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Notes to Accounts of ITC Ltd.

Mar 31, 2017

NOTES:

(1) The Company’s corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The Company is currently focused on four business groups : FMCG, Hotels, Paperboards, Paper and Packaging and Agri Business. The Company’s organizational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

The Operating Segments have been reported in a manner consistent with the internal reporting provided to the Corporate Management Committee, which is the Chief Operating Decision Maker.

(2) The business groups comprise the following :

FMCG : Cigarettes - Cigarettes, Cigars etc.

: Others - Branded Packaged Foods Businesses (Staples; Snacks and Meals; Dairy and Beverages; Confections); Apparel:

Education and Stationery Products; Personal Care Products; Safety Matches and Agarbattis.

Hotels - Hoteliering.

Paperboards, Paper and Packaging - Paperboards, Paper including Specialty Paper and Packaging including Flexibles.

Agri Business - Agri commodities such as soya, spices, coffee and leaf tobacco.

(3) The geographical information considered - Sales within India. for disclosure are : - Sales outside India.

(4) Segment results of ‘FMCG : Others’ are after considering significant business development, brand building and gestation costs of the Branded Packaged Foods businesses and Personal Care Products business.

(5) As stock options are granted under ITC ESOS to align the interests of employees with those of shareholders and also to attract and retain talent for the enterprise as a whole, the option value of ITC ESOS do not form part of the segment performance reviewed by the Corporate Management Committee.

(6) The Company is not reliant on revenues from transactions with any single external customer and does not receive 10% or more of its revenues from transactions with any single external customer.

1. ENTERPRISES WHERE CONTROL EXISTS:

Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) WelcomHotels Lanka (Private) Limited, Sri Lanka

e) Landbase India Limited

f) Russell Credit Limited and its subsidiary

Greenacre Holdings Limited

g) Technico Pty Limited, Australia and its subsidiaries

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary Technico Horticultural (Kunming) Co. Limited, China

h) Technico Agri Sciences Limited

i) Wimco Limited

j) Pavan Poplar Limited k) Prag Agro Farm Limited l) ITC Infotech India Limited and its subsidiaries ITC Infotech Limited, UK ITC Infotech (USA), Inc. and its subsidiaries

Pyxis Solutions, LLC , USA (merged with ITC Infotech (USA), Inc. w.e.f. 01.04.2016)

Indivate Inc., USA (w.e.f. 18.11.2016) m) Gold Flake Corporation Limited n) ITC Investments & Holdings Limited and its subsidiary MRR Trading & Investment Company Limited

o) Surya Nepal Private Limited

p) King Maker Marketing, Inc., USA (ceased w.e.f. 16.11.2016) q) North East Nutrients Private Limited

The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS

i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate

Associates of the Company’s subsidiaries

a) Russell Investments Limited

b) Divya Management Limited

c) Antrang Finance Limited

- being associates of Russell Credit Limited, and

d) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited

Joint Venture of the Company’s subsidiary

a) ITC Essentra Limited

- being joint venture of Gold Flake Corporation Limited

Note: King Maker Marketing, Inc. USA (KMM) ceased to be a subsidiary of the Company with effect from 16.11.2016 consequent to divestment of the Company’s entire shareholding in KMM.

ii) a) Key Management Personnel:

Y. C. Deveshwar1 Chairman & Non-Executive Director

S. Puri2 Chief Executive Officer & Executive Director

N. Anand Executive Director

R. Tandon Executive Director & Chief Financial Officer

Z. Alam Non-Executive Director (w.e.f. 26.10.2016)

A. Baijal* Non-Executive Director (ceased w.e.f. 30.12.2016)

S. Banerjee* Non-Executive Director

A. Duggal* Non-Executive Director

A. V. Girija Kumar Non-Executive Director (upto conclusion of AGM on 22.07.2016) R. E. Lerwill Non-Executive Director (ceased w.e.f. 22.06.2016)

S. B. Mainak Non-Executive Director

S. B. Mathur* Non-Executive Director

P. B. Ramanujam* Non-Executive Director

N. Rao* Non-Executive Director (w.e.f. 08.04.2016)

S. S. H. Rehman* Non-Executive Director

M. Shankar* Non-Executive Director

D.R. Simpson Non-Executive Director (w.e.f. 27.01.2017)

