Consolidated financial statements

Independent Auditors’ Report

To The Members of Infosys Limited

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of INFOSYS LIMITED (hereinafter referred to as ‘the Company’) and its subsidiaries (the Company and its subsidiaries together referred to as ‘the Group’), comprising the Consolidated Balance Sheet as at March 31, 2018, the Consolidated Statement of Profit and Loss (including other comprehensive income), the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

The Company’s Board of Directors is responsible for the preparation of these consolidated financial statements in terms of the requirements of the Companies Act, 2013 (hereinafter referred to as ‘the Act’) that give a true and fair view of the consolidated financial position, consolidated financial performance including other comprehensive income, consolidated statement of changes in equity and consolidated cash flows of the Group in accordance with the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India. The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group 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 consolidated 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 Company, as aforesaid.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. In conducting our 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 auditor’s 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 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 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 Ind AS and other accounting principles generally accepted in India, of the consolidated state of affairs of the Group as at March 31, 2018, and its consolidated profit, consolidated total comprehensive income, consolidated statement of changes in equity and its consolidated cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

As required by Section 143(3) of the Act, based on our audit, we report 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 (including Other Comprehensive Income), Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows 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 Indian Accounting Standards prescribed under Section 133 of the Act.

(e) on the basis of the written representations received from the Directors of the Company as on March 31, 2018 taken on record by the Board of Directors of the Company and its subsidiaries incorporated in India and the reports 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 March 31, 2018 from being appointed as a director in terms of Section 164(2) of the Act.

(f) with respect to the adequacy of the internal financial controls over financial reporting and the operating effectiveness of such controls, refer to our separate report in ‘Annexure A’ which is based on the auditor’s reports of the Company and its subsidiary companies incorporated in India. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the internal financial controls over financial reporting of those companies, for the reasons stated therein.

(g) with respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditor’s) Rules, 2014, as amended, 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.

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 derivative contracts.

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

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm’s registration number : 117366W/W-100018)




Bengaluru,

April 13, 2018

Sd/-

P.R. Ramesh

Partner

(Membership number : 70928)

Annexure A to the Independent Auditors’ Report

(Referred to in paragraph (f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Infosys Limited of even date)

Report on the Internal Financial Controls Over Financial Reporting 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 March 31, 2018, we have audited the internal financial controls over financial reporting of INFOSYS LIMITED (hereinafter referred to as ‘the Company’) and its subsidiary companies, which are companies incorporated in India, as of that date.

Management’s Responsibility for Internal Financial Controls

The Board of Directors of the 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 respective companies 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 (‘the 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 the respective 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 Act.

Auditor’s Responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company and its subsidiary companies, which are companies incorporated in India, 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 the Institute of Chartered Accountants of India and the Standards on Auditing, prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. 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 auditor’s judgement, 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 internal financial controls system over financial reporting of the Company and its subsidiary companies, which are companies incorporated in India.

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 and to the best of our information and according to the explanations given to us, the 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 March 31, 2018, based on the internal control over financial reporting criteria established by the respective companies 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.

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm’s registration number : 117366W/W-100018)




Bengaluru,

April 13, 2018

Sd/-

P.R. Ramesh

Partner

(Membership number : 70928)

Consolidated Balance Sheet

in crore

Particulars

Note no.

As at March 31,

2018

2017

ASSETS

Non-current assets

Property, plant and equipment

2.2

10,116

9,751

Capital work-in-progress

1,606

1,365

Goodwill

2.3.1 & 2.25

2,211

3,652

Other intangible assets

2.3.2

247

776

Investment in associate

2.23

71

Financial assets

Investments

2.4

5,756

6,382

Loans

2.5

36

29

Other financial assets

2.6

284

309

Deferred tax assets (net)

2.15

1,282

540

Income tax assets (net)

2.15

6,070

5,716

Other non-current assets

2.9

2,265

1,059

Total non-current assets

29,873

29,650

Current assets

Financial assets

Investments

2.4

6,407

9,970

Trade receivables

2.7

13,142

12,322

Cash and cash equivalents

2.8

19,818

22,625

Loans

2.5

239

272

Other financial assets

2.6

6,684

5,980

Other current assets

2.9

1,667

2,536

47,957

53,705

Assets held for sale

2.25

2,060

Total current assets

50,017

53,705

Total assets

79,890

83,355

EQUITY AND LIABILITIES

Equity

Equity share capital

2.11

1,088

1,144

Other equity

63,835

67,838

Total equity attributable to equity holders of the Company

64,923

68,982

Non-controlling interests

1

TOTAL EQUITY

64,924

68,982

LIABILITIES

Non-current liabilities

Financial liabilities

Other financial liabilities

2.12

61

70

Deferred tax liabilities (net)

2.15

541

207

Other non-current liabilities

2.13

259

83

Total non-current liabilities

861

360

Current liabilities

Financial liabilities

Trade payables

694

367

Other financial liabilities

2.12

6,946

6,349

Provisions

2.14

492

405

Income tax liabilities (net)

2.15

2,043

3,885

Other current liabilities

2.13

3,606

3,007

13,781

14,013

Liabilities directly associated with assets held for sale

2.25

324

Total current liabilities

14,105

14,013

Total equity and liabilities

79,890

83,355

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

As per our report of even date attached

for Deloitte Haskins & Sells LLP

Chartered Accountants

Firm’s registration number :
117366W/W-100018

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

P.R. Ramesh

Partner

Membership number : 70928

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer and Managing Director

U.B. Pravin Rao

Chief Operating Officer and Whole-time Director

Bengaluru

April 13, 2018

D. Sundaram

Director

M.D. Ranganath

Chief Financial Officer

A.G.S. Manikantha

Company Secretary

Consolidated Statement of Profit and Loss

in crore, except equity share and per equity share data

Particulars

Note no.

Year ended March 31,

2018

2017

Revenue from operations

2.16

70,522

68,484

Other income, net

2.17 & 2.25

3,193

3,080

TOTAL INCOME

73,715

71,564

EXPENSES

Employee benefit expenses

2.18

38,893

37,659

Cost of technical sub-contractors

4,297

3,833

Travel expenses

1,995

2,235

Cost of software packages and others

2.18

1,870

1,597

Communication expenses

489

549

Consultancy and professional charges

1,043

763

Depreciation and amortization expenses

2.2 & 2.3.2

1,863

1,703

Other expenses

2.18

2,924

3,244

TOTAL EXPENSES

53,374

51,583

Profit before non-controlling interests / share in net profit / (loss) of associate

20,341

19,981

Share in net profit / (loss) of associate, including impairment

2.23

(71)

(30)

Profit before tax

20,270

19,951

Tax expense

Current tax

2.15

4,581

5,653

Deferred tax

2.15

(340)

(55)

PROFIT FOR THE YEAR

16,029

14,353

Other comprehensive income

Items that will not be reclassified subsequently to profit or loss

Remeasurement of the net defined benefit liability / asset, net

2.20 & 2.15

55

(45)

Equity instruments through other comprehensive income, net

2.4 & 2.15

7

(5)

62

(50)

Items that will be reclassified subsequently to profit or loss

Fair value changes on derivatives designated as cash flow hedge, net

2.10 & 2.15

(39)

39

Exchange differences on translation of foreign operations

321

(257)

Fair value changes on investments, net

2.4 & 2.15

(1)

(10)

281

(228)

Total other comprehensive income / (loss), net of tax

343

(278)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

16,372

14,075

Profit attributable to

Owners of the Company

16,029

14,353

Non-controlling interests

16,029

14,353

Total comprehensive income attributable to

Owners of the Company

16,372

14,075

Non-controlling interests

16,372

14,075

Earnings per equity share

Equity shares of par value 5 each

Basic ()

71.07

62.80

Diluted ()

71.00

62.77

Weighted average equity shares used in computing earnings per equity share

2.21

Basic

225,53,32,322

228,56,39,447

Diluted

225,75,73,870

228,63,96,745

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

As per our report of even date attached

for Deloitte Haskins & Sells LLP

Chartered Accountants

Firm’s registration number :
117366W/W-100018

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

P.R. Ramesh

Partner

Membership number : 70928

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer and Managing Director

U.B. Pravin Rao

Chief Operating Officer and Whole-time Director

Bengaluru

April 13, 2018

D. Sundaram

Director

M.D. Ranganath

Chief Financial Officer

A.G.S. Manikantha

Company Secretary

Consolidated Statement of Changes in Equity

in crore

Particulars

Equity share capital (1)

Other equity

Total equity attributable to equity holders of the Company

Reserves and surplus

Other comprehensive income

Securities premium reserve

Retained earnings

Capital reserve

General reserve

Share options outstanding account

Special Economic Zone Re-investment Reserve (2)

Other reserves (3)

Capital redemption reserve

Equity instruments through other comprehensive income

Exchange differences on translating the financial statements of a foreign operation

Effective portion of cash flow hedges

Other items of other comprehensive income / (loss)

Balance as at April 1, 2016

1,144

2,213

47,063

54

10,553

8

5

715

(11)

61,744

Changes in equity for the year ended March 31, 2017

Income tax benefit arising on exercise of stock options

1

1

Exercise of stock options
(Refer to Note 2.11)

3

(3)

Dividends (including dividend distribution tax)

(6,952)

(6,952)

Transfer to general reserve

(1,582)

1,582

Transferred to Special Economic Zone Re-investment Reserve

(953)

953

Transferred from Special Economic Zone Re-investment Reserve on utilization

953

(953)

Share-based payments to employees (Refer to Note 2.11)

114

114

Remeasurement of the net defined benefit liability / asset(4) (Refer to Notes 2.20.1 and 2.15)

(45)

(45)

Equity instruments through other comprehensive income(4) (Refer to Note 2.4)

(5)

(5)

Fair value changes on investments, net(4)
(Refer to Note 2.4)

(10)

(10)

Fair value changes on derivatives designated as cash flow hedge(4)(Refer to Note 2.10)

39

39

Profit for the year

14,353

14,353

Exchange differences on translation of foreign operations

(257)

(257)

Balance as at March 31, 2017

1,144

2,216

52,882

54

12,135

120

5

(5)

458

39

(66)

68,982

Balance as at April 1, 2017

1,144

2,216

52,882

54

12,135

120

5

(5)

458

39

(66)

68,982

Changes in equity for the year ended March 31, 2018

Share-based payments to employees (Refer to Note 2.11)

79

79

Share issued on exercise of stock options (Refer to Note 2.11)

5

5

Exercise of stock options
(Refer to Note 2.11)

67

2

(69)

Dividends (including dividend distribution tax)

(7,469)

(7,469)

Transfer to general reserve

(1,382)

1,382

Transferred to Special Economic Zone Re-investment Reserve

(2,200)

2,200

Transferred from Special Economic Zone Re-investment Reserve on utilization

617

(617)

Amount paid upon buyback (Refer to Note 2.11)

(56)

(2,206)

(10,738)

(13,000)

Transaction costs related to buyback(4)(Refer to Note 2.11)

(46)

(46)

Amount transferred to capital redemption reserve upon buyback (Refer to Note 2.11)

(56)

56

Remeasurement of the net defined benefit liability / asset(4) (Refer to Notes 2.20.1 and 2.15)

55

55

Equity instruments through other comprehensive income(4) (Refer to Note 2.4)

7

7

Fair value changes on investments, net(4)
(Refer to Note 2.4)

(1)

(1)

Fair value changes on derivatives designated as cash flow hedge(4) (Refer to Note 2.10)

(39)

(39)

Profit for the year

16,029

16,029

Exchange differences on translation of foreign operations

321

321

Balance as at March 31, 2018

1,088

36

58,477

54

2,725

130

1,583

5

56

2

779

(12)

64,923


(1) Net of treasury shares

(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 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 In
come-tax Act, 1961.

(3) Under the Swiss Code of Obligation, a few subsidiaries of Infosys Lodestone are required to appropriate a certain percentage of the annual profit to legal reserve, which 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.

(4) Net of tax

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

As per our report of even date attached

for Deloitte Haskins & Sells LLP

Chartered Accountants

Firm’s registration number :
117366W/W-100018

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

P.R. Ramesh

Partner

Membership number : 70928

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer and Managing Director

U.B. Pravin Rao

Chief Operating Officer and Whole-time Director

Bengaluru

April 13, 2018

D. Sundaram

Director

M.D. Ranganath

Chief Financial Officer

A.G.S. Manikantha

Company Secretary

Consolidated Statement of Cash Flows

Accounting policy

Cash flows are reported using the indirect method, whereby profit for the year is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.

Amendment to Ind AS 7

Effective April 1, 2017, the Group adopted the amendment to Ind AS 7, which requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement. The adoption of the amendment did not have any material effect on the consolidated financial statements.

in crore

Particulars

Note no.

Year ended March 31,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year

16,029

14,353

Adjustments to reconcile net profit to net cash provided by operating activities :

Income tax expense

2.15

4,241

5,598

Depreciation and amortization

2.2 & 2.3.2

1,863

1,703

Interest and dividend income

(2,360)

(2,668)

Allowances for credit losses on financial assets

34

132

Exchange differences on translation of assets and liabilities

16

38

Impairment loss on assets held for sale

2.25

118

Share in net profit / (loss) of associate, including impairment

71

30

Stock compensation expense

2.11

84

117

Other adjustments

(133)

37

Changes in assets and liabilities

Trade receivables and unbilled revenues

(1,523)

(1,743)

Loans, other financial assets and other assets

(186)

(683)

Trade payables

328

(19)

Other financial liabilities, other liabilities and provisions

1,465

289

Cash generated from operations

20,047

17,184

Income taxes paid

(6,829)

(5,653)

NET CASH GENERATED BY OPERATING ACTIVITIES

13,218

11,531

CASH FLOWS FROM INVESTING ACTIVITIES

Expenditure on property, plant and equipment

(1,998)

(2,760)

Loans to employees

28

27

Deposits placed with corporation

(130)

(164)

Interest and dividend received

1,768

2,753

Payment of contingent consideration for acquisition of business

(33)

(36)

Payment for acquisition of business, net of cash acquired

(27)

Payments to acquire investments

2.1

Preference and equity securities

(23)

(68)

Tax-free bonds and government bonds

(2)

(322)

Liquid mutual funds and fixed maturity plan securities

(62,063)

(54,215)

Non-convertible debentures

(104)

(3,956)

Certificates of deposit

(6,653)

(7,823)

Commercial paper

(291)

Others

(23)

(26)

Proceeds on sale of investments

2.1

Tax-free bonds and government bonds

15

7

Non-convertible debentures

100

Certificates of deposit

9,690

Liquid mutual funds and fixed maturity plan securities

64,163

52,041

Preference and equity securities

35

NET CASH FROM / (USED IN) INVESTING ACTIVITIES

4,452

(14,542)

CASH FLOWS FROM FINANCING ACTIVITIES

Payment of dividends (including dividend distribution tax)

(7,464)

(6,939)

Exercise of employee stock options

5

Buyback including transaction cost

2.11

(13,046)

NET CASH USED IN FINANCING ACTIVITIES

(20,505)

(6,939)

Net increase / (decrease) in cash and cash equivalents

(2,835)

(9,950)

Cash and cash equivalents at the beginning of the year

2.8

22,625

32,697

Effect of exchange rate changes on cash and cash equivalents

81

(122)

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

2.8

19,871

22,625

Supplementary information

Restricted cash balance

2.8

533

572

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

As per our report of even date attached

for Deloitte Haskins & Sells LLP

Chartered Accountants

Firm’s registration number :
117366W/W-100018

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

P.R. Ramesh

Partner

Membership number : 70928

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer and Managing Director

U.B. Pravin Rao

Chief Operating Officer and Whole-time Director

Bengaluru

April 13, 2018

D. Sundaram

Director

M.D. Ranganath

Chief Financial Officer

A.G.S. Manikantha

Company Secretary

Overview and notes to the consolidated financial statements

1. Overview

1.1 Company overview

Infosys Limited (‘the Company’ or Infosys) is a leading provider of consulting, technology, outsourcing and next-generation services and software. 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. Its new offerings span areas like digital, big data and analytics, cloud, data and mainframe modernization, cyber security, IoT engineering services and API and micro services.

