The 2011 Plan (as explained below) was required to be amended and restated in accordance with the SEBI Regulations. Consequently, to effect this change and to further introduce stock options / ADRs and other stock incentives, the Company put forth the 2015 Stock Incentive Compensation Plan (‘the 2015 Plan’) for approval to the shareholders of the Company. Pursuant to the approval by the shareholders through a postal ballot which ended on March 31, 2016, the Board of Directors have been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Plan. The maximum number of shares under the 2015 Plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are currently held by the Trust towards the 2011 Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of four years and the Company expects to grant the instruments under the 2015 Plan over the period of four to seven years.

2011 RSU Plan

The Company had a 2011 RSU Plan (‘the 2011 Plan’) which provided for the grant of restricted stock units (RSUs) to eligible employees of the Company. The Board of Directors recommended the establishment of the 2011 Plan to the shareholders on August 30, 2011 and the shareholders approved the recommendation of the Board of Directors on October 17, 2011 through a postal ballot. The maximum aggregate number of shares that may be awarded under the plan was 1,13,34,400 and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. During the year ended March 31, 2015, the Company made a grant of 1,08,268 restricted stock units (adjusted for bonus issues) to Dr. Vishal Sikka, Chief Executive Office and Managing Director. The Board, in its meeting held on June 22, 2015, on the recommendation of nomination and remuneration committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date. Further, the Company has earmarked 1,00,000 equity shares for welfare activities of the employees, approved by the shareholders through a postal ballot which ended on March 31, 2016. The equity shares currently held under this plan, i.e. 1,12,23,576 equity shares (this includes the aggregate number of equity shares that may be awarded under the 2011 Plan as reduced by 10,824 equity shares already exercised by Dr. Vishal Sikka and 1,00,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 Plan.

Further, the award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSUs for each of the remaining years would be subject to continued employment.

In accordance with the SEBI Regulations, 2014, the excess of the closing market price on the grant date of the RSUs over the exercise price is amortized on a straight-line basis over the vesting period.

The activity in the 2011 Plan during the years ended March 31, 2016 and March 31, 2015 is as follows:

Particulars

Year ended March 31, 2016

Year ended March 31, 2015

Shares arising out of options

Weighted average exercise price

Shares arising out of options

Weighted average exercise price

The 2011 Plan

Outstanding at the beginning (1)

1,08,268

5

Granted

1,24,061

5

1,08,268

5

Forfeited and expired

Exercised (1)

10,824

5

Outstanding at the end

2,21,505

5

1,08,268

5

Exercisable at the end

(1) Adjusted for bonus issues

The weighted average remaining contractual life of RSUs outstanding as of March 31, 2016 and March 31, 2015 under the 2011 Plan was 1.98 years and 2.39 years, respectively.

The weighted average share price of options exercised under the 2011 Plan on the date of exercise was 1,088.

The differential on stock compensation expense if the ‘fair value’ of the RSUs on the date of the grant were considered instead of the ‘intrinsic value’ during the years ended March 31, 2016 and March 31, 2015 is less than 1 crore. Consequently, there is no impact on earnings per share.

The fair value for the above impact analysis is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:

Particulars

For options granted in fiscal

2016

2015

Grant date

22-Jun-15

21-Aug-14

Weighted average share price () (1)

1,024

3,549

Exercise price () (1)

5

5

Expected volatility (%)

28-36

30-37

Expected life of the option (years)

1-4

1-4

Expected dividends (%)

2.43

1.84

Risk-free interest rate (%)

7-8

8-9

Weighted average fair value as on grant date () (1)

948

3,355

(1) Data for fiscal 2015 is not adjusted for bonus issues

The expected term of an RSU is estimated based on the vesting term and contractual term of the RSU, as well as expected exercise behavior of the employee who receives the RSU. Expected volatility during the expected term of the RSU is based on historical volatility of the observed market prices of the Company’s publicly traded equity shares during a period equivalent to the expected term of the RSU.

During the years ended March 31, 2016 and March 31, 2015, the Company recorded an employee compensation expense of 7 crore and 2 crore in the consolidated Statement of Profit and Loss.

2.2 Reserves and surplus

in crore

Particulars

As at March 31,

2016

2015

Capital reserves – Opening balance

54

54

Add: Transferred from surplus

54

54

Foreign currency translation reserve – Opening balance

332

376

Add: Foreign currency translation during the year

81

(44)

Foreign currency translation reserve – Closing balance

413

332

Securities premium account – Opening balance

2,784

3,070

Less: Amount utilized for issuance of bonus shares (Refer to Note 2.1)

572

286

Add: Exercise of stock options

1

2,213

2,784

Stock options outstanding – Opening balance (Refer to Note 2.1)

2

Additions during the year

7

2

Less: Exercise of stock options

1

8

2

General reserve – Opening balance

10,505

9,288

Add: Transferred from surplus

1,579

1,217

12,084

10,505

Other reserve – Opening balance (1)

4

3

Add: Transferred from surplus

1

1

5

4

Cash flow hedge reserve – Opening balance

Add: Unrealized gains / (loss) from effective hedges

1

Less: Reclassification to Statement of Profit and Loss

1

Special Economic Zone Re-investment Reserve – Opening balance (2)

Add: Transferred from surplus

591

Less: Transferred to surplus on utilization

591

Special Economic Zone Re-investment Reserve – Closing balance

Surplus – Opening balance

36,483

31,453

Add: Inter-company dividend

28

21

Add: Net profit after tax transferred from the Statement of Profit and Loss

13,678

12,372

Add: Transfer from Special Economic Zone Re-investment Reserve on utilization

591

Amount available for appropriation

50,780

43,846

Appropriations

Interim dividend

2,297

1,723

Final dividend

3,273

3,388

Total dividend

5,570

5,111

Dividend tax

1,134

1,034

Amount transferred to other reserve

1

1

Amount transferred to Special Economic Zone Re-investment Reserve

591

Amount transferred to general reserve

1,579

1,217

Surplus – Closing balance

41,905

36,483

56,682

50,164

(1) Under the Swiss Code of Obligation, a few subsidiaries of Lodestone are required to appropriate 5% of the annual profit to legal reserve until this equals 20% of the paid-up share capital. To the extent it does not exceed one-half of the share capital, the general reserve may be used only to cover losses or for measures designed to sustain the Company through difficult times, to prevent unemployment or to mitigate its consequences.