K. Vaidyanath Non-Executive Director (ceased w.e.f. 29.07.2016)

1 Chairman & Non-Executive Director since 05.02.2017, prior to which Mr. Deveshwar was Executive Chairman

2 Appointed also as Chief Executive Officer from 05.02.2017

* Independent Directors

Members - Corporate Management Committee

Y. C. Deveshwar (ceased as Chairman of CMC w.e.f. 05.02.2017)

S. Puri (appointed Chairman of CMC w.e.f. 05.02.2017)

N. Anand R. Tandon

B. B. Chatterjee S. Sivakumar K. S. Suresh

C. Dar

R. Sridhar (w.e.f. 01.04.2016)

B. Sumant (w.e.f. 01.04.2016)

S. K. Singh (w.e.f. 27.01.2017)

b) Relatives of Key Management Personnel:

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar)

Mrs. R. Tandon (wife of Mr. R. Tandon)

iii) Employee Trusts where there is significant influence:

a) IATC Provident Fund

b) ITC Defined Contribution Pension Fund

c) ITC Management Staff Gratuity Fund

d) ITC Employees Gratuity Fund

e) ITC Gratuity Fund ‘C’

f) ITC Pension Fund

g) ILTD Seasonal Employees Pension Fund

h) ITC Platinum Jubilee Pension Fund

i) Tribeni Tissues Limited Gratuity Fund

j) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

k) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘A’

l) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘C’

m) ITC Hotels Limited Employees Superannuation Scheme

1. Capital Management

The Company''s financial strategy aims to support its strategic priorities and provide adequate capital to its businesses for growth and creation of sustainable stakeholder value. The Company funds its operations through internal accruals. The Company aims at maintaining a strong capital base largely towards supporting the future growth of its businesses as a going concern.

During the year, the Company issued 7,35,18,980 equity shares of Rs, 1.00 each amounting to Rs, 7.35 Crores (2016 - Rs, 3.17 Crores) towards its equity-settled employee stock options. The securities premium stood at Rs, 6432.24 Crores as at 31st March, 2017 (2016 - Rs, 5685.86 Crores).

C. Financial risk management objectives

The Company has a system-based approach to risk management, anchored to policies and procedures and internal financial controls aimed at ensuring early identification, evaluation and management of key financial risks (such as market risk, credit risk and liquidity risk) that may arise as a consequence of its business operations as well as its investing and financing activities. Accordingly, the Company''s risk management framework has the objective of ensuring that such risks are managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulation. It also seeks to drive accountability in this regard.

Liquidity Risk

The Company''s Current assets aggregate to Rs, 24537.39 Crores (2016 - Rs, 23233.92 Crores; 2015 - Rs, 22775.12 Crores) including Current investments, Cash and cash equivalents and Other bank balances of Rs, 12847.05 Crores (2016 - Rs, 12110.53 Crores; 2015

- Rs, 12364.40 Crores) against an aggregate Current liability of Rs, 6830.07 Crores (2016 - Rs, 6354.27 Crores; 2015 - Rs, 5653.30 Crores); Non-current liabilities due between one year to three years amounting to Rs, 18.31 Crores (2016 - Rs, 29.83 Crores; 2015 - Rs, 27.75 Crores) and Non-current liability due after three years amounting to Rs, 8.89 Crores (2016 - Rs, 11.13 Crores; 2015 - Rs, 17.99 Crores) on the reporting date.

Further, while the CompanyRs,s total equity stands at Rs, 45340.96 Crores (2016 - Rs, 41656.43 Crores; 2015 - Rs, 37287.83 Crores), it has borrowings of Rs, 18.00 Crores (2016 - Rs, 29.43 Crores; 2015 - Rs, 38.71 Crores). In such circumstances, liquidity risk or the risk that the Company may not be able to settle or meet its obligations as they become due does not exist.

Market Risks

The Company is not an active investor in equity markets; it continues to hold certain investments in equity for long term value accretion which are accordingly measured at fair value through Other Comprehensive Income. The value of investments in such equity instruments as at 31st March, 2017 is Rs, 1115.45 Crores (2016 - Rs, 985.52 Crores; 2015 - Rs, 1015.34 Crores). Accordingly, fair value fluctuations arising from market volatility is recognized in Other Comprehensive Income.

As the Company is virtually debt-free and its deferred payment liabilities do not carry interest, the exposure to interest rate risk from the perspective of Financial Liabilities is negligible. Further, treasury activities, focused on managing investments in debt instruments, are centralized and administered under a set of approved policies and procedures guided by the tenets of liquidity, safety and returns. This ensures that investments are only made within acceptable risk parameters after due evaluation.