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

The Company is a public limited company incorporated and domiciled in India and has its registered office at Bengaluru, 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 (ADSs) representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.

The Company has proposed to voluntarily delist its ADS from the Euronext Paris and Euronext London exchanges due to low average daily trading volume of its ADS on these exchanges. The proposed delisting is subject to approval from the said stock exchanges.

The Group’s consolidated financial statements are approved for issue by the Company’s Board of Directors on April 13, 2018.

1.2 Basis of preparation of financial statements

These consolidated financial statements are prepared in accordance with Indian Accounting Standards (Ind AS), under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (‘the Act’) (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.

Effective April 1, 2016, the Group has adopted all the Ind AS standards and the adoption was carried out in accordance with Ind AS 101, First-time adoption of Indian Accounting Standards, with April 1, 2015 as the transition date. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP.

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.

Amounts for the years ended March 31, 2017 and as at March 31, 2017 were audited by previous auditors – B S R & Co LLP.

As the year-end figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year-end figures reported in this statement.

1.3 Basis of consolidation

Infosys consolidates entities which it owns or controls. The consolidated financial statements comprise the financial statements of the Company, its controlled trusts, its subsidiaries and associate, as disclosed in Note 2.23. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity’s returns. Subsidiaries are consolidated from the date control commences until the date control ceases.

The financial statements of the Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. These financial statements are prepared by applying uniform accounting policies in use at the Group. Non-controlling interests, which represent part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the Company, are excluded.

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. 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.

1.4 Use of estimates and judgments

The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.5. 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 financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.

1.5 Critical accounting estimates

a. Revenue recognition

The Group uses the percentage-of-completion method in accounting for its fixed-price contracts. The use of the percentage-of-completion method requires the Group to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable, based on the expected contract estimates at the reporting date.

b. Income taxes

The Company’s two major tax jurisdictions are India and the US, though the Company also files tax returns in other overseas jurisdictions. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions. Also, refer to Notes 2.15 and 2.22.

c. Business combinations and intangible assets

Business combinations are accounted for using Ind AS 103, Business Combinations. Ind AS 103 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuations are conducted by independent valuation experts.

d. Property, plant and equipment

Property, plant and equipment represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of the Group’s assets are determined by the Management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.

e. Impairment of goodwill

Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit (CGU) is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions. The recoverable amount of CGUs is determined based on the higher of value-in-use and fair value less cost to sell. The goodwill impairment test is performed at the level of the CGU or groups of CGUs which are benefiting from the synergies of the acquisition, and which represent the lowest level at which goodwill is monitored for internal management purposes.

Market-related information and estimates are used to determine the recoverable amount. Key assumptions on which the Management has based its determination of recoverable amount include estimated long-term growth rates, weighted average cost of capital and estimated operating margins. The cash flow projections take into account past experience and represent the Management’s best estimate about future developments.

f. Non-current assets and disposal group held for sale

Assets and liabilities of disposal groups held for sale are measured at the lower of carrying amount and fair value less cost to sell. The determination of fair value less costs to sell includes use of management estimates and assumptions. The fair value of the disposal groups has been estimated using valuation techniques (including income and market approach) which includes unobservable inputs.

1.6 Recent accounting pronouncements

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration : On March 28, 2018, the Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration, which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

This amendment will come into force from April 1, 2018. The Group has evaluated the effect of this on the consolidated financial statements and the impact is not material.

Ind AS 115, Revenue from Contract with Customers : On March 28, 2018, the MCA has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition :

  • Retrospective approach – Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8, Accounting Policies, Changes in Accounting. Estimates and Errors
  • Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch-up approach)

The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

The Group will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly, comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is expected to be insignificant.

2.1 Business combinations

Accounting policy

Business combinations have been accounted for using the acquisition method under the provisions of Ind AS 103, Business Combinations.

The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition, which is the date on which control is transferred to the Group. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.

Business combinations between entities under common control is accounted for at carrying value.

Transaction costs that the Group incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.

Noah Consulting LLC

On November 16, 2015, Infosys acquired 100% membership interest in Noah Consulting, LLC (Noah), a provider of advanced information management consulting services for the oil and gas industry. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of US$ 33 million (approximately 216 crore), contingent consideration of up to US$ 5 million (approximately 33 crore on acquisition date) and an additional consideration of up to US$ 32 million (approximately 212 crore on acquisition date), referred to as retention bonus, payable to the employees of Noah at each anniversary year following the acquisition date over the next three years, subject to their continuous employment with the Group at each anniversary. The retention bonus is treated as a post-acquisition employee remuneration expense as per Ind AS 103. During the year ended March 31, 2016, based on an assessment of Noah achieving the targets, the entire contingent consideration was reversed in the Consolidated Statement of Profit and Loss.

Business transfer

On July 14, 2017, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with Noah Consulting LLC, a wholly-owned subsidiary, to transfer the business of Noah Consulting LLC to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. Subsequently on October 17, 2017, the Company entered into a business transfer agreement to transfer the business for a consideration of US$ 41 million (approximately 266 crore) and the transfer was with effect from October 25, 2017. The transaction was between a holding company and a wholly-owned subsidiary and therefore, was accounted for at carrying values and did not have any impact on the consolidated financial statements. Subsequently, in November 2017, Noah Consulting LLC was liquidated.

Kallidus Inc. (d.b.a Skava)

On June 2, 2015, Infosys acquired 100% of the voting interests in Kallidus Inc., US (Kallidus), a provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients and 100% of the voting interests of Skava Systems Private Limited, India, an affiliate of Kallidus. The business acquisition was conducted by entering into a share purchase agreement for a cash consideration of US$ 91 million (approximately 578 crore) and a contingent consideration of up to US$ 20 million (approximately 128 crore on acquisition date).

The balance contingent consideration as at March 31, 2018 and March 31, 2017 were 34 crore and 91 crore, respectively, on an undiscounted basis.

Brilliant Basics Holdings Limited

On September 8, 2017, Infosys acquired 100% of the voting interests in Brilliant Basics Holdings Limited, UK, (Brilliant Basics) a product design and customer experience innovator with experience in executing global programs. The business acquisition was conducted by entering into a share purchase agreement for a cash consideration of 29 crore, a contingent consideration of up to 20 crore and an additional consideration of up to 13 crore, referred to as retention bonus, payable to the employees of Brilliant Basics at each anniversary year over the next two years, subject to their continuous employment with the Group at each anniversary.

The payment of contingent consideration to sellers of Brilliant Basics is dependent upon the achievement of certain financial targets by Brilliant Basics over a period of three years ending in March 2020.

The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Brilliant Basics on achievement of certain financial targets. The key inputs used in determination of the fair value of contingent consideration are the discount rate of 10% and the probabilities of achievement of the financial targets.

The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.

The purchase price has been allocated based on the Management’s estimates and independent appraisal of fair values as follows :

in crore

Component

Acquiree’s carrying amount

Fair value adjustments

Purchase price allocated

Net assets(1)

1

1

Intangible assets – customer relationships

12

12

Deferred tax liabilities on intangible assets

(2)

(2)

1

10

11

Goodwill

35

Total purchase price

46

(1) Includes cash and cash equivalents acquired of 2 crore

The goodwill is not tax-deductible.

The gross amount of trade receivables acquired and its fair value is 3 crore and the amounts have been largely collected.

The fair value of each major class of consideration as at the acquisition date is as follows :

in crore

Component

Consideration settled

Cash paid

29

Fair value of contingent consideration

17

Total purchase price

46

The transaction costs of 2 crore related to the acquisition have been included in the Consolidated Statement of Profit and Loss.

Proposed acquisition

On April 13, 2018, the Company entered into a definitive agreement to acquire WongDoody Holding Company Inc., a US-based creative and consumer insights agency for a total consideration of up to US$ 75 million (approximately 489 crore) including contingent consideration and retention payouts, subject to regulatory approvals and fulfillment of closing conditions.

2.2 Property, plant and equipment

Accounting policy

Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by the Management. The Group depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are 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

Leasehold improvements

Over lease term

(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 is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.

Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end.

Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under other non-current assets and the cost of assets not ready to use before such date are disclosed under ‘Capital work-in-progress’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the Consolidated Statement of Profit and Loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Consolidated Statement of Profit and Loss.

Impairment

Property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.

If such assets are considered to be impaired, the impairment to be recognized in the Consolidated Statement of Profit and Loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Consolidated Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated depreciation) had no impairment loss been recognized for the asset in prior years.

The changes in the carrying value of property, plant and equipment for the year ended March 31, 2018 are as follows :

in crore

Particulars

Land – Freehold

Land – Leasehold

Buildings(1)

Plant and machinery (2)

Office equipment

Computer equipment

Furniture and fixtures

Leasehold improvements

Vehicles

Total

Gross carrying value as at April 1, 2017

1,095

671

7,279

2,048

922

4,540

1,277

469

31

18,332

Additions

134

2

789

264

86

471

130

74

5

1,955

Deletions

(1)

(8)

(8)

(109)

(10)

(12)

(5)

(153)

Reclassified under assets held for sale (Refer to Note 2.25)

(1)

(2)

(40)

(8)

(17)

(68)

Translation difference

63

3

4

22

4

17

113

Gross carrying value as at March 31, 2018

1,229

673

8,130

2,306

1,002

4,884

1,393

531

31

20,179

Accumulated depreciation as at April 1, 2017

(27)

(2,440)

(1,337)

(599)

(3,053)

(869)

(239)

(17)

(8,581)

Depreciation

(4)

(276)

(266)

(125)

(693)

(160)

(105)

(5)

(1,634)

Accumulated depreciation on deletions

7

6

107

9

11

4

144

Reclassified under assets held for sale
(Refer to Note 2.25)

1

1

25

5

15

47

Translation difference

(3)

(2)

(2)

(18)

(2)

(12)

(39)

Accumulated depreciation as at March 31, 2018

(31)

(2,719)

(1,597)

(719)

(3,632)

(1,017)

(330)

(18)

(10,063)

Carrying value as at April 1, 2017

1,095

644

4,839

711

323

1,487

408

230

14

9,751

Carrying value as at March 31, 2018

1,229

642

5,411

709

283

1,252

376

201

13

10,116


The changes in the carrying value of property, plant and equipment for the year ended March 31, 2017 were as follows :

in crore

Particulars

Land – Freehold

Land – Leasehold

Buildings (1)

Plant and machinery (2)

Office equipment

Computer equipment

Furniture and fixtures

Leasehold improvements

Vehicles

Total

Gross carrying value as at April 1, 2016

972

650

6,325

1,742

839

4,072

1,130

331

29

16,090

Additions

123

21

981

313

138

800

191

224

8

2,799

Deletions

(4)

(52)

(315)

(39)

(74)

(6)

(490)

Translation difference

(27)

(3)

(3)

(17)

(4)

(13)

(67)

Gross carrying value as at March 31, 2017

1,095

671

7,279

2,048

922

4,540

1,278

468

31

18,332

Accumulated depreciation as at April 1, 2016

(22)

(2,201)

(1,089)

(509)

(2,618)

(729)

(268)

(17)

(7,453)

Depreciation

(5)

(239)

(256)

(119)

(678)

(161)

(54)

(5)

(1,517)

Accumulated depreciation on deletions

4

27

230

18

74

5

358

Translation difference

4

2

13

3

9

31

Accumulated depreciation as at March 31, 2017

(27)

(2,440)

(1,337)

(599)

(3,053)

(869)

(239)

(17)

(8,581)

Carrying value as at April 1, 2016

972

628

4,124

653

330

1,454

401

63

12

8,637

Carrying value as of March 31, 2017

1,095

644

4,839

711

323

1,487

409

229

14

9,751

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

(2) Includes CSR spend amounting to 168 crore and 25 crore for the years ending March 31, 2018 and March 31, 2017, respectively

Gross carrying value of leasehold land represents amounts paid under certain lease-cum-sale agreements to acquire land, including agreements where the Company has an option to purchase or renew the properties on expiry of the lease period.

The aggregate depreciation has been included under depreciation and amortization expense in the consolidated Statement of Profit and Loss.

2.3 Goodwill and other intangible assets

2.3.1 Goodwill

Accounting policy

Goodwill represents the cost of business acquisition in excess of the Group’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of business acquisition, the bargain purchase excess is recognized after reassessing the fair value of net assets acquired in the capital reserve. Goodwill is measured at cost less accumulated impairment losses.

Impairment

Goodwill is tested for impairment on an annual basis and whenever there is an indication that goodwill may be impaired, relying on a number of factors including operating results, business plans and future cash flows. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the Group’s cash generating units (CGU) or groups of CGUs expected to benefit from the synergies arising from the business combination. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.

Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in net profit in the Consolidated Statement of Profit and Loss and is not reversed in the subsequent period.