(2) The Special Economic Zone Re-investment Reserve has been created out of the profit of eligible SEZ units in terms of the provisions of Section 10AA(1)(ii) of the Income-tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in the terms of the Section 10AA(2) of the Income-tax Act, 1961.

2.3 Deferred taxes

in crore

Particulars

As at March 31,

2016

2015

Deferred tax assets

Fixed assets

178

241

Trade receivables

89

111

Compensated absences

389

299

Computer software

50

51

Accrued compensation to employees

68

48

Post-sales client support

77

74

Others

55

30

906

854

Deferred tax liabilities

Branch profit tax

334

316

Others

39

2

373

318

Deferred tax assets after set-off

533

536

Deferred tax liabilities after set-off

Deferred tax assets and deferred tax liabilities have been offset wherever the Group has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.

As at March 31, 2016 and March 31, 2015, the Group has provided for branch profit tax of 334 crore and 316 crore, respectively, for its overseas branches, as the Group estimates that these branch profits would be distributed in the foreseeable future. The change in provision for branch profit tax includes 18 crore movement on account of exchange rate during the year ended March 31, 2016.

2.4 Other long-term liabilities

in crore

Particulars

As at March 31,

2016

2015

Others

Gratuity obligation – unamortized amount relating to plan amendment
(Refer to Note 2.24)

3

Deferred income – government grant on land-use rights

47

47

Payable for acquisition of business
(Refer to Notes 2.29.3 and 2.29.4)

46

Accrued salaries and benefits

Bonus and incentives

33

126

50

2.5 Other current liabilities

in crore

Particulars

As at March 31,

2016

2015

Accrued salaries and benefits

Salaries and benefits

1,104

1,237

Bonus and incentives

1,162

869

Unearned revenue

1,332

1,052

Unpaid dividends

5

3

Other liabilities

Provision for expenses

2,189

1,984

Retention monies

80

53

Withholding and other taxes payable

1,296

904

Gratuity obligation – unamortized amount relating to plan amendment, current
(Refer to Note 2.24)

4

4

Payable for acquisition of business
(Refer to Notes 2.29.3 and 2.29.4)

86

525

Advances received from clients

28

27

Payable by controlled trusts

167

177

Deferred income – government grant on land-use rights

1

1

Accrued gratuity (Refer to Note 2.24)

1

7

Other payables

141

74

Mark-to-market forward and options contracts

5

3

7,601

6,920

2.6 Short-term provisions

in crore

Particulars

As at March 31,

2016

2015

Provision for employee benefits

Compensated absences

1,341

1,069

Others

Proposed dividend

3,273

3,388

Provision for

Tax on dividend

666

690

Income taxes (net of advance tax and tax deducted at source)

3,410

2,818

Post-sales client support and warranties and others

512

478

9,202

8,443

Provision for post-sales client support and warranties and others

The movement in the provision for post-sales client support and warranties and others is as follows:

in crore

Particulars

Year ended March 31,

2016

2015

Balance at the beginning

478

379

Provision recognized / (reversed)

106

172

Provision utilized

(103)

(84)

Exchange difference

31

11

Balance at the end

512

478

Provision for post-sales client support and warranties and other provisions are expected to be utilized over a period of six months to one year.

2.7 Fixed assets

The changes in the carrying value of fixed assets for the year ended March 31, 2016 are as follows:

in crore, except as otherwise stated

Particulars

Tangible assets

Intangible assets

Total

Land-Freehold

Land- Leasehold

Buildings (1)

Plant and equipment

Office equipment (3)

Computer equipment (3)

Furniture and fixtures (3)

Leasehold improvements

Vehicles

Total

Goodwill

Intellectual property rights and others

Land-use rights

Total

Original cost

As at April 1, 2015

931

633

5,881

1,427

676

3,347

958

221

34

14,108

3,595

42

71

3,708

17,816

Additions through acquisitions (3)

1

2

1

4

881

881

885

Additions during the year

41

17

444

333

166

1,103

256

9

6

2,375

2

2

2,377

Deductions / retirement during the year

(1)

(6)

(396)

(7)

(1)

(12)

(423)

(10)

(10)

(433)

Foreign exchange difference

2

16

1

6

1

26

(2)

1

(1)

25

As at March 31, 2016

972

650

6,325

1,759

839

4,072

1,209

235

29

16,090

4,476

32

72

4,580

20,670

Depreciation and amortization

As at April 1, 2015

16

1,982

881

412

2,287

647

179

19

6,423

42

5

47

6,470

Accumulated depreciation on acquired assets (3)

1

1

2

2

For the year

6

219

220

100

553

139

22

5

1,264

1

1

2

1,266

Deductions / adjustments during the year (3)

(1)

(5)

(237)

(6)

2

(7)

(254)

(10)

(10)

(264)

Foreign exchange difference

1

14

1

2

18

(2)

(2)

16

As at March 31, 2016

22

2,201

1,100

509

2,618

781

205

17

7,453

31

6

37

7,490

Net book value

As at March 31, 2016

972

628

4,124

659

330

1,454

428

30

12

8,637

4,476

1

66

4,543

13,180

The changes in the carrying value of fixed assets for the year ended March 31, 2015 are as follows:

in crore, except as otherwise stated

Particulars

Tangible assets

Intangible assets

Total

Land-Freehold

Land- Leasehold

Buildings (1)

Plant and equipment

Office equipment (3)

Computer equipment (3)

Furniture and fixtures (3)

Leasehold improvements

Vehicles

Total

Goodwill

Intellectual property rights and others

Land-use rights

Total

Original cost

As at April 1, 2014

782

360

5,026

1,150

551

2,659

805

212

35

11,580

2,244

58

68

2,370

13,950

Additions through acquisitions (2)

13

9

22

1,351

1

1,352

1,374

Additions during the year

149

273

855

280

140

765

161

22

6

2,651

2,651

Deductions / retirement during the year

(3)

(14)

(82)

(10)

(10)

(6)

(125)

(17)

(17)

(142)

Foreign exchange difference

(1)

(8)

(7)