The Company''s investments are predominantly held in bonds/debentures, fixed deposits and debt mutual funds. Mark to market movements in respect of the Company''s investments in bonds/debentures that are held at amortized cost are temporary and get recouped through fixed coupon accruals. Other investments in bonds/debentures are fair valued through the Statement of Profit and Loss to recognize market volatility, which is not considered to be significant. Fixed deposits are held with highly rated banks and companies and have a short tenure and are not subject to interest rate volatility.

The Company also invests in mutual fund schemes of leading fund houses. Such investments are susceptible to market price risk that arise mainly from changes in interest rate which may impact the return and value of such investments. However, given the relatively short tenure of underlying portfolio of the mutual fund schemes in which the Company has invested, such price risk is not significant.

For select agricultural commodities primarily held for trading, futures contracts are used to hedge price risks till positions in the physical market are matched. Such activities are managed by the business team within an approved policy framework. The carrying value of inventories is adjusted to the extent of fair value movement of the risk being hedged. Such hedges are generally for short time horizons and recognized in profit or loss within the crop cycle and are managed by the business within the approved policy framework. Accordingly, the Company''s net exposure to commodity price risk is considered to be insignificant.

Foreign currency risk

The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Pound Sterling, Euro and Japanese Yen) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency, including the Company''s net investments in foreign operations (with a functional currency other than Indian Rupee), are also subject to reinstatement risks.

Hedges of foreign currency risk and derivative financial instruments

The Company has established risk management policies to hedge the volatility arising from exchange rate fluctuations in respect of firm commitments and highly probable forecast transactions, through foreign exchange forward and options contracts. The proportion of forecast transactions that are to be hedged is decided based on the size of the forecast transaction and market conditions. As the counterparty for such transactions are highly rated banks, the risk of their non-performance is considered to be insignificant.

The Company uses derivatives to hedge its exposure to changes in movement in foreign currency. Where such derivatives are not designated under hedge accounting, changes in the fair value of such hedges are recognized in the Statement of Profit and Loss.

The Company may also designate certain hedges, usually for large transactions, as a cash flow hedge under hedge accounting, with the objective of shielding the exposure from variability in cash flows. The currency, amount and tenure of such hedges are generally matched to the underlying transaction(s). Changes in the fair value of the effective portion of cash flow hedges are recognized as cash flow hedging reserve in Other Comprehensive Income. While the probability of such hedges becoming ineffective is very low, the ineffective portion, if any, is immediately recognized in the Statement of Profit and Loss.

Foreign Currency Sensitivity

For every percentage point change in the underlying exchange rate of the outstanding foreign currency denominated assets and liabilities, including derivative contracts, holding all other variables constant, the profit before tax for the year ended 31st March, 2017 would change by '' (0.24) Crore (2016 - Rs, 4.55 Crores) and pre-tax total equity as at 31st March, 2017 would change by Rs, 1.11 Crores [2016 - Rs, (0.72) Crore; 2015 - Rs, (4.80) Crores].

Credit Risk

Company''s deployment in debt instruments are primarily in fixed deposits with highly rated banks and companies; bonds issued by government institutions, public sector undertakings and certificate of deposits issued by highly rated banks. Of this, investments that are held at amortised cost stood at Rs, 8705.47 Crores (2016 - Rs, 11009.16 Crores; 2015 - Rs, 7552.33 Crores). With respect to the Company''s investing activities, counter parties are shortlisted and exposure limits determined on the basis of their credit rating (by independent agencies), financial statements and other relevant information. As these counter parties are Government institutions, public sector undertakings with investment grade credit ratings and taking into account the experience of the Company over time, the counter party risk attached to such assets is considered to be insignificant.

The Company''s customer base is large and diverse limiting the risk arising out of credit concentration. Further, credit is extended in business interest in accordance with guidelines issued centrally and business-specific credit policies that are consistent with such guidelines. Exceptions are managed and approved by appropriate authorities, after due consideration of the counterparty''s credentials and financial capacity, trade practices and prevailing business and economic conditions. The Company''s exposure to trade receivables on the reporting date, net of expected loss provisions, stood at Rs, 2207.50 Crores (2016 - Rs, 1686.35 Crores, 2015 - Rs, 1722.40 Crores).

The Company''s historical experience of collecting receivables and the level of default indicate that credit risk is low and generally uniform across markets; consequently, trade receivables are considered to be a single class of financial assets. All overdue customer balances are evaluated taking into account the age of the dues, specific credit circumstances, the track record of the counterparty etc. Loss allowances and impairment is recognized, where considered appropriate by responsible management.