A summary of changes in the carrying amount of goodwill is as follows :

in crore

Particulars

As at March 31,

2018

2017

Carrying value at the beginning

3,652

3,764

Goodwill on Brilliant Basics acquisition (Refer to Note 2.1)

35

Goodwill reclassified under assets held for sale
(Refer to Note 2.25)

(1,609)

Translation differences

133

(112)

Carrying value at the end

2,211

3,652

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, which are benefited from the synergies of the acquisition. The chief operating decision maker reviews the goodwill for any impairment at the operating segment level, which is represented through groups of CGUs.

The goodwill has been allocated to the operating segments as at March 31, 2018 and March 31, 2017 as follows :

in crore

Segment

As at March 31,

2018

2017

Financial services

474

826

Manufacturing

252

409

Retail, Consumer packaged goods and Logistics

314

556

Life Sciences, Healthcare and Insurance

446

638

Energy & Utilities, Communication and Services

470

765

1,956

3,194

Operating segments without significant goodwill

255

458

Total

2,211

3,652

The entire goodwill relating to Infosys BPM’s acquisition of McCamish has been allocated to the groups of CGUs which are represented by the Life Sciences, Healthcare and Insurance segment.

The goodwill relating to Infosys BPM, Infosys Lodestone, Portland, Panaya and Kallidus d.b.a Skava acquisitions has been allocated to the groups of CGUs which are represented by a majority of the entity’s operating segment as at March 31, 2017.

The goodwill relating to Infosys BPM, Infosys Lodestone, Portland and Brilliant Basics acquisitions has been allocated to the groups of CGUs which are represented by a majority of the entity’s operating segment as at March 31, 2018 (Refer to Note 2.25).

The entire goodwill relating to Noah acquisition has been allocated to the group of CGUs which is represented by the Energy & Utilities, Communication and Services segment.

The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. The fair value of a CGU is determined based on the market capitalization. The value-in-use is determined based on specific calculations. These calculations use pre-tax cash flow projections over a period of five years. A range of each assumption used is mentioned below. As at March 31, 2018 and March 31, 2017, the estimated recoverable amount of the CGU exceeded its carrying amount. The key assumptions used for the calculations are as follows :

(in %)

Particulars

As at March 31,

2018

2017

Long-term growth rate

8-10

8-10

Operating margins

17-20

17-20

Discount rate

13.5

14.4

The Management believes that any reasonable possible changes in the key assumptions would not cause the carrying amount to exceed the recoverable amount of the cash generating unit.

2.3.2 Other intangible assets

Accounting policy

Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances). Amortization methods and useful lives are reviewed periodically including at each financial year end.

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 Company 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 labour, overhead costs that are directly attributable to preparing the asset for its intended use.

Impairment

Intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.

If such assets are considered to be impaired, the impairment to be recognized in the Consolidated Statement of Profit and Loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Consolidated Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization) had no impairment loss been recognized for the asset in prior years.

The changes in the carrying value of acquired intangible assets for the year ended March 31, 2018 are as follows :

in crore

Particulars

Customer -related

Software -related

Sub-contracting rights -related

Intellectual property rights -related

Land use – rights -related

Brand or trademark -related

Others

Total

Gross carrying value as at
April 1, 2017

750

405

21

1

66

90

62

1,395

Additions through business combination (Refer to Note 2.1)

12

12

Deletions / retirals during the period

(172)

(21)

(29)

(35)

(257)

Reclassified under assets held for sale (Refer to Note 2.25)

(157)

(388)

(1)

(37)

(583)

Translation differences

12

2

7

2

23

Gross carrying value as at
March 31, 2018

445

19

73

26

27

590

Accumulated amortization as at April 1, 2017

(382)

(121)

(21)

(1)

(7)

(49)

(38)

(619)

Amortization expense

(127)

(79)

(1)

(12)

(10)

(229)

Deletions / retirals during the period

172

21

29

35

257

Reclassified under assets held for sale (Refer to Note 2.25)

56

182

1

21

260

Translation differences

(8)

(1)

(2)

(1)

(12)

Accumulated amortization as at March 31, 2018

(289)

(19)

(10)

(12)

(13)

(343)

Carrying value as at April 1, 2017

368

284

59

41

24

776

Carrying value as at March 31, 2018

156

63

14

14

247

Estimated useful life (in years)

2-10

50

5

5

Estimated remaining useful life
(in years)

1-5

43

3

3

The changes in the carrying value of acquired intangible assets for the year ended March 31, 2017 were as follows :

in crore

Particulars

Customer -related

Software -related

Sub-contracting rights -related

Intellectual property rights- related

Land use – rights -related

Brand or trademark -related

Others

Total

Gross carrying value as at April 1, 2016

775

414

21

1

72

93

63

1,439

Additions during the period

Deletions during the period

Translation differences

(25)

(9)

(6)

(3)

(1)

(44)

Gross carrying value as at March 31, 2017

750

405

21

1

66

90

62

1,395

Accumulated amortization as at April 1, 2016

(303)

(62)

(21)

(1)

(6)

(38)

(23)

(454)

Amortization expense

(91)

(63)

(1)

(14)

(17)

(186)

Deletions during the period

Translation differences

12

4

3

2

21

Accumulated amortization as at March 31, 2017

(382)

(121)

(21)

(1)

(7)

(49)

(38)

(619)

Carrying value as at April 1, 2016

472

352

66

55

40

985

Carrying value as at March 31, 2017

368

284

59

41

24

776

Estimated useful life (in years)

3-10

5-8

50

3-10

3-5

Estimated remaining useful life (in years)

1-6

3-6

44

1-8

1-4

During the year ended March 31, 2017, the Management, based on an internal evaluation, reassessed the remaining useful life of certain technology assets acquired as a part of business combinations. Accordingly, the remaining useful life of the said asset which was eight years had been revised to three years. Amortization expense for the year ended March 31, 2017 was higher by 19 crore due to the revision.

The amortization expense has been included under depreciation and amortization expense in the Consolidated Statement of Profit and Loss.

Research and development expenditure

Research and development expense recognized in the consolidated Statement of Profit and Loss for the years ended March 31, 2018 and March 31, 2017 was 748 crore and 789 crore, respectively.

2.4 Investments

in crore

Particulars

As at March 31,

2018

2017

NON-CURRENT INVESTMENTS

UNQUOTED

Investments carried at fair value through other comprehensive income (Refer to Note 2.4.1)

Preference securities

116

144

Equity instruments

22

15

138

159

Investments carried at fair value through profit or loss (Refer to Note 2.4.1)

Convertible promissory note

12

10

Others

66

35

78

45

QUOTED

Investments carried at amortized cost (Refer to Note 2.4.2)

Tax-free bonds

1,896

1,898

1,896

1,898

Investments carried at fair value through profit or loss (Refer to Note 2.4.3)

Fixed maturity plan securities

429

407

429

407

Investments carried at fair value through other comprehensive income (Refer to Note 2.4.4)

Non-convertible debentures

3,215

3,873

3,215

3,873

TOTAL NON-CURRENT INVESTMENTS

5,756

6,382

Current investments

Unquoted

Investments carried at fair value through profit or loss (Refer to Note 2.4.3)

Liquid mutual fund units

81

1,803

81

1,803

Investments carried at fair value through other comprehensive income

Commercial paper (Refer to Note 2.4.4)

293

Certificates of deposit (Refer to Note 2.4.4)

5,269

7,905

5,562

7,905

Quoted

Investment carried at amortized cost (Refer to Note 2.4.2)

Government bonds

1

9

1

9

Investments carried at fair value through profit or loss (Refer to Note 2.4.3)

Fixed maturity plan securities

151

151

Investments carried at fair value through other comprehensive income (Refer to Note 2.4.4)

Non-convertible debentures

763

102

763

102

Total Current Investments

6,407

9,970

TOTAL INVESTMENTS

12,163

16,352

Aggregate amount of quoted investments

6,304

6,440

Market value of quoted investments (including interest accrued)

6,568

6,701

Aggregate amount of unquoted investments (including investment in associate)

5,859

9,983

Aggregate amount of impairment made for non-current unquoted investments (including investment in associate)

71

18

Investments carried at amortized cost

1,897

1,907

Investments carried at fair value through other comprehensive income

9,678

12,039

Investments carried at fair value through profit or loss

588

2,406

Note : Refer to Note 2.10 for Accounting policies on financial instruments.

Details of amounts recorded in other comprehensive income

in crore

Particulars

Year ended March 31, 2018

Year ended March 31, 2017

Gross

Tax

Net

Gross

Tax

Net

Net gain / (loss) on

Non-convertible debentures

(13)

2

(11)

(7)

(7)

Commercial paper

Certificates of deposit

16

(6)

10

(5)

2

(3)

Equity and preference securities

4

3

7

(2)

(3)

(5)

Method of fair valuation

in crore

Class of investment

Method

Fair value as at March 31,

2018

2017

Liquid mutual funds

Quoted price

81

1,803

Fixed maturity plan securities

Market observable inputs

429

558

Tax-free bonds and government bonds

Quoted price and market observable inputs

2,151

2,168

Non-convertible debentures

Quoted price and market observable inputs

3,978

3,975

Commercial paper

Market observable inputs

293

Certificates of deposit

Market observable inputs

5,269

7,905

Unquoted equity and preference securities

Discounted cash flows method, Market multiples method, Option pricing model

138

159

Unquoted convertible promissory note

Discounted cash flows method, Market multiples method, Option pricing model

12

10

Others

Discounted cash flows method, Market multiples method, Option pricing model

66

35

Note : Certain quoted investments are classified as Level 2 in the absence of active market for such investments.

2.4.1 Details of investments

The details of investments in preference securities, equity instruments and others as at March 31, 2018 and March 31, 2017 are as follows :

(In crore, except otherwise stated)

Particulars

As at March 31,

2018

2017

Preference securities

Airviz Inc.

6

9

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

ANSR Consulting

10

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

Whoop Inc

20

15

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

CloudEndure Ltd.

26

37

25,59,290 (25,59,290) Series B Preferred Shares, fully paid up, par value ILS 0.01 each

Nivetti Systems Private Limited

10

10

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

Waterline Data Science, Inc

23

24

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

Trifacta Inc.

21

26

11,80,358 (11,80,358) Series C-1 Preferred Stock

Cloudyn Software Ltd

13

Nil (27,022) Series B-3 Preferred shares, fully paid up, par value ILS 0.01 each

Ideaforge

10

5,402 (Nil) Series A compulsorily convertible cumulative Preference shares of 10 each, fully paid up

Total INVESTMENTS IN preference securities

116

144

Equity instruments

OnMobile Systems Inc., USA

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

Merasport Technologies Private Limited

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

Global Innovation and Technology Alliance

1

1

15,000 (15,000) equity shares at 1,000 each, fully paid up, par value 1,000 each

Unsilo A/S

21

14

69,894 (69,894) Equity Shares, fully paid up, par value DKK 1 each

Ideaforge

100 (Nil) equity shares at 10, fully paid up

Total INVESTMENTS IN equity instruments

22

15

Others

Stellaris Venture Partners India

7

3

Vertex Ventures US Fund L.L.P

59

32

Total INVESTMENTS IN otherS

66

35

Convertible promissory note

Tidalscale

12

10

Total INVESTMENT IN convertible promissory note

12

10

Total

216

204

2.4.2 Details of investments in tax-free bonds and government bonds

The balances held in tax-free bonds as at March 31, 2018 and March 31, 2017 are as follows :

in crore, except as otherwise stated

Particulars

Face value

As at March 31, 2018

As at March 31, 2017

Units

Amount

Units

Amount

7.04% Indian Railway Finance Corporation Limited Bonds 03MAR2026

10,00,000

470

50

470

50

7.16% Power Finance Corporation Limited Bonds 17JUL2025

10,00,000

1,000

106

1,000

107

7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023

1,000

20,00,000

201

20,00,000

201

7.28% Indian Railway Finance Corporation Limited Bonds 21DEC2030

1,000

4,22,800

42

4,22,800

42

7.28% National Highways Authority of India Bonds 18SEP2030

10,00,000

3,300

343

3,300

343

7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028

1,000

21,00,000

211

21,00,000

211

7.35% National Highways Authority of India Bonds 11JAN2031

1,000

5,71,396

57

5,71,396

57

7.93% Rural Electrification Corporation Limited Bonds 27MAR2022

1,000

2,00,000

21

2,00,000

21

8.00% Indian Railway Finance Corporation Limited Bonds 23FEB2022

1,000

1,50,000

15

1,50,000

15

8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027

1,000

5,00,000

52

5,00,000

53

8.20% Power Finance Corporation Limited Bonds 01FEB2022

1,000

5,00,000

50

5,00,000

50

8.26% India Infrastructure Finance Company Limited Bonds 23AUG2028

10,00,000

1,000

100

1,000

100

8.30% National Highways Authority of India Bonds 25JAN2027

1,000

5,00,000

53

5,00,000

53

8.35% National Highways Authority of India Bonds 22NOV2023

10,00,000

1,500

150

1,500

150

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

8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028

10,00,000

450

45

450

45

8.54% Power Finance Corporation Limited Bonds 16NOV2028

1,000

5,00,000

50

5,00,000

50

TOTAL INVESTMENTS IN TAX-FREE BONDS

74,55,416

1,896

74,55,416

1,898

The balances held in government bonds as at March 31, 2018 and March 31, 2017 are as follows :

(In crore, except as otherwise stated)

Particulars

Face value PHP

As at March 31, 2018

As at March 31, 2017

Units

Amount

Units

Amount

Treasury Notes PHY6972FWQ99 MAT DATE 07 Jun 2017

100

3,40,000

4

Treasury Notes PIBL1217E082 MAT DATE 09 May 2018

100

1,00,000

1

Treasury Notes PIBL1217C056 MAT DATE 14 Mar 2018

100

4,00,000

5

TOTAL INVESTMENTS IN GOVERNMENT BONDS

1,00,000

1

7,40,000

9

2.4.3 Details of investments in liquid mutual fund units and fixed maturity plan securities

The balances held in liquid mutual fund units as at March 31, 2018 and March 31, 2017 are as follows :

(In crore, except as otherwise stated)

Particulars

As at March 31, 2018

As at March 31, 2017

Units

Amount

Units

Amount

Aditya Birla Sun Life Cash Plus – Growth – Direct Plan

16,31,554

45

1,45,22,491

380

BSL Cash Manager – Growth

2,66,264

11

ICICI Prudential Liquid – Direct Plan – Growth

13,65,687

36

1,03,88,743

250

IDFC Cash Fund – Direct Plan – Growth

12,65,679

250

Kotak Low Duration Fund – Direct Plan – Growth (Ultra Short-Term)