(3)

(1)

(20)

3

3

(17)

As at March 31, 2015

931

633

5,881

1,427

676

3,347

958

221

34

14,108

3,595

42

71

3,708

17,816

Depreciation and amortization

As at April 1, 2014

1,794

703

345

1,965

530

169

18

5,524

45

3

48

5,572

Accumulated depreciation on acquired assets (2)

(9)

(4)

(13)

(13)

For the year

16

188

181

81

387

128

16

6

1,003

13

1

14

1,017

Deductions / adjustments during the year (2)

(2)

(13)

(52)

(2)

(8)

(4)

(81)

(16)

(16)

(97)

Foreign exchange difference

(1)

(1)

(4)

(5)

2

(1)

(10)

1

1

(9)

As at March 31, 2015

16

1,982

881

412

2,287

647

179

19

6,423

42

5

47

6,470

Net book value

As at March 31, 2015

931

617

3,899

546

264

1,060

311

42

15

7,685

3,595

66

3,661

11,346

(1) Buildings include 250 being the value of five shares of 50 each in Mittal Towers Premises Co-operative Society Limited.

(2) Includes certain assets having gross book value of 23 crore, accumulated depreciation of 14 crore and net book value of 9 crore taken over on acquisition of Panaya effective March 5, 2015.

(3) Includes certain assets having gross book value of 4 crore, accumulated depreciation of 2 crore and net book value of 2 crore taken over on acquisition of Kallidus, Skava and Noah.

During the quarter ended June 30, 2014, the Management, based on internal and external technical evaluation, had reassessed the remaining useful life of certain assets primarily consisting of buildings and computers with effect from April 1, 2014. Accordingly, the useful lives of certain assets required a change from the previous estimate.

The Company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of some of these agreements, the Company has the option to purchase or renew the properties on expiry of the lease period.

2.8 Leases

Obligations on long-term, non-cancelable operating leases

The lease rentals charged during the year and the future minimum rental payments in respect of non-cancelable operating leases are as follows:

in crore

Particulars

Year ended March 31,

2016

2015

Lease rentals recognized during the year

360

309

in crore

Particulars

As at March 31,

2016

2015

Lease obligations payable

Within one year of the Balance Sheet date

372

168

Due in a period between one year and five years

873

395

Due after five years

442

168

A majority of the Group’s operating lease arrangements extend up to a maximum of 10 years from their respective dates of inception and relate to rented overseas premises. Some of these lease agreements have price escalation clauses.

2.9 Investments

in crore, except as otherwise stated

Particulars

As at March 31,

2016

2015

Non-current investments

Long-term investments – at cost

Others (unquoted)

Investments in preferred stock and equity instruments (Refer to Note 2.9.1)

99

7

Less: Provision for equity investments

6

6

93

1

Others (Refer to Note 2.9.1)

22

115

1

Others (quoted)

Investments in tax-free bonds
(Refer to Note 2.9.2)

1,599

1,300

Investment in government bonds
(Refer to Note 2.9.2)

4

1,599

1,304

Long-term investments – equity method

Trade (unquoted)

Investment in associate

DWA Nova LLC (Refer to Note 2.21)

103

93

103

93

Total non-current investments

1,817

1,398

Current investments

Current portion of long-term investments

Quoted

Fixed maturity plans
(Refer to Note 2.9.3)

30

Investment in government bonds
(Refer to Note 2.9.2)

5

5

30

Current investments – at the lower of cost and fair value

Unquoted

Liquid mutual fund units
(Refer to Note 2.9.4)

68

842

68

842

Quoted

Investment in government bonds
(Refer to Note 2.9.2)

2

2

Total current investments

75

872

Total investments

1,892

2,270

Aggregate amount of quoted investments excluding interest accrued but not due of 58 crore included under Note 2.14 Short-term loans and advances

1,606

1,334

Market value of quoted investments

1,703

1,376

Aggregate amount of unquoted investments

292

942

Aggregate amount of provision made for non-current unquoted investments

6

6

2.9.1 Details of investments

The details of non-current other investments in preferred stock, equity instruments and others as at March 31, 2016 and March 31, 2015 are as follows:

in crore

Particulars

As at March 31,

2016

2015

Preferred stock

Airviz Inc.

2,82,279 (Nil) Series A Preferred Stock, fully paid-up, par value USD 0.001 each

13

ANSR Consulting

52,631 (Nil) Series A Preferred Stock, fully paid-up, par value USD 0.001 each

9

Whoop Inc.

16,48,352 (Nil) Series B Preferred Stock, fully paid-up, par value USD 0.0001 each

20

CloudEndure Ltd.

12,79,645 (Nil) Preferred Series B Shares, fully paid-up, par value ILS 0.01 each

13

Nivetti Systems Private Limited

2,28,501 (Nil) Preferred Stock, fully paid-up, par value 1 each

10

Waterline Data Science Inc.

39,33,910 (Nil) Series B Preferred Stock, fully paid-up, par value USD 0.00001 each

27

Equity instrument

OnMobile Systems Inc.,
(formerly Onscan Inc.) U.S.

21,54,100 (21,54,100) common stock at USD 0.4348 each, fully paid-up, par value
USD 0.001 each

4

4

Merasport Technologies Private Limited

2,420 (2,420) equity shares at 8,052/- each, fully paid-up, par value 10/- each

2

2

Global Innovation and Technology Alliance 15,000 (10,000) equity shares at 1,000/- each, fully paid-up, par value 1,000/- each