The movement of the expected loss provision (allowance for bad and doubtful loans and receivables etc.) made by the Company are as under:

D. Fair value measurement Fair value hierarchy

Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:

Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.

Level 2: Inputs other than quoted price 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).

The fair value of financial instruments that are not traded in an active market is determined using market approach and valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Derivatives are valued using valuation techniques with market observable inputs such as foreign exchange spot rates and forward rates at the end of the reporting period, yield curves, risk free rate of returns, volatility etc., as applicable.

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

If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparty.

The fair value of trade receivables, trade payables and other Current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature. Where such items are Non-current in nature, the same has been classified as Level 3 and fair value determined using discounted cash flow basis. Similarly, unquoted equity instruments where most recent information to measure fair value is insufficient, or if there is a wide range of possible fair value measurements, cost has been considered as the best estimate of fair value.

There has been no change in the valuation methodology for Level 3 inputs during the year. The Company has not classified any material financial instruments under Level 3 of the fair value hierarchy. There were no transfers between Level 1 and Level 2 during the year.

(i) Ind AS 101 (First-time Adoption of Indian Accounting Standards) provides a suitable starting point for accounting in accordance with Ind AS and is required to be mandatorily followed by first-time adopters. The Company has prepared the opening Balance Sheet as per Ind AS as of 1st April, 2015 (the transition date) by:

a. recognizing all assets and liabilities whose recognition is required by Ind AS,

b. not recognizing items of assets or liabilities which are not permitted by Ind AS,

c. reclassifying items from previous Generally Accepted Accounting Principles (GAAP) to Ind AS as required under Ind AS, and

d. applying Ind AS in measurement of recognized assets and liabilities.

iii) Ind AS 101 mandates certain exceptions and allows first-time adopters exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions in the financial statements:

a. Ind AS 103 (Business Combinations) has not been applied retrospectively to business combinations that occurred prior to 1st April, 2015. Use of this exemption means that in the opening Balance Sheet, goodwill and other assets and liabilities acquired in previous business combinations remain at the previous GAAP carrying values.

b. Property, plant and equipment and intangible assets were carried in the Balance Sheet prepared in accordance with previous GAAP on 31st March, 2015. Under Ind AS, the Company has elected to regard such carrying values as deemed cost at the date of transition.

Further, the Company had revalued certain freehold land and buildings based on professional valuation as at 30th June, 1986 and had a balance of Rs, 52.41 Crores in revaluation reserve on the date of transition. On transition, such revaluation reserve has been adjusted in retained earnings.

c. Under previous GAAP, the Company accumulated exchange differences arising on monetary items that, in substance, formed part of Company''s net investment in non-integral foreign operations in a foreign currency translation reserve. Such balances are to be recognized in the Statement of Profit and Loss on disposal of the net investment. Ind AS allows an entity an option to reset the cumulative translation differences arising on monetary items that exist as of the transition date to zero. The Company has elected to continue presenting the foreign exchange translation reserve under equity.

d. Under previous GAAP, investment in subsidiaries, joint ventures and associates were stated at cost and provisions made to recognize the decline, other than temporary. Under Ind AS, the Company has considered their previous GAAP carrying amount as their deemed cost.

e. Under previous GAAP, the cost of options granted under the ITC Employee Stock Option Scheme (ITC ESOS) [equity - settled] was recognized using the intrinsic value method. Under this method, no expenses were recognized in the Statement of Profit and Loss as the fair value of the shares on the date of grant equaled the exercise price. Under Ind AS, the cost of options granted under ITC ESOS is recognized based on the fair value of the options as on the grant date. In terms of the exemptions, the fair value of unvested options as at the date of transition have been accounted for as part of reserves.

The cost of ITC ESOS applicable to employees of group companies, net of reimbursements, have been considered as capital contribution.

Accordingly, cost of share options totaling Rs, 677.87 Crores which were granted before and still vesting at 1st April, 2015, have been recognized as a separate component of equity in share option outstanding reserve against retained earnings at 1st April, 2015.

f. Under previous GAAP, Trademarks were necessarily amortized. Under Ind AS, certain trademarks have been determined to be of indefinite useful life. This has been recognized in the current financial year. Accordingly, the amortization thereof considered in the previous year has been eliminated.

g. The Company has applied Appendix C of Ind AS 17 (Leases) - ‘Determining whether an Arrangement contains a Lease'' to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.

h. Under previous GAAP, interest free sales tax deferment loan was carried at cost. Under Ind AS, such interest free loans have been carried at previous GAAP amount at the date of transition.