15,02,564

305

L&T Liquid Fund – Direct Plan – Growth

6,72,806

150

Reliance Liquid Fund – Cash Plan

28,305

7

Reliance Liquid Fund – Treasury Plan – Direct Growth Plan – Growth Option

8,82,465

350

SBI Premier Liquid Fund – Direct Plan – Growth

3,91,909

100

TOTAL INVESTMENTS IN LIQUID MUTUAL FUND UNITS

29,97,241

81

2,99,21,226

1,803

The balances held in fixed maturity plan securities as at March 31, 2018 and March 31, 2017 are as follows :

(In crore, except as otherwise stated)

Particulars

As at March 31, 2018

As at March 31, 2017

Units

Amount

Units

Amount

Aditya Birla Sun Life Fixed Term Plan – Series OD 1145 Days – GR Direct

6,00,00,000

65

6,00,00,000

61

Aditya Birla Sun Life Fixed Term Plan – Series OE 1153 Days – GR Direct

2,50,00,000

27

2,50,00,000

25

HDFC FMP 1155D Feb 2017 – Direct Growth – Series 37

3,80,00,000

41

3,80,00,000

38

HDFC FMP 1169D Feb 2017 – Direct – Quarterly Dividend – Series 37

4,50,00,000

45

4,50,00,000

45

ICICI FMP Series 80 –1194 D Plan F Div

5,50,00,000

59

5,50,00,000

55

ICICI Prudential Fixed Maturity Plan Series 80 – 1187 Days Plan G Direct Plan

4,20,00,000

45

4,20,00,000

42

ICICI Prudential Fixed Maturity Plan Series 80 – 1253 Days Plan J Direct Plan

3,00,00,000

32

3,00,00,000

30

IDFC Fixed Term Plan Series 129 Direct Plan – Growth 1147 Days

1,00,00,000

11

1,00,00,000

10

IDFC Fixed Term Plan Series 131 Direct Plan – Growth 1139 Days

1,50,00,000

16

1,50,00,000

15

Kotak FMP Series 199 Direct – Growth

3,50,00,000

37

3,50,00,000

36

Reliance Fixed Horizon Fund – XXXII Series 8 – Dividend Plan

5,00,00,000

51

5,00,00,000

50

Reliance Yearly Interval Fund Series 1 – Direct Plan – Growth Plan

10,69,06,898

151

TOTAL INVESTMENTS IN FIXED MATURITY PLAN SECURITIES

40,50,00,000

429

51,19,06,898

558

2.4.4 Details of investments in non-convertible debentures, certificates of deposit and commercial paper

The balances held in non-convertible debenture units as at March 31, 2018 and March 31, 2017 are as follows :

inn crore, except as otherwise stated

Particulars

Face value

As at March 31, 2018

As at March 31, 2017

Units

Amount

Units

Amount

7.48% Housing Development Finance Corporation Ltd 18NOV2019

1,00,00,000

50

51

50

52

7.58% LIC Housing Finance Ltd 28FEB2020

10,00,000

1,000

101

1,000

100

7.58% LIC Housing Finance Ltd 11JUN2020

10,00,000

500

52

500

51

7.59% LIC Housing Finance Ltd 14OCT2021

10,00,000

3,000

306

3,000

309

7.75% LIC Housing Finance Ltd 27AUG2021

10,00,000

1,250

129

1,250

129

7.78% Housing Development Finance Corporation Ltd 24MAR2020

1,00,00,000

100

99

7.79% LIC Housing Finance Ltd 19JUN2020

10,00,000

500

53

500

52

7.80% Housing Development Finance Corporation Ltd 11NOV2019

1,00,00,000

150

153

150

155

7.81% LIC Housing Finance Ltd 27APR2020

10,00,000

2,000

214

2,000

208

7.95% Housing Development Finance Corporation Ltd 23SEP2019

1,00,00,000

50

53

50

53

8.02% LIC Housing Finance Ltd 18FEB2020

10,00,000

500

50

500

51

8.26% Housing Development Finance Corporation Ltd 12AUG2019

1,00,00,000

100

105

100

106

8.34% Housing Development Finance Corporation Ltd 06MAR2019

1,00,00,000

200

215

200

217

8.37% LIC Housing Finance Ltd 03OCT2019

10,00,000

2,000

216

2,000

218

8.37% LIC Housing Finance Ltd 10MAY2021

10,00,000

500

54

500

55

8.43% IDFC Bank Ltd 30JAN2018

10,00,000

1,000

102

8.46% Housing Development Finance Corporation Ltd 11MAR2019

1,00,00,000

50

54

50

54

8.47% LIC Housing Finance Ltd 21JAN2020

10,00,000

500

51

500

52

8.49% Housing Development Finance Corporation Ltd 27APR2020

5,00,000

900

49

900

49

8.50% Housing Development Finance Corporation Ltd 31AUG2020

1,00,00,000

100

108

100

108

8.54% IDFC Bank Ltd 30MAY2018

10,00,000

1,500

194

1,500

182

8.59% Housing Development Finance Corporation Ltd 14JUN2019

1,00,00,000

50

51

50

51

8.60% LIC Housing Finance Ltd 22JUL2020

10,00,000

1,000

107

1,000

108

8.60% LIC Housing Finance Ltd 29JUL2020

10,00,000

1,750

188

1,750

190

8.61% LIC Housing Finance Ltd 11DEC2019

10,00,000

1,000

104

1,000

104

8.66% IDFC Bank Ltd 25JUN2018

10,00,000

1,520

196

1,520

184

8.66% IDFC Bank Ltd 27DEC2018

10,00,000

400

52

400

49

8.72% Housing Development Finance Corporation Ltd 15APR2019

1,00,00,000

75

76

75

77

8.75% Housing Development Finance Corporation Ltd 13JAN2020

5,00,000

5,000

256

5,000

260

8.75% LIC Housing Finance Ltd 14JAN2020

10,00,000

1,070

112

1,070

112

8.75% LIC Housing Finance Ltd 21DEC2020

10,00,000

1,000

102

1,000

104

8.97% LIC Housing Finance Ltd 29OCT2019

10,00,000

500

52

500

53

9.45% Housing Development Finance Corporation Ltd 21AUG2019

10,00,000

3,000

323

3,000

327

9.65% Housing Development Finance Corporation Ltd 19JAN2019

10,00,000

500

52

500

53

TOTAL INVESTMENTS IN NON-CONVERTIBLE DEBENTURES

31,815

3,978

32,715

3,975

The balances held in certificates of deposit as at March 31, 2018 and March 31, 2017 are as follows :

(In crore, except as otherwise stated)

Particulars

Face value

As at March 31, 2018

As at March 31, 2017

Units

Amount

Units

Amount

Andhra Bank

1,00,000

35,000

344

Axis Bank

1,00,000

2,08,000

1,985

3,05,600

2,914

Corporation Bank

1,00,000

33,500

327

DBS Bank

1,00,000

5,000

49

HDFC Bank

1,00,000

15,000

147

ICICI Bank

1,00,000

1,26,000

1,186

42,500

413

IDFC Bank

1,00,000

1,40,000

1,328

IndusInd Bank

1,00,000

1,35,000

1,271

1,06,400

1,011

Kotak Bank

1,00,000

70,000

680

85,500

813

Vijaya Bank

1,00,000

14,000

137

Yes Bank

1,00,000

60,000

569

TOTAL INVESTMENTS IN CERTIFICATES OF DEPOSIT

5,54,000

5,269

8,27,500

7,905

The balances held in commercial paper as at March 31, 2018 and March 31, 2017 are as follows :

in crore, except as otherwise stated

Particulars

Face value

As at March 31, 2018

As at March 31, 2017

Units

Amount

Units

Amount

LIC

5,00,000

6,000

293

TOTAL INVESTMENTS IN COMMERCIAL PAPER

6,000

293

2.5 Loans

in crore

Particulars

As at March 31,

2018

2017

Non-current

Unsecured, considered good

Other loans

Loans to employees

36

29

36

29

Unsecured, considered doubtful

Other loans

Loans to employees

17

24

53

53

Less : Allowance for doubtful loans to employees

17

24

TOTAL NON-CURRENT LOANS

36

29

Current

Unsecured, considered good

Other loans

Loans to employees

239

272

TOTAL CURRENT LOANS

239

272

Total loans

275

301

2.6 Other financial assets

in crore

Particulars

As at March 31,

2018

2017

Non-current

Security deposits(1)

53

86

Rental deposits(1)

171

175

Restricted deposits(1)

60

48

TOTAL NON-CURRENT OTHER FINANCIAL ASSETS

284

309

Current

Security deposits(1)

9

10

Rental deposits(1)

13

9

Restricted deposits(1)

1,535

1,416

Unbilled revenues(1)

4,261

3,648

Interest accrued but not due(1)

766

576

Foreign currency forward and options contracts(2)(3)

16

284

Others(1)

84

37

TOTAL CURRENT OTHER FINANCIAL ASSETS

6,684

5,980

Total OTHER financial assets

6,968

6,289

(1) Financial assets carried at amortized cost

6,952

6,005

(2) Financial assets carried at fair value through other comprehensive income

12

52

(3) Financial assets carried at fair value through profit or loss

4

232

Restricted deposits represent deposits with financial institutions to settle employee-related obligations as and when they arise during the normal course of business.

2.7 Trade receivables (1)

in crore

Particulars

As at March 31,

2018

2017

Current

Unsecured

Considered good

13,142

12,322

Considered doubtful

354

318

13,496

12,640

Less : Allowances for credit loss

354

318

TOTAL TRADE RECEIVABLES

13,142

12,322

(1) Includes dues from companies where directors are interested

1

2.8 Cash and cash equivalents

in crore

Particulars

As at March 31,

2018

2017

Balances with banks

In current and deposit accounts

13,168

14,889

Cash on hand

Others

Deposits with financial institutions

6,650

7,736

TOTAL CASH AND CASH EQUIVALENTS

19,818

22,625

Cash and cash equivalents included under assets classified under held for sale (Refer to Note 2.25)

53

19,871

22,625

Balances with banks in unpaid dividend accounts

22

17

Deposit with more than 12 months maturity

6,332

6,954

Balances with banks held as margin money deposits against guarantees

356

404

Cash and cash equivalents as at March 31, 2018 and March 31, 2017 include restricted cash and bank balances of 533 crore and 572 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,

2018

2017

Current accounts

ANZ Bank, Taiwan

9

3

Axis Bank, India

1

Banamex Bank, Mexico

2

2

Banamex Bank, Mexico
(US Dollar account)

13

8

Bank Leumi, Israel

11

Bank Leumi, Israel
(US Dollar account)

2

Bank of America, Mexico

25

54

Bank of America, USA

1,172

1,030

Bank of Baroda, Mauritius

1

Bank of Tokyo-Mitsubishi UFJ Ltd., Japan

1

Bank Zachodni WBK S.A, Poland

17

4

Barclays Bank, UK

40

1

BNP Paribas Bank, Norway

88

17

China Merchants Bank, China

6

9

Citibank N.A., Australia

223

19

Citibank N.A., Brazil

14

30

Citibank N.A., China

116

61

Citibank N.A., China
(US Dollar account)

9

11

Citibank N.A., Costa Rica

1

5

Citibank N.A., Dubai

6

1

Citibank N.A., EEFC
(US Dollar account)

4

1

Citibank N.A., Hungary

6

3

Citibank N.A., India

3

3

Citibank N.A., Japan

18

12

Citibank N.A., New Zealand

11

10

Citibank N.A., Philippines
(US Dollar account)

1

Citibank N.A., Portugal

8

2

Citibank N.A., Romania

2

Citibank N.A., Singapore

4

2

Citibank N.A., South Africa

33

9

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

1

1

Citibank N.A., South Korea

2

1

Citibank N.A., USA

3

78

Commerzbank, Germany

18

Danske Bank, Sweden

1

Deutsche Bank, Belgium

27

10

Deutsche Bank, Czech Republic

16

8

Deutsche Bank, Czech Republic (Euro account)

3

7

Deutsche Bank, Czech Republic
(US Dollar account)

2

30

Deutsche Bank, EEFC
(Australian Dollar account)

2

38

Deutsche Bank, EEFC
(Euro account)

34

25

Deutsche Bank, EEFC
(Swiss Franc account)

2

2

Deutsche Bank, EEFC
(US Dollar account)

32

76

Deutsche Bank, EEFC (United Kingdom Pound Sterling account)

9

10

Deutsche Bank, France

19

8

Deutsche Bank, Germany

100

48

Deutsche Bank, Hong Kong

1

Deutsche Bank, India

44

12

Deutsche Bank, Malaysia

5

7

Deutsche Bank, Netherlands

15

2

Deutsche Bank, Philippines

25

5

Deutsche Bank, Philippines
(US Dollar account)

3

4

Deutsche Bank, Poland

18

12

Deutsche Bank, Poland
(Euro account)

8

4

Deutsche Bank, Russia

3

3

Deutsche Bank, Russia
(US Dollar account)

5

1

Deutsche Bank, Singapore

17

6

Deutsche Bank, Spain

1

Deutsche Bank, Switzerland

29

9

Deutsche Bank, Switzerland
(US Dollar account)

1

Deutsche Bank, United Kingdom

79

26

Deutsche Bank, USA

2

12

HSBC Bank, Brazil

1

HSBC Bank, Dubai

2

HSBC Bank, Hong Kong

2

1

HSBC Bank, United Kingdom

6

ICICI Bank, EEFC (Euro account)

1

1

ICICI Bank, EEFC
(US Dollar account)

40

5

ICICI Bank, EEFC (United Kingdom Pound Sterling account)

11

1

ICICI Bank, India

52

53

ING Bank, Belgium

2

Nordbanken, Sweden

50

33

Punjab National Bank, India

12

6

Raiffeisen Bank, Czech Republic

5

4

Raiffeisen Bank, Romania

3

4

Royal Bank of Canada, Canada

166

83

Santander Bank, Argentina

1

1

Silicon Valley Bank, USA

4

Silicon Valley Bank (Euro account)

19

Silicon Valley Bank (United Kingdom Pound Sterling account)

2

Splitska Banka D.D., Société Générale Group, Croatia

8

State Bank of India, India

1

7

The Saudi British Bank, Saudi Arabia

3

Union Bank of Switzerland AG

3

Union Bank of Switzerland AG (Euro account)

4

Wells Fargo Bank N.A., USA

33

Westpac, Australia

1

2,703

2,044

Deposit accounts

Axis Bank

1,175

Bank BGZ BNP Paribas S.A.