1

1

Others

Vertex Ventures U.S. Fund I, L.P

22

121

7

Less: Provision for investment

6

6

115

1

2.9.2 Details of investments in tax-free bonds and government security bond

The balances held in tax-free bonds as at March 31, 2016 and March 31, 2015 are as follows:

in crore

Particulars

Face value

As at March 31, 2016

As at March 31, 2015

Units

Amount

Units

Amount

7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028

1,000/-

21,00,000

211

21,00,000

211

8.30% National Highways Authority of India Bonds 25JAN2027

1,000/-

5,00,000

53

5,00,000

53

7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023

1,000/-

20,00,000

201

20,00,000

201

8.46% India Infrastructure Finance Company Limited Bonds 30AUG2028

10,00,000/-

2,000

200

2,000

200

8.46% Power Finance Corporation Limited Bonds 30AUG2028

10,00,000/-

1,500

150

1,500

150

8.35% National Highways Authority of India Bonds 22NOV2023

10,00,000/-

1,500

150

1,500

150

8.26% India Infrastructure Finance Company Limited Bonds 23AUG28

10,00,000/-

1,000

100

1,000

100

8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027

1,000/-

5,00,000

53

5,00,000

53

8.54% Power Finance Corporation Limited Bonds 16NOV2028

1,000/-

5,00,000

50

5,00,000

50

8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028

10,00,000/-

450

45

450

45

7.93% Rural Electrification Corporation Limited Bonds 27MAR2022

1,000/-

2,00,000

21

2,00,000

21

8.20% Power Finance Corporation Limited Bonds 2022

1,000/-

5,00,000

51

5,00,000

51

8.00% Indian Railway Finance Corporation Limited Bonds 2022

1,000/-

1,50,000

15

1,50,000

15

7.28% National Highways Authority of India Bonds 18SEP30

10,00,000/-

2,000

200

7.28% Indian Railway Finance Corporation Limited 21DEC30

1,000/-

4,22,800

42

7.35% National Highways Authority of India Bonds 11JAN31

1,000/-

5,71,396

57

74,52,646

1,599

64,56,450

1,300

The balances held in government bonds as at March 31, 2016 and March 31, 2015 are as follows:

in crore

Particulars

Face value PHP

As at March 31, 2016

As at March 31, 2015

Units

Amount

Units

Amount

Fixed Rate Treasury Notes 1.62 PCT MAT DATE 7 SEPT 2016

100

50,000

1

Fixed Rate Treasury Notes 2.20 PCT MAT DATE 25 APR 2016

100

60,000

1

60,000

1

Fixed Rate Treasury Notes 1.00 PCT MAT DATE 25 APR 2016

100

2,00,000

3

2,00,000

3

Fixed Rate Treasury Notes 1.70 PCT MAT DATE 22 FEB 2017

100

10,000

Fixed Rate Treasury Notes 1.70 PCT PHY6972FW G18 MAT Date 22 FEB 2017

100

1,50,000

2

Fixed Rate Treasury Notes 1.96 PCT MAT DATE 27 JAN 2016

100

10,000

Fixed Rate Treasury Notes 7.00 PCT PIBD0716A488 MAT DATE 27 JAN 2016

100

10,000

4,70,000

7

2,80,000

4

2.9.3 Details of investments in fixed maturity plans

The balances held in fixed maturity plans as at March 31, 2015 are as follows:

in crore

Particulars

Face value

Units

Amount

SBI debt fund series A-28-Growth – direct-367 days

10

1,25,00,000

13

SBI debt fund series A-31-Growth – direct-367 days

10

75,00,000

7

UTI Fixed Term Income Fund Series XIX – III (368 days)

10

1,00,00,000

10

3,00,00,000

30

2.9.4 Details of investments in liquid mutual fund units and certificates of deposit

The balances held in liquid mutual fund units as at March 31, 2016 are as follows:

in crore

Particulars

Units

Amount

Reliance Money Manage Fund

32,925

7

Reliance Liquid Fund Cash Plan

2

ICICI Prudential Liquid – Direct Plan

16,07,064

16

Reliance Liquid Fund Treasury Plan

2,07,283

31

BSL Cash Manager – Growth

3,89,089

14

22,36,363

68

The balances held in liquid mutual fund units as at March 31, 2015 are as follows:

in crore

Particulars

Units

Amount

SBI Premier Liquid Fund – Direct Plan Daily Dividend

9,97,094

100

IDFC Cash Fund – Direct Plan Daily Dividend

29,30,197

293

Reliance Liquid Fund – Treasury Plan – Direct Plan Daily Dividend Option

9,81,551

150

Reliance Mutual Fund – Liquid

4,08,049

45

Birla Sun Life Mutual Fund – Liquid

47,37,327

48

ICICI Liquid Plan – Direct Plan Daily Dividend

2,05,44,807

206

3,05,99,025

842

2.10 Long-term loans and advances

in crore

Particulars

As at March 31,

2016

2015

Unsecured, considered good

Capital advances

933

664

Security deposits

78

68

Rental deposits

146

47

Other loans and advances

Advance income taxes (net of provisions)

5,230

4,089

Prepaid expenses

87

7

Deferred contract cost

333

Loans and advances to employees

Housing and other loans

25

31

6,832

4,906

Unsecured, considered doubtful

Loans and advances to employees

19

12

6,851

4,918

Less: Provision for doubtful loans and advances to employees

19

12

6,832

4,906

2.11 Other non-current assets

in crore

Particulars

As at March 31,

2016

2015

Others

Advance to gratuity trust
(Refer to Note 2.24)

4

27

Restricted deposits (Refer to Note 2.28)

62

58

66

85

2.12 Trade receivables

in crore

Particulars

As at March 31,

2016

2015

Debts outstanding for a period exceeding six months

Unsecured

Considered doubtful

200

182

Less: Provision for doubtful debts

200

182

Other debts

Unsecured

Considered good

11,330

9,713

Considered doubtful

89

184

11,419

9,897

Less: Provision for doubtful debts

89

184

11,330

9,713

11,330

9,713

2.13 Cash and cash equivalents

in crore

Particulars

As at March 31,

2016

2015

Cash on hand

Balances with banks

In current and deposit accounts

27,420

26,195

Others

Deposits with financial institutions

5,277

4,172

32,697

30,367

Balances with banks in unpaid dividend accounts

5

3

Deposit accounts with more than 12 months maturity

404

311

Balances with banks held as margin money deposits against guarantees

342

185

Cash and cash equivalents as of March 31, 2016 and March 31, 2015 include restricted cash and bank balances of 492 crore and 364 crore, respectively. The restrictions are primarily on account of cash and bank balances held by irrevocable trusts controlled by the Company, bank balances held as margin money deposits against guarantees and balances held in unpaid dividend bank accounts.