(iv) In addition to the above, the principal adjustments made by the Company in restating its previous GAAP financial statements, including the Balance Sheet as at 1st April, 2015 and the financial statements as at and for the year ended 31st March, 2016 are detailed below:

a. Under previous GAAP, leasehold properties were presented as fixed assets and amortized over the period of the lease. Under Ind AS, such properties have been classified as prepayments within non-current assets (current portion presented as other current assets) and have been amortized over the period of the lease, resulting in decrease in property, plant and equipment by '' 224.83 Crores as at 31st March, 2016 and by Rs, 204.16 Crores as at 1st April, 2015 and capital work-in-progress (CWIP) by Rs, 81.66 Crores as at 31st March, 2016 and by Rs, 75.02 Crores as at 1st April, 2015 and corresponding increase in other non-Current assets by Rs, 303.84 Crores as at 31st March, 2016 and by Rs, 276.05 Crores as at 1st April, 2015 and in other current assets by Rs, 2.65 Crores as at 31st March, 2016 and by Rs, 3.13 Crores as at 1st April, 2015.

Such reclassification has resulted in decrease in depreciation and amortization expense by Rs, 2.52 Crores for the year ended 31st March, 2016 and corresponding increase in other expenses, but does not affect profit

b. Under previous GAAP, dividend payable on equity shares (including the tax thereon) was recognized as a liability in the period to which it relates. Under Ind AS, dividends (including the tax thereon) to shareholders are recognized when declared by the members in a general meeting.

c. Under previous GAAP, non-current investments were stated at cost. Where applicable, provision was made to recognise a decline, other than temporary, in valuation of such investments. Under Ind AS, equity instruments [other than investment in subsidiaries, joint ventures and associates] have been classified as Fair Value through Other Comprehensive Income (FVTOCI) through an irrevocable election at the date of transition.

Investment in Mutual Funds classified as non-current under previous GAAP and carried at cost as on 31st March, 2016, have been measured at Fair Value through Profit or Loss (FVTPL).

d. Under previous GAAP, current investments were stated at lower of cost and fair value. Under Ind AS, these financial assets have been classified as Fair Value through Profit or Loss (FVTPL) on the date of transition and fair value changes after the date of transition has been recognized in profit or loss.

e. The Company uses derivative financial instruments, such as currency forwards, options and exchange traded commodity futures, to hedge its foreign currency risks and commodity price risks, respectively. Under previous GAAP, the net mark to market losses on the outstanding portfolios of such instruments, other than those designated as cash flow hedges, were recognized in the profit or loss, and the net gain, if any, were ignored.

Under Ind AS, changes in the fair value of derivatives designated as cash flow hedges are recognized in equity. Amounts deferred in equity are transferred to the Statement of Profit and Loss in line with the hedged transaction. Changes in the fair value of any derivative instruments that are not designated for hedge accounting are recognized in the Statement of Profit and Loss.

f. Under previous GAAP, actuarial gains and losses related to the defined benefit schemes for gratuity and pension plans and liabilities towards employee leave encashment were recognized in profit or loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability/asset which is recognized in OCI. Consequently, the tax effect of the same has also been recognized in OCI instead of profit or loss.

g. Under previous GAAP, movements in cash credit facilities, repayable on demand, were reflected in cash flows from financing activities in cash flow statement. Under Ind AS, such cash credit facilities are included in cash and cash equivalents in the cash flow statement.


Mar 31, 2015

1. Additional Notes to the Financial Statements

(i) Expenditure incurred under Section 135 of the Companies Act, 2013 applicable for the first time in 2014-15 on Corporate Social Responsibility (CSR) activities - Rs. 214.06 Crores comprising employee benefits expense of Rs. 7.61 Crores and other expenses of Rs. 206.45 Crores of which Rs. 12.67 Crores is accrued for payment as on 31st March, 2015. Such CSR expenditure of Rs. 214.06 Crores excludes Rs. 4.97 Crores being the excess of expenditure of salaries of CSR personnel and administrative expenses over the limit imposed of 5% of total CSR expenditure laid down under Rule 4(6) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 for such expenses.

(ii) Research and Development expenses for the year amount to Rs. 105.79 Crores (2014 - Rs. 117.18 Crores).

