SUBSIDIARY COMPANIES - ITC Ltd

Notes to financial statements for the year ended 31 March 2012
25. In accordance with Accounting Standard 22 on "Accounting for Taxes
on Income" as notified under the Companies Accounting Standards
Rules, 2006 (as amended), on conservative basis, deferred tax assets
have not been accounted for in the books of accounts, since the
estimation of future taxable profits cannot be made with virtual certainty
against which such Deferred Tax Assets would be realised.
26. Estimated amount of contracts remaining to be executed on capital
account and not provided for ` Nil (Previous Year ` Nil).
27. Operating Lease
General description of the Company's operating lease arrangements:
The Company has entered into operating lease arrangements primarily
for Office premises, Godowns etc. Some of the significant terms and
conditions for the arrangements are:
• agreements can generally be terminated by lessee/either parties by
serving one to three months notice or by paying the notice period
rent in lieu thereof;
• the lease is generally renewable on the expiry of lease period subject
to mutual agreement;
• the Company has no obligation towards the owner in case of
damage to the property on account of risk factors like fire, flood, riots,
natural calamities, etc.
(` in ‘000)
Particulars Year ended Year ended
March 31, 2012 March 31, 2011
Lease rentals charged to the
profit and loss account. 4,661 3,989
28. Employee benefit plans:
The Company has a defined benefit gratuity plan. Every employee who
has completed five years or more of service gets a gratuity on departure
at 15 days salary (last drawn salary) for each completed year of service.
The scheme is funded with an insurance company in the form of a
qualifying insurance policy.
The Provident Fund being administered by a Trust (managed by the
ultimate holding company of the Company) is a defined contribution
scheme. Shortfall in the interest, if any, is adequately provided by the
Company.
The following table summarises the components of net benefit expense
recognised in the profit and loss account, the funded/unfunded status
and amounts recognised in the balance sheet for the Gratuity and Leave
encashment.
80
Profit and Loss account
Net employee benefit expense (recognised in Employee Cost)
(` in ‘000)
Particulars 2011-12 2010-11
Gratuity Leave Gratuity Leave
Encashment Encashment
(Funded) (Unfunded) (Funded) (Unfunded)
Current service cost 347 144 313 130
Interest cost on benefit
obligation 119 152 77 107
Expected return on plan
assets (143) — (97) —
Net actuarial (gain)/loss
recognised in the year 2 273 (11) 470
Past service cost — — 97 —
Net benefit expense 325 569 379 707
Actual return on plan assets 151 — 190 —
Balance Sheet
TECHNICO AGRI SCIENCES LIMITED
Details of Provision for Gratuity and Leave Encashment
Particulars 2011-12 2010-11
(` in ‘000)
Gratuity Leave Gratuity Leave
Encashment Encashment
Defined benefit obligation (1,840) (2,266) (1,519) (1,982)
Fair value of plan assets 1,874 — 1,600 —
Less: Un-recognized
past service cost — — — —
Plan asset/(liability) 34 (2,266) 81 (1,982)
Changes in the present value of the defined benefit obligation are as follows:
(` in ‘000)
Particulars 2011-12 2010-11
Gratuity Leave Gratuity Leave
Encashment Encashment
Opening defined benefit
obligation 1,519 1,982 975 1,416
Interest cost 119 152 77 107
Current service cost 347 144 313 130
Past service cost — — 97 —
Benefits paid (155) (285) (25) (141)
Actuarial (gains)/losses
on obligation 10 273 81 470
Closing defined benefit
obligation 1,840 2.266 1,519 1,982
Changes in the fair value of plan assets are as follows:
Particulars 2011-12
(` in ‘000)
2010-11
Gratuity Leave Gratuity Leave
Encashment Encashment
Opening fair value of
plan assets 1,600 — 993 —
Expected return 143 — 97 —
Contributions by employer 278 285 442 141
Benefits paid (155) (285) (25) (141)
Actuarial gains / (losses) 8 — 93 —
Closing fair value of
plan assets 1,874 — 1,600 —
The Company expects to contribute ` 450 (Previous year ` 400)
thousands to gratuity fund in 2012-13.
The major categories of plan assets as a percentage of the fair value of
total plan assets are as follows:
Particulars 2011-12 2010-11
Investments with insurer 100% 100%
The principal assumptions are the discount rate & salary increase. The
discount rate is based upon the market yields available on Government
bonds at the accounting date with a term that matches that of liabilities
and the salary increase takes in to account inflation, seniority, promotion
and other relevant factors on long term basis.
The principal assumptions used in determining gratuity obligations for
the Company’s plans are shown below:
Particulars 2011-12 2010-11
(In %) (In %)
Discount rate 8.25 8.00
Expected rate of return on plan assets 8.25 7.50