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

The details of balances as on Balance Sheet dates with banks are as follows:

in crore

Particulars

As at March 31,

2016

2015

In current accounts

ANZ Bank, Taiwan

13

4

Axis Bank, India

1

Banamex Bank, Mexico

5

10

Banamex Bank, Mexico
(U.S. Dollar account)

3

1

Bank of America, Mexico

21

26

Bank of America, U.S.

681

716

Bank Zachodni WBK S.A, Poland

3

4

Bank of Tokyo-Mitsubishi UFJ, Ltd., Japan

1

1

Barclays Bank, U.K.

19

10

Bank Leumi, Israel (U.S. Dollar account)

17

7

Bank Leumi, Israel
(Israeli Sheqel account)

10

15

Bank Leumi, Israel (Euro account)

3

China Merchants Bank, China

8

4

Citibank N.A, China

65

20

Citibank N.A., China
(U.S. Dollar account)

72

24

Citibank N.A., Costa Rica

2

5

Citibank N.A., Czech Republic

6

Citibank N.A., Australia

72

25

Citibank N.A., Brazil

5

27

Citibank N.A., Dubai

1

1

Citibank N.A., India

1

7

Citibank N.A., Japan

15

20

Citibank N.A., New Zealand

6

6

Citibank N.A., Portugal

2

Citibank N.A., Singapore

3

2

Citibank N.A., South Africa

5

3

CitiBank N.A., South Africa
(Euro account)

1

Citibank N.A., Philippines,
(U.S. Dollar account)

1

1

CitiBank N.A., U.S.

60

CitiBank N.A., EEFC
(U.S. Dollar account)

2

Commerzbank, Germany

19

19

Crédit Industriel et Commercial Bank, France

4

1

Deutsche Bank, India

8

5

Deutsche Bank, Philippines

13

3

Deutsche Bank, Philippines
(U.S. Dollar account)

1

3

Deutsche Bank, Poland

5

19

Deutsche Bank, Poland (Euro account)

1

Deutsche Bank, EEFC
(Australian Dollar account)

2

Deutsche Bank, EEFC (Euro account)

32

3

Deutsche Bank, EEFC (Swiss Franc account)

5

5

Deutsche Bank, EEFC
(U.S. Dollar account)

96

8

Deutsche Bank, EEFC (United Kingdom Pound Sterling account)

9

5

Deutsche Bank, Belgium

59

13

Deutsche Bank, Malaysia

9

Deutsche Bank, Czech Republic

14

6

Deutsche Bank, Czech Republic
(Euro account)

1

2

Deutsche Bank, Czech Republic
(U.S. Dollar account)

28

20

Deutsche Bank, France

10

2

Deutsche Bank, Germany

17

8

Deutsche Bank, Netherlands

6

2

Deutsche Bank, Russia

2

Deutsche Bank, Russia
(U.S. Dollar account)

1

Deutsche Bank, Singapore

4

5

Deutsche Bank, Spain

1

1

Deutsche Bank, Switzerland

1

Deutsche Bank, United Kingdom

170

25

HSBC Bank, Brazil

5

3

HSBC Bank, Hong Kong

1

44

ICICI Bank, India

72

30

ICICI Bank, EEFC (U.S. Dollar account)

10

14

ING Bank, Belgium

3

Nordbanken, Sweden

15

3

Punjab National Bank, India

4

7

Raiffeisen Bank, Czech Republic

5

Raiffeisen Bank, Romania

4

Royal Bank of Scotland, China

45

Royal Bank of Scotland, China
(U.S. Dollar account)

47

Royal Bank of Canada, Canada

78

16

Santander Bank, Argentina

2

Santander Bank, Spain

1

State Bank of India, India

8

2

Silicon Valley Bank, U.S.

5

66

Silicon Valley Bank, (Euro account)

65

16

Silicon Valley Bank, (United Kingdom Pound Sterling account)

19

5

Union Bank of Switzerland AG

15

12

Union Bank of Switzerland AG,
(Euro account)

12

4

Union Bank of Switzerland AG, (Australian Dollar account)

2

Union Bank of Switzerland AG,
(U.S. Dollar account)

28

2

Union Bank of Switzerland AG,
(United Kingdom Pound Sterling account)

4

1

Wells Fargo Bank N.A., U.S.

23

38

Westpac, Australia

6

6

1,994

1,470

In deposit accounts

Allahabad Bank

200

Andhra Bank

948

171

Axis Bank

1,340

1,495

Bank of Baroda

2,394

Bank of India

77

2,691

Canara Bank

2,115

3,006

Central Bank of India

1,538

1,383

Citibank

125

Corporation Bank

1,285

1,277

Deutsche Bank, Poland

237

121

Development Bank of Singapore

35

HDFC Bank Ltd.

2,650

2,097

ICICI Bank

4,049

3,166

IDBI Bank

1,900

856

Indian Overseas Bank

1,250

651

Indusind Bank

250

75

ING Vysya Bank

100

Jammu & Kashmir Bank

25

Kotak Mahindra Bank

537

5

National Australia Bank

1

87

Oriental Bank of Commerce

1,967

1,580

Punjab National Bank

18

592

South Indian Bank

23

27

State Bank of India

2,310

Syndicate Bank

1,266

407

Union Bank of India

140

1,051

Vijaya Bank

304

466

Yes Bank

724

604

25,079

24,537

In unpaid dividend accounts

Axis Bank – Unpaid dividend account

2

HDFC Bank – Unpaid dividend account

1

1

ICICI Bank – Unpaid dividend account

2

2

5

3

In margin money deposits against guarantees

Canara Bank

132

128

Citibank

3

ICICI Bank

150

State Bank of India

57

57

342

185

Deposits with financial institutions

HDFC Limited

5,277

4,172

5,277

4,172

Total cash and cash equivalents as per Balance Sheet

32,697

30,367

2.14 Short-term loans and advances

in crore

Particulars

As at March 31,

2016

2015

Unsecured, considered good

Others

Advances

Prepaid expenses

201

98

Deferred contract cost

48

For supply of goods and rendering of services

110

79

Withholding and other taxes receivable

1,799

1,364

Others

25

9

2,183

1,550

Restricted deposits (Refer to Note 2.28)