144

183

Barclays Bank

200

825

Canara Bank

84

84

Citibank

224

165

Deutsche Bank, AG

24

Deutsche Bank, Poland

211

71

HDFC Bank

2,498

469

HSBC Bank

500

ICICI Bank

3,497

4,644

IDBI Bank

250

1,750

IDFC Bank

1,500

200

IndusInd Bank

1,000

191

Kotak Mahindra Bank

535

South Indian Bank

450

450

Standard Chartered Bank

500

Syndicate Bank

49

Yes Bank

5

633

10,087

12,424

Unpaid dividend accounts

Axis Bank, unpaid dividend account

1

2

HDFC Bank, unpaid dividend account

1

2

ICICI Bank, unpaid dividend account

20

13

22

17

Margin money deposits against guarantees

Canara Bank

151

177

Citibank

3

2

ICICI Bank

202

225

356

404

Deposits with financial institutions

HDFC Limited

5,450

7,036

LIC Housing Finance Limited

1,200

700

6,650

7,736

Total cash and cash equivalents

19,818

22,625

2.9 Other assets

in crore

Particulars

As at March 31,

2018

2017

Non-current

Capital advances

421

600

Advances other than capital advances

Prepaid gratuity
(Refer to Note 2.20.1)

43

79

Others

Withholding taxes and others

1,428

Prepaid expenses

111

96

Deferred contract cost

262

284

TOTAL NON-CURRENT OTHER ASSETS

2,265

1,059

Current

Advances other than capital advances

Payment to vendors for supply of goods

119

131

Others

Withholding taxes and others

1,032

1,886

Prepaid expenses

472

441

Deferred contract cost

44

78

TOTAL CURRENT OTHER ASSETS

1,667

2,536

Total other assets

3,932

3,595

Deferred contract costs are upfront costs incurred for the contract and are amortized over the term of the contract. Withholding taxes and others primarily consist of input tax credits.

2.10 Financial instruments

Accounting policy

2.10.1 Initial recognition

The Group recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.

2.10.2 Subsequent measurement

a. Non-derivative financial instruments

(i) Financial assets carried at amortized cost

A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(ii) Financial assets at fair value through other comprehensive income (FVOCI)

A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.

(iii) Financial assets at fair value through profit or loss

A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.

(iv) Financial liabilities

Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit or loss. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate the fair value due to the short maturity of these instruments.

b. Derivative financial instruments

The Group holds derivative financial instruments such as foreign exchange forward and options contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.

(i) Financial assets or financial liabilities, at fair value through profit or loss.

This category includes derivative financial assets or liabilities which are not designated as hedges.

Although the Group believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated as hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.

Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the consolidated Statement of Profit and Loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets / liabilities in this category are presented as current assets / current liabilities if they are either held for trading or are expected to be realized within 12 months after the Balance Sheet date.

(ii) Cash flow hedge

The Group designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the Consolidated Statement of Profit and Loss. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the Consolidated Statement of Profit and Loss upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified to net profit in the Consolidated Statement of Profit and Loss.

c. Share capital and treasury shares

(i) Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options and buyback of ordinary shares are recognized as a deduction from equity, net of any tax effects.

(ii) Treasury shares

When any entity within the Group purchases the Company’s ordinary shares, the consideration paid including any directly attributable incremental cost, is presented as a deduction from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to / from share premium.

2.10.3 Derecognition of financial instruments

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the Group’s Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.

2.10.4 Fair value of financial instruments

In determining the fair value of its financial instruments, the Group uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.

Refer to table ‘Financial instruments by category’ below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximates fair value due to the short maturity of those instruments.

2.10.5 Impairment

The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in Consolidated Statement of Profit and Loss.

Financial instruments by category

The carrying value and fair value of financial instruments by categories as at March 31, 2018 is as follows :

in crore

Particulars

Amortized cost

Financial assets / liabilities at fair value through profit or loss

Financial assets / liabilities at fair value through OCI

Total carrying value

Total fair value

Designated upon initial recognition

Mandatory

Equity instruments designated upon initial recognition

Mandatory

Assets

Cash and cash equivalents
(Refer to Note 2.8)

19,818

19,818

19,818

Investments (Refer to Note 2.4)

Preference securities and equity instruments

138

138

138

Tax-free bonds and government bonds

1,897

1,897

(1) 2,151

Liquid mutual fund units

81

81

81

Non-convertible debentures

3,978

3,978

3,978

Certificates of deposit

5,269

5,269

5,269

Commercial paper

293

293

293

Convertible promissory note

12

12

12

Other investments

66

66

66

Fixed maturity plan securities

429

429

429

Trade receivables (Refer to Note 2.7)

13,142

13,142

13,142

Loans (Refer to Note 2.5)

275

275

275

Other financial assets
(Refer to Note 2.6)

6,952

4

12

6,968

(2) 6,884

Total

42,084

592

138

9,552

52,366

52,536

Liabilities

Trade payables

694

694

694

Other financial liabilities
(Refer to Note 2.12)

5,442

93

3

5,538

5,538

Total

6,136

93

3

6,232

6,232

(1) On account of fair value changes including interest accrued

(2) Excludes interest accrued on tax-free bonds and government bonds

The carrying value and fair value of financial instruments by categories as at March 31, 2017 were as follows :

in crore

Particulars

Amortized cost

Financial assets / liabilities at fair value through profit or loss

Financial assets / liabilities at fair value through OCI

Total carrying value

Total fair value

Designated upon initial recognition

Mandatory

Equity instruments designated upon initial recognition

Mandatory

Assets

Cash and cash equivalents
(Refer to Note 2.8)

22,625

22,625

22,625

Investments (Refer to Note 2.4)

Preference securities and equity instruments

159

159

159

Tax-free bonds and government bonds

1,907

1,907

(1) 2,168

Liquid mutual fund units

1,803

1,803

1,803

Non-convertible debentures

3,975

3,975

3,975

Certificates of deposit

7,905

7,905

7,905

Convertible promissory note

10

10

10

Other investments

35

35

35

Fixed maturity plan securities

558

558

558

Trade receivables (Refer to Note 2.7)

12,322

12,322

12,322

Loans (Refer to Note 2.5)

301

301

301

Other financial assets
(Refer to Note 2.6)

6,005

232

52

6,289

(2) 6,205

Total

43,160

2,638

159

11,932

57,889

58,066

Liabilities

Trade payables

367

367

367

Other financial liabilities
(Refer to Note 2.12)

4,973

87

5,060

5,060

Total

5,340

87

5,427

5,427

(1) On account of fair value changes including interest accrued

(2) Excludes interest accrued on tax-free bonds and government bonds

Fair value hierarchy

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 – Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The fair value hierarchy of assets and liabilities as at March 31, 2018 is as follows :

in crore

Particulars

As at
March 31, 2018

Fair value measurement at end of the reporting period / year using

Level 1

Level 2

Level 3

Assets

Investments in liquid mutual funds units (Refer to Note 2.4)

81

81

Investments in tax-free bonds (Refer to Note 2.4)

2,150

1,878

272

Investments in government bonds (Refer to Note 2.4)

1

1

Investments in equity instruments (Refer to Note 2.4)

22

22

Investments in preference securities (Refer to Note 2.4)

116

116

Investments in non-convertible debentures (Refer to Note 2.4)

3,978

2,695

1,283

Investments in certificates of deposit (Refer to Note 2.4)

5,269

5,269

Investments in commercial paper (Refer to Note 2.4)

293

293

Investments in fixed maturity plan securities (Refer to Note 2.4)

429

429

Investments in convertible promissory note (Refer to Note 2.4)

12

12

Other investments (Refer to Note 2.4)

66

66

Derivative financial instruments – gain on outstanding foreign currency forward and options contracts (Refer to Note 2.6)

16

16

Liabilities

Derivative financial instruments – loss on outstanding foreign currency forward and options contracts (Refer to Note 2.12)

42

42

Liability towards contingent consideration (Refer to Note 2.12)(1)(2)

54

54

(1) Pertains to contingent consideration payable to selling shareholders of Kallidus and Brilliant Basics Holdings Limited as per the share purchase agreement

(2) Includes 21 crore pertaining to acquisition of Brilliant Basics discounted at 10%

During the year ended March 31, 2018, tax-free bonds and non-convertible debentures of 1,797 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and 850 crore were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.

The fair value hierarchy of assets and liabilities as at March 31, 2017 was as follows :

in crore

Particulars

As at
March 31, 2017

Fair value measurement at end of the reporting period / year using

Level 1

Level 2

Level 3

Assets

Investments in liquid mutual funds units (Refer to Note 2.4)

1,803

1,803

Investments in tax-free bonds (Refer to Note 2.4)

2,159

282

1,877

Investments in government bonds (Refer to Note 2.4)

9

9

Investments in equity instruments (Refer to Note 2.4)

15

15

Investments in preference securities (Refer to Note 2.4)

144

144

Investments in non-convertible debentures (Refer to Note 2.4)

3,975

3,371

604

Investments in certificates of deposit (Refer to Note 2.4)

7,905

7,905

Investments in fixed maturity plan securities (Refer to Note 2.4)

558

558

Investments in convertible promissory notes (Refer to Note 2.4)

10

10

Other investments (Refer to Note 2.4)

35

35

Derivative financial instruments - gain on outstanding foreign currency forward and options contracts (Refer to Note 2.6)

284

284

Liabilities

Derivative financial instruments - loss on outstanding foreign currency forward and options contracts (Refer to Note 2.12)

2

2

Liability towards contingent consideration (Refer to Note 2.12)(1)(2)

85

85

(1) Pertains to contingent consideration payable to selling shareholders of Kallidus as per the share purchase agreement.

(2) Discounted 91 crore at 14.2%

During the year ended March 31, 2017, tax-free bonds of 115 crore were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.

A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.

The movement in contingent consideration as at March 31, 2018 from March 31, 2017 is mainly on account of settlement of 45 crore pertaining to Kallidus acquisition and addition of 17 crore in relation to acquisition of Brilliant Basics Holdings Limited (Refer to Note 2.3)

Financial risk management

Financial risk factors

The Group’s activities expose it to a variety of financial risks : market risk, credit risk and liquidity risk. The Group’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Group is foreign exchange risk. The Group uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Group’s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers.

Market risk

The Group operates internationally and a major portion of the business is transacted in several currencies and consequently the Group is exposed to foreign exchange risk through its sales and services in the United States and elsewhere, and purchases from overseas suppliers in various foreign currencies. The Group holds derivative financial instruments such as foreign exchange forward and options contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Group’s operations are adversely affected as the rupee appreciates / depreciates against these currencies.

The foreign currency risk from financial instruments as at March 31, 2018 is as follows :

in crore

Particulars

USD

Euro

GBP

AUD

Other currencies

Total

Cash and cash equivalents

1,287

218

147

353

1,192

3,197

Trade receivables

8,317

1,751

845

788

781

12,482

Other financial assets (including loans)

2,636

663

330

173

470

4,272

Trade payables

(273)

(81)

(114)

(30)

(58)

(556)

Other financial liabilities

(2,289)

(417)

(215)

(273)

(596)

(3,790)

Net assets / (liabilities)

9,678

2,134

993

1,011

1,789

15,605

The foreign currency risk from financial instruments as at March 31, 2017 was as follows :

in crore

Particulars

USD

Euro

GBP

AUD

Other currencies

Total

Cash and cash equivalents

1,334

131

36

183

700

2,384

Trade receivables

8,345

1,244

775

561

702

11,627

Other financial assets (including loans)

2,862

535

372

159

403

4,331

Trade payables

(115)

(32)

(13)

(5)

(158)

(323)

Other financial liabilities

(2,129)

(406)

(211)

(211)

(547)

(3,504)

Net assets / (liabilities)

10,297

1,472

959

687

1,100

14,515

Sensitivity analysis between Indian rupee and USD

Particulars

Year ended March 31,

2018

2017

Impact on the Group’s incremental operating margins

0.50%

0.50%

Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

Derivative financial instruments

The Group holds derivative financial instruments such as foreign currency forward and options contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.

The details in respect of outstanding foreign currency forward and options contracts are as follows :

Particulars

As at
March 31, 2018

As at
March 31, 2017

In million

In crore

In million

In crore

Derivatives designated as cash flow hedges

Forward contracts

In AUD

130

644

In Euro

95

658

In GBP

40

324

Options Contracts

In AUD

60

300

In Euro

100

808

40

277

In GBP

20

184

Other derivatives

Forward contracts

In AUD

5

25

35

174

In CAD

20

99

In Euro

91

735

114

786

In JPY

550

34

In NZD

16

76

In NOK

40

34

In SGD

5

25

5

23

In ZAR

25

14

In SEK

50

40

50

36

In CHF

21

146

10

65

In USD

623

4,061

526

3,411

In GBP

51

466

75

609

Options contracts

In AUD

20

100

In CAD

13

65

In Euro

45

363

25

173

In CHF

5

33

In USD

320

2,086

195

1,265

In GBP

25

231

30

243

Total forward and options CONTRACTS

9,860

8,753

The foreign exchange forward and options contracts mature within 12 months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as at the Balance Sheet date :

in crore

Particulars

As at March 31,

2018

2017

Not later than one month

2,828

2,303

Later than one month and not later than three months

4,568

4,316

Later than three months and not later than one year

2,464

2,134

TOTAL

9,860

8,753

During the years ended March 31, 2018 and March 31, 2017, the Group has designated certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedges as at March 31, 2018 are expected to occur and will be reclassified to the consolidated Statement of Profit and Loss within three months.

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.

If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in Consolidated Statement of Profit and Loss at the time of the hedge relationship rebalancing.

