in a Dynamic Environment - Domain-b

Annual Report 2008-09The use of hedging instruments is governed by the Company’s policies approved by the board of directors,which provide written principles on the use of such financial derivatives consistent with the Company’s riskmanagement strategy.Hedging instruments are initially measured at fair value, and are remeasured at subsequent reporting dates.Changes in the fair value of these derivatives that are designated and effective as hedges of future cash flowsare recognised directly in shareholders’ funds and the ineffective portion is recognised immediately in the profitand loss account.Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting arerecognised in the profit and loss account as they arise.Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, orno longer qualifies for hedge accounting. At that time for forecasted transactions, any cumulative gain or losson the hedging instrument recognised in shareholders’ funds is retained there until the forecasted transactionoccurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised inshareholders’ funds is transferred to the profit and loss account for the period.n) InventoriesRaw materials, sub-assemblies and components are carried at the lower of cost and net realisable value. Cost isdetermined on a weighted average basis. Purchased goods in transit are carried at cost. Work-in-progress iscarried at the lower of cost and net realisable value. Stores and spare parts are carried at cost, less provision forobsolescence. Finished goods produced or purchased by the Company are carried at lower of cost and netrealisable value. Cost includes direct material and labour cost and a proportion of manufacturing overheads.o) Provisions, Contingent Liabilities and Contingent AssetsA provision is recognised when the Company has a present obligation as a result of past event and it is probablethat an outflow of resources will be required to settle the obligation, in respect of which reliable estimate canbe made. Provisions (excluding retirement benefits) are not discounted to its present value and are determinedbased on best estimate required to settle the obligation at the balance sheet date. These are reviewed at eachbalance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognisedin the financial statements. A Contingent asset is neither recognised nor disclosed in the financial statements.p) Cash and cash equivalentsThe Company considers all highly liquid financial instruments, which are readily convertible into cash and haveoriginal maturities of three months or less from the date of purchase, to be cash equivalents.2) Acquisitions / Divestmentsa) On May 12, 2008, the Company, through its wholly owned subsidiary, Tata Consultancy Services Asia Pacific PteLimited, subscribed to 100 percent share capital of Tata Consultancy Services (Thailand) Limited.b) On September 19, 2008, the Company, through its wholly owned subsidiary, Tata Consultancy Services AsiaPacific Pte Limited, subscribed to 100 percent share capital of Tata Consultancy Services (Philippines) Inc.c) On October 22, 2008, Tata Infotech Deutschland GmbH has merged with Tata Consultancy Services DeutschlandGmbH. The merged entity is a wholly owned subsidiary of Tata Consultancy Services Limited.d) On December 2, 2008, Financial Network Services (Europe) Plc (subsidiary of TCS FNS Pty Limited) has beenvoluntarily liquidated.e) On December 11, 2008 the Company subscribed to 50 percent share capital of National Power Exchange Limited,established to promote trading of electrical power in India.f) On December 31, 2008 the Company acquired 96.26 percent equity interest in TCS e-Serve Limited (formerlyknown as Citigroup Global Services Limited (CGSL)), a business process outsourcing provider in the Bankingand Financial Services sector, for a total consideration of Rs. 2449.48 crores (USD 504.54 million).g) On February 10, 2009, the Company, through its subsidiary, TCS e-Serve International Limited, subscribed to100 percent share capital of TCS e-Serve America, Inc.136