1,238

1,100

Unbilled revenues

3,029

2,845

MAT credit entitlement

Interest accrued but not due

762

444

Loans and advances to employees

Salary advances

229

64

Housing and other loans

74

158

Security deposits

7

4

Rental deposits

13

24

Mark-to-market forward and options contracts

116

101

7,651

6,290

2.15 Income from software services and products

in crore

Particulars

Year ended March 31,

2016

2015

Income from software services

60,528

51,666

Income from software products

1,913

1,653

62,441

53,319

2.16 Other income

in crore

Particulars

Year ended March 31,

2016

2015

Interest received on deposits with banks and others

2,634

2,734

Dividend received on investment in mutual fund units

64

158

Gain on sale of investments

3

14

Gains / (losses) on foreign currency, net

165

480

Miscellaneous income, net

262

44

3,128

3,430

2.17 Expenses

in crore

Particulars

Year ended March 31,

2016

2015

Employee benefit expenses

Salaries and bonus including overseas staff expenses

33,549

29,022

Contribution to provident and other funds

660

646

Employee compensation expense
(Refer to Note 2.1)

7

2

Staff welfare

202

132

34,418

29,802

Cost of software packages and others

For own use

740

855

Third-party items bought for service delivery to clients

534

189

1,274

1,044

Other expenses

Office maintenance

581

420

Power and fuel

217

219

Brand building

198

158

Rent

360

309

Rates and taxes, excluding taxes on income

109

126

Repairs to building

190

99

Repairs to plant and machinery

92

76

Computer maintenance

151

125

Consumables

41

44

Insurance charges

60

53

Provision for post-sales client support and warranties

8

39

Commission to non-whole-time directors

9

9

Provision for bad and doubtful debts and advances

(46)

175

Auditors’ remuneration

Statutory audit fees

7

5

Taxation matters

Other services

Reimbursement of expenses

Bank charges and commission

9

12

Contributions towards CSR

(Refer to Note 2.30)

216

254

Others

295

355

2,497

2,478

2.18 Tax expense

in crore

Particulars

Year ended March 31,

2016

2015

Current tax

Income taxes

5,315

4,835

Deferred taxes

(14)

76

5,301

4,911

Income tax expense for the years ended March 31, 2016 and March 31, 2015 includes reversals (net of provisions) of 309 crore and 158 crore pertaining to earlier periods.

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 as per Indian Income-tax Act, 1961. Infosys’ operations are conducted through Software Technology Parks (‘STPs’) and Special Economic Zones (‘SEZs’). Income from STPs were tax exempt for the first 10 years from the fiscal year in which the unit commenced software development, or March 31, 2011 whichever is earlier. 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.

2.19 Contingent liabilities and commitments (to the extent not provided for)

in crore

Particulars

As at March 31,

2016

2015

Contingent liabilities

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

56

43

Claims against the Company, not acknowledged as debts (2)
[Net of amount paid to statutory authorities 4,409 crore ( 3,598 crore)]

284

264

Commitments

Estimated amount of unexecuted capital contracts (net of advances and deposits)

1,486

1,574

Other commitment (1)

79

(1) Uncalled capital pertaining to investment in Vertex Ventures U.S. Fund I, L.P

(2) Claims against the Company not acknowledged as debts for the year ended March 31, 2016 include demand from the Indian income tax authorities for payment of tax of 4,135 crore ( 3,337 crore), including interest of 1,224 crore ( 964 crore) upon completion of their tax assessment for fiscals 2007, 2008, 2009, 2010 and 2011 (for the year ended March 31, 2015 – upon completion of their tax assessment for fiscals 2006, 2007, 2008, 2009 and 2010). These demands were paid to statutory tax authorities which include 913 crore paid during the year ended March 31, 2016 consequent to demand from tax authorities in India for fiscal 2011 towards denial of certain tax benefits. The Company has filed an appeal with the income tax appellate authorities.

Demand for fiscals 2007, 2008 and 2009 includes disallowance of a portion of the deduction claimed by the Company under Section 10A of the Income-tax Act as 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. Demand for fiscals 2007, 2008, 2009, 2010 and 2011 also includes disallowance of portion of profit earned outside India from the STP units under Section 10A of the Income-tax Act and disallowance of profits earned from SEZ units under Section 10AA of the Income-tax Act. The matters for fiscals 2007, 2008 and 2009 are pending before the Commissioner of Income Tax (Appeals) Bangalore. The matter for fiscals 2010 and 2011 is pending before Honorable Income Tax Appellate Tribunal (ITAT) Bangalore. The Company is contesting the demand and the Management including its tax advisors believes that its position will likely be upheld in the appellate process. The Management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position and results of operations.

The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the Company’s results of operations or financial condition.

2.20 Derivative instruments

The details in respect of outstanding foreign exchange forward and option contracts are as follows:

Particulars

As at March 31,

2016

2015

in million

in crore

in million

in crore

Forward contracts outstanding

In USD

510

3,379

716

4,475

In Euro

100

750

67

447

In GBP

65

623

73

671

In AUD

55

281

98

466

In CAD

12

59

In SGD

25

114

In CHF

25

173

Options outstanding

In USD

125

828

In Euro

6,034

6,232

As of the Balance Sheet date, the Group’s net foreign currency exposures that are not hedged by a derivative instrument or otherwise is 1,506 crore ( 568 crore as at March 31, 2015).

The foreign exchange forward and option contracts mature within 12 months. The derivative financial instruments are analyzed into relevant maturity groupings based on the remaining period as of the Balance Sheet date as follows:

in crore

Particulars

As at March 31,

2016

2015

Not later than one month

1,577

1,484

Later than one month and not later than three months

3,420

3,781

Later than three months and not later than one year

1,037

967

6,034

6,232

The Group recognized a gain on derivative financial instruments of 29 crore and gain of 514 crore during the year ended March 31, 2016 and March 31, 2015, respectively, which is included in ‘Other income’.

2.21 Related party transactions

in %

Name of subsidiary

Country

Holding as at March 31,

2016

2015

Infosys BPO Limited (Infosys BPO)

India

99.98

99.98

Infosys Technologies (China) Co. Limited (Infosys China)

China

100

100

Infosys Technologies S. de R. L. de C. V.
(Infosys Mexico)

Mexico

100

100

Infosys Technologies (Sweden) AB (Infosys Sweden)

Sweden

100

100

Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai)

China

100

100

Infosys Tecnologia do Brasil Ltda. (Infosys Brasil)

Brazil

100

100

Infosys Public Services, Inc. (Infosys Public Services)

U.S.