The reconciliation of cash flow hedge reserve is as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Gain / (Loss)

Balance at the beginning of the year

39

Gain / (Loss) recognized in other comprehensive income during
the year

(93)

121

Amount reclassified to profit and loss during the year

41

(69)

Tax impact on above

13

(13)

Balance at the end of the year

39

The Group offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

The quantitative information about offsetting of derivative financial assets and derivative financial liabilities is as follows :

in crore

Particulars

As at March 31,

2018

2017

Derivative financial asset

Derivative financial liability

Derivative financial asset

Derivative financial liability

Gross amount of recognized financial asset / liability

20

(46)

285

(3)

Amount set off

(4)

4

(1)

1

Net amount presented in Balance Sheet

16

(42)

284

(2)

Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to 13,142 crore and 12,322 crore as at March 31, 2018 and March 31, 2017, respectively and unbilled revenues amounting to 4,261 crore and 3,648 crore as at March 31, 2018 and March 31, 2017, respectively. Trade receivables and unbilled revenues are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk has always been managed by the Group through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Group grants credit terms in the normal course of business. As per Ind AS 109, the Group uses ECL model to assess the impairment loss or gain. The Group uses a provision matrix to compute the ECL allowance for trade receivables and unbilled revenues. The provision matrix takes into account available external and internal credit risk factors such as credit default swap quotes, credit ratings from international credit rating agencies and the Group’s historical experience for customers.

The details in respect of percentage of revenues generated from top customer and top 10 customers are as follows :

(In %)

Particulars

Year ended March 31,

2018

2017

Revenue from top customer

3.4

3.4

Revenue from top 10 customers

19.3

21.0

Credit risk exposure

The allowance of lifetime ECL on customer balances for the years ended March 31, 2018 and March 31, 2017 was 34 crore and 132 crore, respectively.

The movement in credit loss allowance on customer balances is as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Balance at the beginning

411

289

Impairment loss recognized

34

132

Write-offs

(5)

(1)

Reclassified under held for sale (Refer to Note 2.25)

(1)

Translation differences

10

(9)

Balance at the end

449

411

Credit exposure

The Company’s credit period generally ranges from 30-60 days.

in crore

As at March 31,

2018

2017

Trade receivables

13,142

12,322

Unbilled revenues

4,261

3,648

Days sales outstanding was 67 days and 68 days as of March 31, 2018 and March 31, 2017, respectively.

Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, fixed maturity plan securities, certificates of deposit, quoted bonds issued by government and quasi-government organizations, commercial paper and non-convertible debentures.

Liquidity risk

The Group’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Group has no outstanding borrowings. The Group believes that the working capital is sufficient to meet its current requirements.

As at March 31, 2018, the Group had a working capital of 34,176 crore including cash and cash equivalents of 19,818 crore and current investments of 6,407 crore. As at March 31, 2017, the Group had a working capital of 39,692 crore including cash and cash equivalents of 22,625 crore and current investments of 9,970 crore.

As at March 31, 2018 and March 31, 2017, the outstanding compensated absences were 1,469 crore and 1,359 crore, respectively, which have been substantially funded. Accordingly, no liquidity risk is perceived.

The details regarding the contractual maturities of significant financial liabilities as at March 31, 2018 are as follows :

in crore

Particulars

Less than 1 year

1-2 years

2-4 years

4-7 years

Total

Trade payables

694

694

Other financial liabilities (excluding liability towards acquisition) (Refer to Note 2.12)

5,442

5,442

Liability towards acquisitions on an undiscounted basis
(contingent consideration) (Refer to Note 2.12)

41

7

7

55

The details regarding the contractual maturities of significant financial liabilities as at March 31, 2017 are as follows :

in crore

Particulars

Less than 1 year

1-2 years

2-4 years

4-7 years

Total

Trade payables

367

367

Other financial liabilities (excluding liability towards acquisition) (Refer to Note 2.12)

4,943

31

4,974

Liability towards acquisitions on an undiscounted basis
(contingent consideration) (Refer to Note 2.12)

45

46

91

2.11 Equity

Share capital

in crore, except as otherwise stated

Particulars

As at March 31,

2018

2017

Authorized

Equity shares, 5 par value 240,00,00,000 (240,00,00,000) equity shares

1,200

1,200

Issued, subscribed and paid-up

Equity shares, 5 par value (1) 217,33,12,301 (228,56,55,150) equity shares fully paid-up(2)

1,088

1,144

1,088

1,144

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

(1) Refer to Note 2.21 for details of basic and diluted shares

(2) Net of treasury shares 1,08,01,956 (1,12,89,514)

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 equity shares represented by ADSs carry similar rights to voting and dividends as the other equity shares. Each ADS represents one underlying equity share.

In the period of five years immediately preceding March 31, 2018 :

  • The Company has allotted 114,84,72,332 and 57,42,36,166 fully paid-up shares of face value 5 each during the quarter ended June 30, 2015 and December 31, 2014, pursuant to bonus issue approved by the shareholders through a postal ballot. For both the bonus issues, bonus share of one equity share for every equity share held, and a stock dividend of one ADS for every ADS held, respectively, have 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 (RSU) have been adjusted for bonus shares.

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. However, no such preferential amounts exist currently, other than the amounts held by irrevocable controlled trusts. For irrevocable controlled trusts, the corpus would be settled in favour of the beneficiaries.

Dividend

The final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors.

The Company declares and pays dividends in Indian rupees. The remittance of dividends outside India is governed by Indian law on foreign exchange and is subject to applicable distribution taxes. Dividend distribution tax paid by subsidiaries may be reduced / available as credit against dividend distribution tax payable by Infosys Limited.

Amount of per share dividend recognized as distribution to equity shareholders :

in

Particulars

Year ended March 31,

2018

2017

Final dividend for fiscal 2016

14.25

Interim dividend for fiscal 2017

11.00

Final dividend for fiscal 2017

14.75

Interim dividend for fiscal 2018

13.00

Effective from fiscal 2018, the Company’s policy is to pay out up to 70% of the free cash flow of the corresponding financial year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated Statement of Cash Flows prepared under IFRS. Dividend payout includes dividend distribution tax.

The Board of Directors recommended a final dividend of 20.50 per equity share for the financial year ended March 31, 2018 and a special dividend of 10 per equity share. The payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company, to be held on June 23, 2018 and if approved would result in a cash outflow of approximately 7,949 crore, (excluding dividend paid on treasury shares) including dividend distribution tax.

The Board of Directors, at its meeting on October 24, 2017, declared an interim dividend of 13 per equity share which resulted in a net cash outflow of approximately 3,408 crore (excluding dividend paid on treasury shares) inclusive of dividend distribution tax.

Buyback

The Board, at its meeting on August 19, 2017, approved a proposal for the Company to buy back its fully paid-up equity shares of face value of 5 each from the eligible equity shareholders of the Company for an amount not exceeding 13,000 crore. The shareholders approved the said proposal of buyback of equity shares through a postal ballot that concluded on October 7, 2017. The buyback offer comprised a purchase of 11,30,43,478 equity shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of 1,150 per equity share. The buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on the record date by cancelling ADSs and withdrawing underlying equity shares) of the Company as on the record date (i.e November 1, 2017) on a proportionate basis through the ‘Tender offer’ route. The Company concluded the buyback procedures on December 27, 2017 and 11,30,43,478 equity shares were extinguished. The Company has utilized securities premium and general reserve for the buyback of its shares. In accordance with Section 69 of the Companies Act, 2013, the Company has created a Capital Redemption Reserve of 56 crore equal to the nominal value of the shares bought back as an appropriation from the general reserve.

The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As of March 31, 2018, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure, there are no externally imposed capital requirements.

The details of shareholder holding more than 5% shares as at March 31, 2018 and March 31, 2017 are as follows :

Name of the shareholder

As at March 31, 2018

As at March 31, 2017

No. of shares

% held

No. of shares

% held

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

37,99,05,859

17.39

38,33,17,937

16.69

Life Insurance Corporation of India

14,95,14,017

6.85

16,14,36,123

7.03

The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2018 and March 31, 2017 is as follows :

in crore, except as stated otherwise

Particulars

As at March 31, 2018

As at March 31, 2017

No. of shares

Amount

No. of shares

Amount

At the beginning of the period

228,56,55,150

1,144

228,56,21,088

1,144

Add : Shares issued on exercise of employee stock options

7,00,629

34,062

Less : Shares bought back

11,30,43,478

56

At the end of the period

217,33,12,301

1,088

228,56,55,150

1,144

Employee Stock Option Plan (ESOP)

Accounting policy

The Group recognizes compensation expense relating to share-based payments in net profit using fair value in accordance with Ind AS 102, Share-based Payment. The estimated fair value of awards is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance, multiple awards with a corresponding increase to share options outstanding account.

Amendment to Ind AS 102 :

Effective April 1, 2017, the Group adopted amendment to Ind AS 102 which provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes. The adoption of amendment did not have any material effect on the consolidated financial statements.

2015 Stock Incentive Compensation Plan (‘the 2015 Plan’) (formerly 2011 RSU Plan) :

On March 31, 2016, pursuant to the approval by the shareholders through a postal ballot, the Board has 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 held by the trust towards the 2011 Plan as at March 31, 2016). Out of this, 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 on the date of the grant. These instruments will generally 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.

Controlled trust holds 1,08,01,956 and 1,12,89,514 shares as at March 31, 2018 and March 31, 2017, respectively under the 2015 Plan, out of which 1,00,000 equity shares have been earmarked for welfare activities of the employees.

Stock incentives granted to Salil Parekh (Chief Executive Officer and Managing Director)

Pursuant to the approval of the shareholders through a postal ballot on February 20, 2018, Salil Parekh (CEO & MD) is eligible to receive under the 2015 Plan, a) an annual grant of RSUs of fair value 3.25 crore which will vest over time in three equal annual installments upon completion of each year of service from the respective grant date, b) a one-time grant of RSUs of fair value 9.75 crore which will vest over time in two equal annual installments upon completion of each year of service from the grant date, and c) annual grant of performance-based RSUs of fair value 13 crore which will vest after completion of three years, the first of which concludes on March 31, 2021, subject to the achievement of performance targets set by the Board or its committee.

The Board, based on the recommendations of the nomination and remuneration committee, approved on February 27, 2018, the annual time-based grant for fiscal 2018 of 28,256 RSUs and the one-time time-based grant of 84,768 RSUs. The grants were made effective February 27, 2018. Though the annual time-based grants for the remaining employment term have not been granted as of March 31, 2018 , in accordance with Ind AS 102, Share-based Payment, the Company has recorded employment stock compensation expense.

Stock incentives granted to Dr. Vishal Sikka

Consequent to Dr. Vishal Sikka’s resignation from the Company on August 24, 2017, the unvested stock incentives (time-based and performance-based awards) granted to him were forfeited.

Stock incentives granted to COO

The nomination and remuneration committee (‘the Committee’), at its meeting held on October 14, 2016 recommended a grant of 27,250 RSUs and 43,000 ESOPs amounting to 4 crore to U.B. Pravin Rao, under the 2015 Plan and the same was approved by the shareholders through a postal ballot on March 31, 2017. These RSUs and ESOPs have been granted effective May 2, 2017. These RSUs and stock options would vest over a period of four years and shall be exercisable within the period as approved by the Committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant, as approved by the shareholders.

Stock incentives granted to KMP (other than CEO, Dr. Vishal Sikka, and COO)

On November 1, 2016, the Company granted 2,47,250 RSUs and 5,02,550 stock options under the 2015 Plan, to key managerial personnel (KMP), other than Dr. Vishal Sikka and the COO, based on fiscal 2016 performance. On August 1, 2017, the Company granted 58,150 RSUs and 44,450 ESOPs to KMP. These RSUs and stock options will generally vest over a period of four years and shall be exercisable within the period as approved by the Committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant. On February 27, 2018, based on the recommendation and approval of the nomination and remuneration committee, the Company granted 2,14,950 RSUs to the KMP other than CEO and COO. These instruments will vest over a period of four years and are subject to continued service.

During the year ended March 31, 2018, three of the KMP have resigned (Refer to Note 2.23, Related party transactions for further details) and hence, the RSUs and stock options granted to them were forfeited.

Stock incentive granted to employees other than KMP

During fiscal 2017, the Company granted 25,06,740 RSUs and 7,03,300 ESOPs and 1,12,210 incentive units (cash-settled) to certain eligible employees at mid and senior levels under the 2015 Plan. Further, on May 2, 2017, the Company granted 37,090 RSUs (includes equity shares and equity shares represented by ADS) at par value, 73,600 employee stock options (ESOPs) (including equity shares and equity shares represented by ADS) to be exercised at market price at the time of grant, to certain employees at the senior management level. On August 1, 2017, the Company granted 7,450 incentive units (cash-settled) to employees at the senior management level. These instruments will vest over a period of four years and are subject to continued service. On February 27, 2018 15,59,920 RSUs and 42,590 incentive units (cash-settled) were granted to eligible employees. These instruments will vest over a period of 4 years and are subject to continued service.

As at March 31, 2018 and March 31, 2017, 1,11,757 and 1,06,845 incentive units were outstanding (net of forfeitures).

The break-up of employee stock compensation expense is as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Granted to

KMP(2)

(13)

36

Employees other than KMP

97

81

Total(1)

84

117

(1) Cash-settled stock compensation expense included above is 5 crore and 1 crore in the years ended March 31, 2018 and March 31, 2017, respectively.

(2) Includes a reversal of stock compensation cost of 35 crore towards forfeiture of stock incentives granted to Dr. Vishal Sikka upon his resignation

The carrying value of liability towards cash-settled, share-based payments was 6 crore and 3 crore as at March 31, 2018 and March 31, 2017, respectively.

The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled, share-based payment transactions during the year ended March 31, 2018 is as follows :

Particulars

Year ended March 31, 2018

Shares arising out of options

Weighted average exercise price ()

2015 Plan : Restricted Stock Units (RSUs)

Outstanding at the beginning

29,61,373

5

Granted

22,80,608

5

Exercised

6,48,217

5

Forfeited and expired

8,43,355

5

Outstanding at the end

37,50,409

5

Exercisable at the end

24,205

5

2015 Plan : Employee Stock Options (ESOPs)

Outstanding at the beginning

11,97,650

992

Granted

4,91,575

943

Exercised

52,412

983

Forfeited and expired

6,69,900

961

Outstanding at the end

9,66,913

986

Exercisable at the end

1,96,912

992

The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled, share-based payment transactions during the year ended March 31, 2017 was as follows :

Particulars

Year ended March 31, 2017

Shares arising out of options

Weighted average exercise price ()

2015 Plan : RSUs

Outstanding at the beginning

2,21,505

5

Granted

28,74,690

5

Forfeited and expired

1,00,760

5

Exercised

34,062

5

Outstanding at the end

29,61,373

5

Exercisable at the end

2015 Plan : ESOPs

Outstanding at the beginning

Granted

12,05,850

992

Forfeited and expired

8,200

992

Exercised

Outstanding at the end

11,97,650

992

Exercisable at the end

During the years ended March 31, 2018, and March 31, 2017, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 992 and 1,084, respectively.

