SUBSIDIARY COMPANIES - ITC Ltd

NOTES TO THE ACCOUNTS
Net Asset/(Liability)
recognized in Balance Sheet
(including experience
adjustment impact)
1
2
3
For the year ended
31st March, 2012
Gratuity
Leave
Encashment
For the year ended
31st March, 2011
Gratuity
Leave
Encashment
For the year ended
31st March, 2010
Gratuity
Leave
Encashment
WIMCO LIMITED
For the year ended
31st March, 2009
Gratuity
Leave
Encashment
Present Value of Defined
Benefit Obligation
367.47 89.93 763.22 85.83 1,066.53 110.90 951.89 94.21
Fair Value on Plan assets 279.70 — 514.01 — 969.37 — 956.07 —
Status [Surplus/(deficit)] (87.77) (89.93) (249.21) (85.83) (97.16) (110.90) 4.18 (94.21)
There are no experience adjustments of plan assets / obligations as at March 31, 2012
(` in Lacs)
Gratuity
Defined Benefit Plans
Leave Encashment
(Funded) (Unfunded)
2011-12 2010-11 2011-12 2010-11
Change in obligation during the year
1. Obligation at the beginning of the year 763.22 1,066.52 85.83 110.90
2. Service cost 18.79 41.93 14.13 32.09
3. Interest cost 52.47 85.49 5.72 8.99
4. Actuarial (gains) / losses 241.87 143.14 31.87 37.68
5. Benefits’ payments (708.88) (573.86) (47.62) (103.83)
6. Obligations at the end of the year
Change in plan assets
367.47 763.22 89.93 85.83
1. Plan assets at the beginning of the year 514.01 969.37 — —
2. Expected return on plan assets 30.57 88.58 — —
3. Contribution by employers 444.00 32.00 — —
4. Actual benefits paid (708.88) (573.86) — —
5. Actuarial gains / (losses) — (2.09) — —
6. Plan assets at the end of the year
Reconciliation of present value of the obligation and the fair value of the plan assets
279.70 514.00 — —
1. Fair value of plan assets at the end of the year 279.70 514.01 — —
2. Present value of the defined benefit obligation at the end of the year 367.47 763.22 89.93 85.83
3. Asset /(liability) recognised in the balance sheet
Cost for the period
(87.77) (249.21) (89.93) (85.83)
1. Service cost 18.79 41.93 14.13 32.09
2. Interest cost 52.47 85.49 5.72 8.99
3. Return on plan assets (30.57) (88.58) — —
4. Actuarial (gains) / losses 241.87 143.14 31.87 37.68
Net cost
Investment details of plan assets
The Gratuity Scheme is invested in a Group-cum-Life Assurance cash
accumulation policy offered by Life Insurance Corporation (LIC) of India
282.56 181.98 51.72 78.76
Actual return on plan assets
Actuarial Assumptions:
(30.57) (88.58) — —
1. Discount Rate 8.25% 8.00% 8.25% 8.00%
2. Salary escalation 4.00% 4.00% 4.00% 4.00%
3. Expected return on plan assets 9.00% 9.00% — —
(` in Lacs)
A. Amounts recognised as an expense ` 82.83 lacs (2010-11: ` 78.76 lacs) for leave encashment in "contribution to provident and other funds".
B. Basis used to determine expected rate of return on assets:
The Gratuity scheme is invested in a Group-cum-life assurance cash accumulation policy offered by Life Insurance Corporation of India (LIC). The
invested return earned on the policy comprises bonuses declared by LIC having regard to LIC's investment earnings. The information on the allocation
of the fund into major asset classes and major class are not readily available. We understand that expected return on each LIC's overall portfolio of
assets is well diversified and as such, the long-term return on the policy is expected to be higher than the rate of return on Central Government bonds.
C. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such
as supply and demand in the employment market.
Provident fund liability:
Eligible employees receive benefits from a provident fund, wherein, both the employee and the Company make monthly contributions equal to a
specified percentage of the employee's salary. The company contributed ` 114.46 Lacs (including shortfall of ` 26.53 Lacs) and ` 164.48 Lacs (including
shortfall of ` 10.51 Lacs) towards provident fund during the year ended March 31,2012 and March 31, 2011, respectively. The contributions other
than for the employees of erstwhile Wimco Seedlings Limited, are made to a Trust administered by the Company. Pursuant to the Guidance Note on
Valuation of Interest rate Guarantees on Exempt Provident Fund issued by the Institute of Actuaries of India during the year, based on an actuarial
valuation at March 31, 2012 in this regard, plan assets at year end, at fair value stands at ` 2309.25 Lacs and present value of defined obligation at
year end is ` 2303.74 Lacs. The key assumptions include: (a) Government of India bond yield at 8.57%; (b) Expected guaranteed interest rate at 8.25%;
and (c) Remaining term of maturity at 9 years.
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