100

100

Infosys Americas Inc. (Infosys Americas)

U.S.

100

100

Infosys (Czech Republic) Limited s.r.o (formerly Infosys BPO s.r.o) (1)

Czech Republic

99.98

99.98

Infosys Poland Sp. z o.o. (1)

(formerly Infosys BPO Poland, Sp z.o.o)

Poland

99.98

99.98

Infosys BPO S. de R.L. de C.V (1)(17)

Mexico

Infosys McCamish Systems LLC (1)

U.S.

99.98

99.98

Portland Group Pty. Limited (1)

Australia

99.98

99.98

Portland Procurement Services Pty Ltd (5)

Australia

Infosys BPO Americas LLC (1)(16)

U.S.

Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2)

Australia

100

100

EdgeVerve Systems Limited (EdgeVerve) (7)

India

100

100

Infosys Consulting Holding AG (Infosys Lodestone)

(formerly Lodestone Holding AG)

Switzerland

100

100

Lodestone Management Consultants Inc. (3)

U.S.

100

100

Infosys Management Consulting Pty Limited (formerly Lodestone Management Consultants Pty. Limited) (3)

Australia

100

100

Infosys Consulting AG (formerly Lodestone Management Consultants AG) (3)

Switzerland

100

100

Lodestone Augmentis AG (2)(6)

Switzerland

100

100

Lodestone GmbH
(formerly Hafner Bauer & Ödman GmbH) (2)(3)

Switzerland

100

100

Lodestone Management Consultants (Belgium) S.A. (4)

Belgium

99.90

99.90

Infosys Consulting GmbH (formerly Lodestone Management Consultants GmbH) (3)

Germany

100

100

Infosys Consulting Pte Ltd. (formerly Lodestone Management Consultants Pte Ltd) (3)

Singapore

100

100

Infosys Consulting SAS (formerly Lodestone Management Consultants SAS) (3)

France

100

100

Infosys Consulting s.r.o. (formerly Lodestone Management Consultants s.r.o.) (3)

Czech Republic

100

100

Lodestone Management Consultants GmbH (3)

Austria

100

100

Lodestone Management Consultants Co., Ltd. (3)

China

100

100

Infy Consulting Company Ltd. (formerly Lodestone Management Consultants Ltd.) (3)

U.K.

100

100

Infy Consulting B.V.
(formerly Lodestone Management Consultants B.V.) (3)

Netherlands

100

100

Infosys Consulting Ltda.

(formerly Lodestone Management Consultants Ltda.) (4)

Brazil

99.99

99.99

Infosys Consulting
Sp. Z o.o.
(formerly Lodestone Management Consultants Sp. z o.o.) (3)

Poland

100

100

Lodestone Management Consultants Portugal, Unipessoal, Lda (3)

Portugal

100

100

S.C. Infosys Consulting S.R.L.(formerly SC Lodestone Management Consultants S.R.L.) (3)

Romania

100

100

Infosys Consulting S.R.L. (formerly Lodestone Management Consultants S.R.L.) (3)

Argentina

100

100

Infosys Canada Public Services Ltd.(8)

Canada

Infosys Nova Holdings LLC (Infosys Nova) (9)

U.S.

100

100

Panaya Inc. (Panaya)(10)

U.S.

100

100

Panaya Ltd. (11)

Israel

100

100

Panaya GmbH (11)

Germany

100

100

Panaya Pty Ltd. (11)

Australia

Panaya Japan Co. Ltd. (11)

Japan

100

100

Skava Systems Pvt. Ltd. (Skava Systems) (12)

India

100

Kallidus Inc. (Kallidus) (13)

U.S.

100

Noah Consulting LLC (Noah) (14)

U.S.

100

Noah Information Management Consulting Inc. (Noah Canada) (15)

Canada

100

(1) Wholly-owned subsidiary of Infosys BPO

(2) Under liquidation

(3) Wholly-owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)

(4) Majority-owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)

(5) Wholly-owned subsidiary of Portland Group Pty. Limited. Liquidated effective May 14, 2014.

(6) Wholly-owned subsidiary of Infosys Consulting AG (formerly Lodestone Management Consultants AG)

(7) Incorporated effective February 14, 2014 (Refer to Note 2.29.5)

(8) Wholly-owned subsidiary of Infosys Public Services, Inc. Incorporated effective December 19, 2014

(9) Incorporated effective January 23, 2015

(10) On March 5, 2015, Infosys acquired 100% of the voting interest in Panaya Inc.

(Refer to Note 2.29.2)

(11) Wholly-owned subsidiary of Panaya Inc.

(12) On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems

(Refer to Note 2.29.3)

(13) On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc.

(Refer to Note 2.29.3)

(14) On November 16, 2015, Infosys acquired 100% of the membership interests in Noah

(Refer to Note 2.29.4)

(15) Wholly-owned subsidiary of Noah

(16) Incorporated effective November 20, 2015

(17) Liquidated effective March 15, 2016

Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.

in %

Name of associate

Country

Holding as at March 31,

2016

2015

DWA Nova LLC (1)

U.S.

16

20

(1) Associate of Infosys Nova Holdings LLC. During the year ended March 31, 2015, the Group acquired 20% of the equity interests in DWA Nova LLC for a cash consideration of 94 crore. The Company has made this investment to form a new company along with Dream Works Animation (DWA). The new company, DWA Nova LLC, will develop and commercialize image generation technology to provide end-to-end digital manufacturing capabilities for companies involved in the design, manufacturing, marketing or distribution of physical consumer products. As of March 31, 2016, Infosys Nova holds 16% of the equity interest in DWA Nova LLC.