The summary of information about equity-settled RSUs and ESOPs outstanding as at March 31, 2018 is as follows :

Range of exercise prices per share ()

Options outstanding

No. of shares arising out of options

Weighted average remaining contractual life

Weighted average exercise price ()

2015 Plan :

0-5 (RSU)

37,50,409

1.89

5.00

900-1100 (ESOP)

9,66,913

6.60

992.68

47,17,322

2.57

207.45

The summary of information about equity-settled RSUs and ESOPs outstanding as at March 31, 2017 was as follows :

Range of exercise prices per share ()

Options outstanding

No. of shares arising out of options

Weighted average remaining contractual life

Weighted average exercise price ()

2015 Plan :

0-5 (RSU)

29,61,373

1.88

5.00

900-1100 (ESOP)

11,97,650

7.09

1,026.50

41,59,023

3.38

299.16

The fair value of each equity settled award is estimated on the date of grant using the Black–Scholes–Merton model with the following assumptions :

Particulars

For options granted during the year ended March 31, 2018

Equity shares

ADS

RSU

ESOP

RSU

ESOP

Weighted average share price () / ($-ADS)

1,144

923

16.61

14.65

Exercise price () /
($-ADS)

5.00

919

0.08

14.67

Expected volatility (%)

20-25

25-28

21-26

25-31

Expected life of the option (years)

1-4

3-7

1-4

3-7

Expected dividends (%)

2.78

2.78

2.74

2.74

Risk-free
interest rate (%)

6-7

6-7

1-2

1-2

Weighted average fair value as on grant date () / ($-ADS)

1,066

254

15.47

2.93

Particulars

For options granted during the year ended March 31, 2017

Equity shares

ADS

RSU

ESOP

RSU

ESOP

Weighted average share price () / ($-ADS)

1,067

989

15.77

15.26

Exercise price () /
($-ADS)

5.00

998

0.07

15.26

Expected volatility (%)

24-29

27-29

26-29

27-31

Expected life of the option (years)

1-4

3-7

1-4

3-7

Expected dividends (%)

2.37

2.37

2.29

2.29

Risk-free
interest rate (%)

6-7

6-7

1-2

1-2

Weighted average fair value as on grant date () / ($-ADS)

1,002

285

14.84

3.46

The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behavior of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP 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 / ESOP.

2.12 Other financial liabilities

in crore

Particulars

As at March 31,

2018

2017

Non-current

Others

Accrued compensation to employees(1)

30

Compensated absences

48

Payable for acquisition of business - Contingent consideration
(Refer to Note 2.1)(2)

13

40

TOTAL Non-current OTHER FINANCIAL LIABILITIES

61

70

Current

Unpaid dividends(1)

22

17

Others

Accrued compensation to employees(1)

2,509

1,881

Accrued expenses(1)

2,452

2,585

Retention monies(1)

132

220

Payable for acquisition of business - Contingent consideration
(Refer to Note 2.1)(2)

41

45

Payable by controlled trusts(1)

139

145

Compensated absences

1,421

1,359

Foreign currency forward and options contracts(2)(3)

42

2

Capital creditors(1)

155

48

Other payables(1)

33

47

TOTAL CURRENT OTHER FINANCIAL LIABILITIES

6,946

6,349

Total financial liabilities

7,007

6,419

(1) Financial liability carried at amortized cost

5,442

4,973

(2) Financial liability carried at fair value through profit or loss

93

87

(3) Financial liability carried at fair value through other comprehensive income

3

Contingent consideration on undiscounted basis

55

91

2.13 Other liabilities

in crore

Particulars

As at March 31,

2018

2017

Non-current

Others

Deferred income – government grant on land use rights

44

41

Accrued gratuity
(Refer to Note 2.20.1)

28

Deferred rent

151

Deferred income

36

42

TOTAL Non-current OTHER LIABILITIES

259

83

Current

Unearned revenues

2,295

1,777

Client deposit

38

Others

Withholding taxes and others

1,240

1,226

Accrued gratuity
(Refer to Note 2.20.1)

1

Deferred rent

32

2

Deferred income – government grant on land use rights

1

1

TOTAL current OTHER LIABILITIES

3,606

3,007

TOTAL OTHER LIABILITIES

3,865

3,090

2.14 Provisions

Accounting policy

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive 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 discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

a. Post-sales client support

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-related revenues are recorded and included in Consolidated Statement of Profit and Loss. The Group estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.

b. 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 the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established the Group recognizes any impairment loss on the assets associated with that contract.

Provision for post-sales client support and others

in crore

Particulars

As at March 31,

2018

2017

Current

Others

Post-sales client support and others

492

405

TOTAL PROVISIONS

492

405

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

in crore

Particulars

Year ended
March 31,

2018

2017

Balance at the beginning

405

512

Provision recognized

143

94

Provision utilized

(62)

(195)

Exchange difference

6

(6)

Balance at the end

492

405

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

2.15 Income taxes

Accounting policy

Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the Consolidated Statement of Profit and Loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of subsidiaries and branches where it is expected that the earnings of the subsidiary or branch will not be distributed in the foreseeable future. The Group offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to securities premium.

Income tax expense in the consolidated Statement of Profit and Loss comprises :

in crore

Particulars

Year ended March 31,

2018

2017

Current taxes

4,581

5,653

Deferred taxes

(340)

(55)

Income tax expense

4,241

5,598

Advance Pricing Agreement (APA)

During the three months ended December 31, 2017, the Company had concluded an APA with the US Internal Revenue Service (IRS) for the US branch covering the years ending March 2011 to March 2021. Under the APA, the Company and the IRS have agreed on the methodology to allocate revenues and compute the taxable income of the Company’s US branch operations.

During the three months ended December 31, 2017, in accordance with the APA, the Company has reversed income tax expense provision of 1,432 crore which pertains to previous periods. This comprises reversal of current tax expense of 1,610 crore, reversal of 132 crore on account of deferred tax assets pertaining to the temporary differences which are no longer required and a deferred tax liability of 46 crore pertaining to BPT for the three months ended December 31, 2017 on account of conclusion of APA. In line with the APA, the Company has to pay an amount of approximately 1,488 crore due to the difference between the taxes payable for prior periods as per the APA and the actual taxes paid for such periods. The Company has paid 479 crore during the three months ended March 31, 2018, and the balance amount is expected to be paid over the next few quarters.

Additionally, income tax expense for the year ended March 31, 2018 includes reversal (net of provisions) of 291 crore, pertaining to prior periods on account of adjudication of certain disputed matters in favor of the Company across various jurisdictions.

Income tax expense for the year ended March 31, 2017 includes reversal (net of provisions) of 152 crore, pertaining to prior periods.

The ‘Tax Cuts and Jobs Act (H.R. 1)’ was signed into law on December 22, 2017 (‘US tax reforms’). The US tax reforms has reduced federal tax rates from 35% to 21% effective January 1, 2018 among other measures. During the year ended March 31, 2018 , the US tax reforms has resulted in a positive impact of 155 crore on account of credits pertaining to deferred tax liabilities on branch profit. The impact of US tax reforms is expected to be not significant for future periods.

During the years ended March 31, 2018 and March 31, 2017, a current tax charge of 17 crore and current tax credit of 10 crore, respectively have been recorded in other comprehensive income pertaining to remeasurement of defined benefit plan asset.

During the year ended March 31, 2018, a deferred tax credit of 13 crore and a deferred tax charge of 1 crore have been recorded in other comprehensive income pertaining to unrealized gains on derivatives designated as cash flow hedges and unrealized gain on investment in non-convertible debentures, certificates of deposit, commercial paper and equity and preference securities.

During the year ended March 31, 2017, a deferred tax charge of 13 crore has been recorded in other comprehensive income pertaining to unrealized gains on derivatives designated as cash flow hedges.

A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is as follows :

in crore except otherwise stated

Particulars

Year ended March 31,

2018

2017

Profit before income taxes

20,270

19,951

Enacted tax rates in India

34.61%

34.61%

Computed expected tax expense

7,015

6,905

Tax effect due to non-taxable income for Indian tax purposes

(2,068)

(1,982)

Overseas taxes

701

750

Tax provision (reversals)

(1,617)

(152)

Effect of exempt non-operating income

(66)

(65)

Effect of unrecognized deferred tax assets

188

93

Effect of differential overseas tax rates

52

64

Effect of non-deductible expenses

57

26

Branch profit tax (net of credits)

(210)

Subsidiary dividend distribution tax

172

Others

17

(41)

Income tax expense

4,241

5,598

Infosys is subject to a 15% BPT in the US to the extent its US branch’s net profit during the year is greater than the increase in the net assets of the US branch during the year, computed in accordance with the Internal Revenue Code. As of March 31, 2018, Infosys’ US branch net assets amounted to approximately 5,030 crore. During the year ended March 31, 2018, an additional deferred tax liability has been created for BPT amounting to 46 crore on account of conclusion of APA explained above. Further, on account of US tax reforms, the Company has a credit of 155 crore pertaining to BPT for the year ended March 31, 2018. The Company has also reversed 55 crore of BPT during the year ended March 31, 2018. As of March 31, 2018, the Company has a deferred tax liability for BPT of 164 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed in the foreseeable future.

Other income for the year ended March 31, 2018 includes interest on income tax refund of 262 crore.

The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the Company has benefited from certain income tax incentives that the Government of India had provided for export of software from the units registered under the Special Economic Zones Act (SEZs), 2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% of profits or gains derived from the export of services for the first five years from the financial year in which the unit commenced the provision of services and 50% of such profits or gains for further five years. Up to 50% of such profits or gains is also available for a further five years subject to the creation of a Special Economic Zone re-investment Reserve out of the profit for the eligible SEZ units and utilization of such reserve by the Company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income-tax Act, 1961.

During the year ended March 31, 2018, the Company received 846 crore as dividend from Infosys BPM, its majority owned subsidiary. Dividend distribution tax paid by the subsidiary on such dividend has been reduced as credit against dividend distribution tax payable by Infosys. Accordingly, the Group has recorded a charge of 172 crore as income tax expense during the year ended March 31, 2018.

Deferred income tax liabilities have not been recognized on temporary differences amounting to 5,045 crore and 5,309 crore as at March 31, 2018 and March 31, 2017, respectively, associated with investments in subsidiaries and branches as it is probable that the temporary differences will not reverse in the foreseeable future.

The following table provides the details of income tax assets and income tax liabilities as at March 31, 2018 and March 31, 2017 :

in crore

Particulars

As at March 31,

2018

2017

Income tax assets

6,070

5,716

Current income tax liabilities

(2,043)

(3,885)

Net current income tax asset / (liability) at the end

4,027

1,831

The gross movement in the current income tax asset / (liability) for the years ended March 31, 2018 and March 31, 2017 is as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Net current income tax asset / (liability) at the beginning

1,831

1,820

Income tax paid

6,829

5,653

Current income tax expense

(4,581)

(5,653)

Income tax benefit arising on exercise of stock options

1

Income tax on other comprehensive income

(17)

10

Reclassified under assets held for sale (Refer to Note 2.25)

(35)

Net current income tax asset / (liability) at the end

4,027

1,831

The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows :

in crore

Particulars

As at March 31,

2018

2017

Deferred income tax assets

Property, plant and equipment

215

138

Computer software

40

Accrued compensation to employees

12

57

Trade receivables

141

136

Compensated absences

366

374

Post-sales client support

98

97

Derivative financial instruments

13

Intangibles

9

22

Credits related to branch profits

341

Others

117

143

Total deferred income tax assets

1,312

1,007

Deferred income tax liabilities

Intangible assets

(38)

(206)

Branch profit tax

(505)

(327)

Derivative financial instruments

(2)

(74)

Others

(26)

(67)

Total deferred income tax liabilities

(571)

(674)

Deferred income tax assets after set-off

1,282

540

Deferred income tax liabilities after set-off

(541)

(207)

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.

In assessing the reliability of deferred income tax assets, the Management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, the Management believes that the Group will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

The gross movement in the deferred income tax account for the years ended March 31, 2018 and March 31, 2017, is as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Net deferred income tax asset at the beginning

333

284

Addition through business combination (Refer to Note 2.1)

(2)

Translation differences

5

7

Credits / (charge) relating to temporary differences

340

55

Temporary differences on other comprehensive income

12

(13)

Reclassified under assets held for sale (Refer to Note 2.25)

53

Net deferred income tax asset at the end

741

333

The entire deferred income tax, except for a credit of 155 crore (on account of US tax reforms explained above), for the year ended March 31, 2018, relates to origination and reversal of temporary differences.

The credit relating to temporary differences during the year ended March 31, 2018 is primarily on account of property plant and equipment and trade receivables partially offset by accrued compensation to employees. The credit relating to temporary differences during the year ended March 31, 2017 are primarily on account of property, plant and equipment, and compensated absences partially offset by trade receivables and post-sales client support.

2.16 Revenue from operations

Accounting policy

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

Revenue on time-and-material contracts are 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, fixed-timeframe contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage-of-completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Costs and earnings in excess of billings are classified as unbilled revenues, while billings in excess of costs and earnings are classified as unearned revenues. Deferred contract costs are amortized over the term of the contract. Maintenance revenue is recognized rateably over the term of the underlying maintenance arrangement.

In arrangements for software development and related services and maintenance services, the Company has applied the guidance in Ind AS 18, Revenue, by applying the revenue recognition criteria for each separately identifiable component of a single transaction. The arrangements generally meet the criteria for considering software development and related services as separately identifiable components. For allocating the consideration, the Company has measured the revenue in respect of each separable component of a transaction at its fair value, in accordance with principles given in Ind AS 18. The price that is regularly charged for an item when sold separately is the best evidence of its fair value. In cases where the Company is unable to establish objective and reliable evidence of fair value for the software development and related services, the Company has used a residual method to allocate the arrangement consideration. In these cases the balance of the consideration, after allocating the fair values of undelivered components of a transaction, has been allocated to the delivered components for which specific fair values do not exist.