List of other related parties

Particulars

Country

Nature of relationship

Infosys Limited Employees’ Gratuity Fund Trust

India

Post-employment benefit plan of Infosys

Infosys Limited Employees’ Provident Fund Trust

India

Post-employment benefit plan of Infosys

Infosys Limited Employees’ Superannuation Fund Trust

India

Post-employment benefit plan of Infosys

Infosys BPO Limited Employees’ Superannuation Fund Trust

India

Post-employment benefit plan of Infosys BPO

Infosys BPO Limited Employees’ Gratuity Fund Trust

India

Post-employment benefit plan of Infosys BPO

EdgeVerve Systems Limited Employees’ Gratuity Fund Trust

India

Post-employment benefit plan of EdgeVerve

EdgeVerve Systems Limited Employees’ Superannuation Fund Trust

India

Post-employment benefit plan of EdgeVerve

Infosys Limited Employees’ Welfare Trust

India

Controlled trust

Infosys Employee Welfare Trust

India

Controlled trust

Infosys Science Foundation

India

Controlled trust

Notes:

Refer to Notes 2.24, 2.25 and 2.26 for information on transactions with post-employment benefit plans mentioned above.

List of key managerial personnel

Whole-time directors

S. D. Shibulal

(resigned effective July 31, 2014)

Srinath Batni

(resigned effective July 31, 2014)

B. G. Srinivas

(resigned effective June 10, 2014)

U. B. Pravin Rao

Dr. Vishal Sikka

(appointed effective June 14, 2014)

Non-whole-time directors

N. R. Narayana Murthy

(resigned effective October 10, 2014)

S. Gopalakrishnan

(resigned effective October 10, 2014)

K. V. Kamath

(resigned effective June 5, 2015)

Dr. Omkar Goswami

(retired effective December 31, 2014)

Prof. Jeffrey S. Lehman

R. Seshasayee

Ann M. Fudge

(retired effective June 14, 2014)

Ravi Venkatesan

Kiran Mazumdar-Shaw

Carol M. Browner

(resigned effective November 23, 2015)

Prof. John W. Etchemendy

(appointed effective December 4, 2014)

Roopa Kudva

(appointed effective February 4, 2015)

Dr. Punita Kumar-Sinha

(appointed effective January 14, 2016)

Executive officers

M. D. Ranganath

Chief Financial Officer and Executive Vice President (effective October 12, 2015)

David D. Kennedy

Executive Vice President, General Counsel and Chief Compliance Officer (effective November 1, 2014)

Rajiv Bansal

Chief Financial Officer (till October 12, 2015)

Srikantan Moorthy

Group Head of Human Resource Development (till March 31, 2015)

Parvatheesam K.

Company Secretary (resigned effective January 10, 2015)

Company secretary

A. G. S. Manikantha

(appointed effective June 22, 2015)

Related party transactions

Transaction with key managerial personnel

The compensation to key managerial personnel, comprising directors and members of executive officers, is as follows:

Particulars

Year ended March 31,

2016

2015

Salaries and other employee benefits to whole-time directors and members of executive officers (1)(2)(3)(4)

101

30

Commission and other benefits to non-executive / independent directors

10

9

Total

111

39

(1) Includes stock compensation expense of 7 crore for the year ended March 31, 2016 ( 2 crore for the year ended March 31, 2015) to the CEO in line with the compensation plan approved by the shareholders.

(2) Includes payables to the CFO who stepped down w.e.f. October 12, 2015.

(3) Includes payment of variable pay amounting to 14 crore for the year ended March 31, 2015 to the CEO as decided by the nomination and remuneration committee in line with the compensation plan approved by the shareholders.

(4) Includes provision for variable pay amounting to US $4.33 million (approximately 29 crore) for the year ended March 31, 2016 to the CEO. The shareholders in the EGM dated July 30, 2014 had approved a variable pay of US $4.18 million (approximately 28 crore at current exchange rate) at a target level and also authorized the Board to alter and vary the terms of remuneration. Accordingly, the Board based on the recommendations of the nominations committee approved on April 15, 2016, US $4.33 million (approximately 29 crore) as variable pay for the year ended March 31, 2016.

Additional information pursuant to para 2 of general instructions for the preparation of Consolidated financial statements

in crore

Name of entity

Net assets

Share in profit or loss

as % of consolidated net assets

Amount

as % of consolidated profit or loss

Amount

Infosys Ltd.

89.2

57,157

96.0

15,786

Indian Subsidiaries

Infosys BPO

5.4

3,475

3.5

570

EdgeVerve

1.8

1,152

(0.5)

(90)

Skava Systems

0.0

15

0.0

6

Foreign Subsidiaries

Infosys China

0.2

107

(0.5)

(86)

Infosys Mexico

0.1

96

0.1

15

Infosys Sweden

(0.1)

(40)

(0.1)

(17)

Infosys Shanghai

1.1

677

0.0

(1)

Infosys Brasil

0.1

90

0.2

29

Infosys Public Services

0.4

271

0.7

111

Infosys Americas

0.0

1

0.0

Infosys (Czech Republic) Limited s.r.o (formerly Infosys BPO s.r.o)

0.1

50

0.0

4

Infosys BPO (Poland) Sp Z.o.o

0.6

358

0.6

95

Infosys McCamish Systems LLC

0.1

53

0.2

25

Portland Group Pty. Limited

0.2

103

0.2

31

Infosys Australia

0.1

37

0.0

1

Infosys Lodestone

0.5

301

0.0

6

Lodestone Management Consultants Inc.

0.0

18

0.1

22

Lodestone Management Consultants Pty Limited

0.0

(20)

0.0

(6)

Infosys Consulting AG

0.1

88

0.3

43

Lodestone Augmentis AG

0.0

2

0.0

Hafner Bauer & Ödman GmbH

0.0

0.0

Lodestone Management Consultants (Belgium) S.A.

0.0

(22)

0.0

(4)

Infosys Consulting GmbH

0.1

33

(0.1)

(11)

Infosys Consulting Pte Ltd.

(0.1)

(45)

(0.1)

(9)

Infosys Consulting SAS

0.0

(9)

0.0

(7)

Infosys Consulting s.r.o.

0.0

4

0.0

3

Lodestone Management Consultants GmbH

0.0

(2)

0.0

Lodestone Management Consultants Co., Ltd.

(0.1)

(33)

(0.1)

(19)

Infosys Consulting Ltd.

0.1

44

0.0

6

Infy Consulting B.V.

0.0

15

0.1

12

Infosys Consulting Ltda.

0.0

23

(0.1)

(10)

Infosys Consulting Sp. Z o.o.

0.0

7