License fee revenues are recognized when the general revenue recognition criteria given in Ind AS 18 are met. Arrangements to deliver software products generally have three elements : license, implementation and Annual Technical Services (ATS). The Company has applied the principles given in Ind AS 18 to account for revenues from these multiple element arrangements. Objective and reliable evidence of fair value has been established for ATS. Objective and reliable evidence of fair value is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement and objective and reliable evidence of their fair values have been established, the revenue from such contracts are allocated to each component of the contract in a manner, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of objective and reliable evidence of fair value for implementation, the entire arrangement fee for license and implementation is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the services are performed. ATS revenue is recognized rateably over the period in which the services are rendered.

Advances received for services and products are reported as client deposits until all conditions for revenue recognition are met.

The Group accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the rateable allocation of the discounts / incentives amount to each of the underlying revenue transaction that results in progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increase in levels of revenue transactions, the Company 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 discount is not recognized until the payment is probable and the amount can be estimated reliably. The Company 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.

Revenues for the years ended March 31, 2018 and March 31, 2017 are as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Revenue from software services

68,460

66,383

Revenue from software products

2,062

2,101

TOTAL REVENUE FROM OPERATIONS

70,522

68,484

2.17 Other income, net

Accounting policy

Other income

Other income is comprised primarily of interest income, dividend income, gain / loss on investment and exchange gain  / loss on forward and options contracts and on translation of other assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.

Foreign currency

Functional currency

The functional currency of Infosys, Infosys BPM, controlled trusts, EdgeVerve and Skava is the Indian rupee. The functional currencies for Infosys Australia, Infosys China, Infosys Mexico, Infosys Sweden, Infosys Brasil, Infosys Public Services, Infosys Shanghai, Infosys Lodestone, Infosys Americas, Infosys Nova, Infosys Consulting Pte Ltd., Panaya, Kallidus, Brilliant Basics and Noah are the respective local currencies. These financial statements are presented in Indian rupees (rounded off to crore; one crore equals ten million).

Transactions and translations

Foreign-currency-denominated monetary assets and liabilities are translated into the relevant functional currency at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in net profit in the Consolidated 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.

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. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.

The translation of financial statements of the foreign subsidiaries to the presentation currency is performed for assets and liabilities using the exchange rate in effect at the Balance Sheet date and for revenue, expense and cash-flow items using the average exchange rate for the respective periods. The gains or losses resulting from such translation are included in currency translation reserves under other components of equity. When a subsidiary is disposed off, in full, the relevant amount is transferred to net profit in the Consolidated Statement of Profit and Loss. However when a change in the parent’s ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the Balance Sheet date.

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 assets are treated as deferred income and are recognized in net profit 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 net profit 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.

Other income for the years ended March 31, 2018 and March 31, 2017 is as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Interest income on financial assets carried at amortized cost

Tax-free bonds and government bonds

143

128

Deposits with banks and others

1,531

2,233

Interest income on financial assets carried at fair value through other comprehensive income

Non-convertible debentures, certificates of deposit and commercial paper

682

190

Income on investments carried at fair value through profit or loss

Dividend income on liquid mutual funds

4

29

Gain / (loss) on liquid mutual funds

253

119

Exchange gains / (losses) on foreign currency forward and options contracts

1

591

Exchange gains / (losses) on translation of assets and liabilities

233

(359)

Impairment loss on assets classified under held for sale (Refer to Note 2.25)

(118)

Miscellaneous income, net

464

149

TOTAL OTHER INCOME

3,193

3,080

2.18 Expenses

in crore

Particulars

Year ended March 31,

2018

2017

Employee benefit expenses

Salaries including bonus

37,764

36,557

Contribution to provident and other funds

828

770

Share-based payments to employees (Refer to Note 2.11)

84

117

Staff welfare

217

215

38,893

37,659

Cost of software packages
and others

For own use

887

795

Third-party items bought for service delivery to clients

983

802

1,870

1,597

Other expenses

Repairs and maintenance

1,089

1,242

Power and fuel

207

228

Brand and marketing

305

342

Operating lease payments
(Refer to Note 2.19)

528

491

Rates and taxes

166

148

Consumables

30

40

Insurance

59

56

Provision for post-sales client support

142

80

Commission to non-whole time directors

9

10

Impairment loss recognized / (reversed) on financial assets

71

140

Contributions towards corporate social responsibility

156

230

Others

162

237

2,924

3,244

2.19 Leases

Accounting policy

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

The lease rentals charged during the period is as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Lease rentals recognized during the period

528

491

The obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows :

in crore

Future minimum lease payable

As at March 31,

2018

2017

Not later than 1 year

456

461

Later than 1 year and not later than 5 years

1,388

1,237

Later than 5 years

874

740

The operating lease arrangements are renewable on a periodic basis and for most of the leases extend up to a maximum of ten years from their respective dates of inception and relates to rented premises. Some of these lease agreements have price escalation clauses.

2.20 Employee benefits

Accounting policy

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 BPM 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 the Life Insurance Corporation of India as permitted by Indian law.

The Group recognizes the net obligation of a defined benefit plan in its Balance Sheet as an asset or liability. Gains and losses through remeasurements of the net defined benefit liability / (asset) are recognized in other comprehensive income and are not reclassified to the Consolidated Statement of Profit or Loss in subsequent periods. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in other comprehensive income. The effect of any plan amendments is recognized in the Consolidated Statement of Profit and Loss.

Superannuation

Certain employees of Infosys, Infosys BPM 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 portion 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 companies 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 obligation to the plan beyond its monthly contributions.

Compensated absences

The Group has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each Balance Sheet date 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.

2.20.1 Gratuity

The funded status of the Gratuity Plan and the amounts recognized in the Group’s financial statements as at March 31, 2018 and March 31, 2017 are as follows :

in crore

Particulars

As at March 31,

2018

2017

Change in benefit obligations

Benefit obligations at the beginning

1,117

944

Service cost

150

129

Interest expense

73

69

Remeasurements –
Actuarial (gains) / losses

(59)

67

Transfer

28

Curtailment gain

(3)

Benefits paid

(107)

(89)

Reclassified under held for sale (Refer to Note 2.25)

(1)

Benefit obligations at the end

1,201

1,117

Change in plan assets

Fair value of plan assets at the beginning

1,195

947

Interest income

80

79

Remeasurements – Return on plan assets excluding amounts included in interest income

13

12

Contributions

35

246

Benefits paid

(107)

(89)

Fair value of plan assets
at the end

1,216

1,195

Funded status

15

78

Prepaid gratuity benefit

43

79

Accrued gratuity

(28)

(1)

The amounts for the years ended March 31, 2018 and March 31, 2017 recognized in the Consolidated Statement of Profit and Loss under employee benefit expense are as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Service cost

150

129

Net interest on the net defined benefit liability / asset

(7)

(10)

Curtailment gain

(3)

Net gratuity cost

143

116

The amounts for the years ended March 31, 2018 and March 31, 2017 recognized in the consolidated statement of other comprehensive income are as follows :

in crore

Particulars

Year ended March 31,

2018

2017

Remeasurements of the net defined benefit liability / (asset)

Actuarial (gains) / losses

(59)

67

(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability / (asset)

(13)

(12)

(72)

55

in crore

Particulars

Year ended March 31,

2018

2017

(Gain) / loss from change in demographic assumptions

(Gain) / loss from change in financial assumptions

(41)

56

(Gain) / loss from experience adjustment

(18)

11

(59)

67

The weighted-average assumptions used to determine benefit obligations as at March 31, 2018 and March 31, 2017 are as follows :

Particulars

As at March 31,

2018

2017

Discount rate (%)

7.5

6.9

Weighted average rate of increase in compensation levels (%)

8.0

8.0

The weighted-average assumptions used to determine net periodic benefit cost for the years ended March 31, 2018 and March 31, 2017 are as follows :

Particulars

Year ended March 31,

2018

2017

Discount rate (%)

6.9

7.8

Weighted average rate of increase in compensation
levels (%)

8.0

8.0

Weighted average duration of defined benefit obligation (years)

6.1

6.1

Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.

The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards. The discount rate is based on the government securities yield.

Sensitivity of significant assumptions used for valuation of defined benefit obligation :

in crore

Impact from percentage point increase / decrease in

As at March 31, 2018

Discount rate

58

Weighted average rate of increase in compensation levels

50

Sensitivity to significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by one percentage, keeping all other actuarial assumptions constant. In practice, this is not probable, and changes in some of the assumptions may be correlated.

Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit gratuity plans.

The Company contributes all ascertained liabilities towards gratuity to the Infosys Limited Employees’ Gratuity Fund Trust. In case of Infosys BPM and EdgeVerve, contributions are made to the Infosys BPO Employees’ Gratuity Fund Trust and EdgeVerve Systems Limited Employees Gratuity Fund Trust, respectively. Trustees administer contributions made to the trust. As at March 31, 2018 and March 31, 2017, the plan assets have been primarily invested in insurer managed funds.

Actual return on assets for the years ended March 31, 2018, and March 31, 2017 were 93 crore and 91 crore, respectively.

The Group expects to contribute 130 crore to the gratuity trusts during fiscal 2019.

Maturity profile of defined benefit obligation :

in crore

Within 1 year

174

1-2 year

178

2-3 year

192

3-4 year

203

4-5 year

211

5-10 years

1,023

2.20.2 Superannuation

The Group contributed 173 crore and 168 crore during the years ended March 31, 2018 and March 31, 2017, respectively and the same has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.

2.20.3 Provident fund

Infosys has an obligation to fund any shortfall on the yield of the trust’s investments over the administered interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and in most cases the actual return earned by the Company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the assumptions provided below there is no shortfall as at March 31, 2018 and March 31, 2017, respectively.

The details of fund and plan asset position are as follows :

in crore

Particulars

As at March 31,

2018

2017

Plan assets at period end,
at fair value

5,160

4,459

Present value of benefit obligation at period end

5,160

4,459

Asset recognized in Balance Sheet

The plan assets have been primarily invested in government securities.

Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach :

Particulars

As at March 31,

2018

2017

Government of India (GOI) bond yield (%)

7.50

6.90

Remaining term to maturity of portfolio (year)

5.9

6.0

Expected guaranteed interest rate (%)

8.55

8.60

The Group contributed 484 crore and 462 crore during the years ended March 31, 2018 and March 31, 2017, respectively. The same has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.

The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.

2.20.4 Employee benefit costs

in crore

Particulars

Year ended March 31,

2018

2017

Salaries and bonus(1)(2)

38,093

36,913

Defined contribution plans

260

252

Defined benefit plans

540

494

38,893

37,659

(1) Includes a employee stock compensation expense of 84 crore, for the year ended March 31, 2018. Similarly, includes employee stock compensation expense of 117 crore for the year ended March 31, 2017.

(2) Included in the above is a reversal of stock compensation cost of 35 crore towards forfeiture of stock incentives granted to Dr. Vishal Sikka upon his resignation. Refer to Note 2.11.

2.21 Reconciliation of basic and diluted shares used in computing earnings per share

Accounting policy

Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity 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 equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.

A reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share is as follows :

Particulars

Year ended March 31,

2018

2017

Basic earnings per equity share – weighted average number of equity shares outstanding(1)

225,53,32,322

228,56,39,447

Effect of dilutive common equivalent shares – share options outstanding

22,41,548

7,57,298

Diluted earnings per equity share – weighted average number of equity shares and common equivalent shares outstanding

225,75,73,870

228,63,96,745

(1) Excludes treasury shares

For the year ended March 31, 2018, 67,238 options to purchase equity shares had an anti-dilutive effect.

For the year ended March 31, 2017, 1,12,190 options to purchase equity shares had an anti-dilutive effect.

2.22 Contingent liabilities and commitments

in crore

Particulars

As at March 31,

2018

2017

Contingent liabilities

Claims against the Company, not acknowledged as debts(2)
[Amount paid to statutory authorities 6,551 crore ( 4,717 crore)]

4,802

6,714

Commitments

Estimated amount of contracts remaining to be executed on capital contracts and not provided for (net of advances and deposits)

1,452

1,149

Other commitments(1)

81

114

(1) Uncalled capital pertaining to investments

(2) As at March 31, 2018, claims against the Group not acknowledged as debts in respect of income tax matters amounted to 4,542 crore. These matters are pending before various Appellate Authorities and the Management, including its tax advisors, expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Group’s financial position and results of operations.

Income tax claims amounting to 4,670 crore have not been considered as claims not acknowledged as debt because the Company has received favorable decisions on similar claims and therefore, based on its assessment, is of the view that any liability resulting from these claims is remote and will not sustain on ultimate resolution.

Amount paid to statutory authorities against the above tax claims amounted to 6,540 crore.

The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company’s 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.

2.23 Related party transactions

Subsidiaries

in %

Name of subsidiaries

Country

Holdings as at March 31,

2018

2017

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 Nova Holdings LLC. (Infosys Nova)

US

100

100

EdgeVerve Systems Limited (EdgeVerve)

India

100

100

Lodestone Management Consultants GmbH(1)

Austria

100

100

Skava Systems Pvt. Ltd. (Skava Systems)

India

100

100

Kallidus Inc. (Kallidus)

US

100

100

Infosys Chile SpA(2)

Chile

Infosys Arabia Limited(3)

Saudi Arabia

70

Infosys Americas Inc., (Infosys Americas)

US

100

100

Infosys Technologies (Australia) Pty. Limited (Infosys Australia)(4)

Australia

100

100

Infosys Public Services, Inc. USA (Infosys Public Services)

US

100

100

Infosys Canada Public Services Ltd.(5)(6)

Canada

Infosys BPM Limited (formerly Infosys BPO Limited)

India

99.98

99.98

Infosys (Czech Republic) Limited s.r.o.(7)

Czech Republic

99.98

99.98

Infosys Poland, Sp z.o.o(7)

Poland

99.98

99.98

Infosys McCamish Systems LLC (7)

US

99.98

99.98

Portland Group Pty Ltd(7)

Australia

99.98

99.98

Infosys BPO Americas LLC.(7)

US

99.98

99.98

Infosys Consulting Holding AG (Infosys Lodestone)

Switzerland

100

100

Lodestone Management Consultants Inc.(4)(8)

US

100

100

Infosys Management Consulting Pty Limited(8)

Australia

100

100

Infosys Consulting AG(8)

Switzerland

100

100

Infosys Consulting GmbH(8)

Germany

100

100

Infosys Consulting SAS(8)

France

100

100

Infosys Consulting s.r.o.(8)

Czech Republic

100

100

Lodestone Management Consultants Co., Ltd.(8)

China

100

100

Infy Consulting Company Ltd(8)

UK

100

100

Infy Consulting B.V.(8)

The Netherlands

100

100

Infosys Consulting Sp. z.o.o(8)