(iii) Contingent liabilities and commitments:

(a) Contingent liabilities

(i) Claims against the Company not acknowledged as debts Rs. 404.88 Crores (2014 - Rs. 361.50 Crores). Interest on claims, where applicable, is estimated to be Rs. 153.37 Crores (2014 - Rs. 121.34 Crores). These comprise:

- Excise duty, VAT / sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 314.43 Crores (2014 - Rs. 254.99 Crores). Interest on claims, where applicable, is estimated to be Rs. 135.58 Crores (2014 - Rs. 103.89 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 55.32 Crores (2014 - Rs. 63.62 Crores). Interest on claims, where applicable, is estimated to be Rs. 13.47 Crores (2014 - Rs. 12.36 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 29.05 Crores (2014 - Rs. 37.36 Crores). Interest on claims, where applicable, is estimated to be Rs.0.14 Crore (2014 - Rs. 1.12 Crores).

- Other matters Rs. 6.08 Crores (2014 - Rs. 5.53 Crores). Interest on other matters, where applicable, is estimated to be Rs. 4.18 Crores (2014 - Rs. 3.97 Crores).

It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any, in respect of the above.

(ii) Corporate Guarantee given to Yes Bank Limited for credit facility availed by Broadcast Audience Research Council (BARC) outstanding - Rs. 1.30 Crores (2014 - Nil).

(b) Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs. 1432.41 Crores (2014 - Rs. 1528.10 Crores).

- Uncalled liability on shares partly paid Rs. 26.40 Crores (2014 - Rs. 26.40 Crores).

(iv) Micro, Small and Medium scale business entities:

A sum of Rs. 24.56 Crores is payable to Micro and Small Enterprises as at 31st March, 2015 (2014 - Rs. 23.25 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2015. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(v) The Company's significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as 'Rent' under Note 28.

(vi) Derivative Instruments:

The Company uses forward exchange contracts and currency options to hedge its exposures in foreign currency related to firm commitments and highly probable forecasted transactions. The information on derivative instruments is as follows:

a) Forward exchange contracts outstanding as at year end:

(vii) The Members of the Company had approved the Scheme of Arrangement on 24th March, 2014 between its subsidiary Wimco Limited ('Wimco') and the Company and their respective shareholders under Sections 391 and 394 read with Sections 78, 80, 100 and other applicable provisions of the Companies Act, 1956 for demerger of the Non-Engineering Business including Safety Matches and Agri (Forestry) Business of Wimco to the Company on a going concern basis with effect from 1st April, 2013.

The Hon'ble High Courts at Bombay and Calcutta had sanctioned the Scheme on 10th April, 2014 and 14th May, 2014, respectively. The Scheme became effective on 27th June, 2014 on filing of the Order of the Hon'ble High Court with the respective Registrars of Companies. Consequent to such filing, Scheme has been given effect to, in the financial statements during the financial year ended 31st March, 2015.

Pavan Poplar Limited and Prag Agro Farm Limited engaged in the business of agro-forestry and other related activities, have become direct subsidiaries of the Company with effect from 27th June, 2014, consequent upon the Scheme becoming effective.

The accounting of this Arrangement was done as per the Scheme and the same has been given effect to in the financial statements as under:

a) the assets and liabilities of the Non-Engineering business of Wimco as at 1st April, 2013 have been taken over at their book values subject to adjustments as specified in the Scheme.

b) cancellation of the carrying amount of the Company's investment in Equity amounting to Rs. 113.19 Crores and Preference Shares amounting to Rs. 50.00 Crores of Wimco to the extent attributable to the Non-Engineering business of Wimco.

c) in consideration of the above, the Company issued and allotted 87,761 Ordinary Shares of Rs. 1.00 each as fully paid-up to the shareholders of Wimco in the ratio of 2 Ordinary Shares of Rs. 1.00 each of the Company for every 77 Equity Shares of Rs. 1.00 each of Wimco.

d) the excess of the value of the net assets of the Non-Engineering business of Wimco over the sum of face value of the shares allotted and cancellation of the Company's investment in Wimco, amounting to Rs. 91.00 Crores was debited to General Reserve. Further, earlier unrecognised net deferred tax assets of Rs. 45.84 Crores on carry forward of business losses and other net timing differences of Wimco have been recognised as an adjustment to revenue reserves.

Further, the loss of Rs. 8.01 Crores for the year from 1st April, 2013 (the appointed date) to 31st March, 2014 has been recognised as an adjustment to the revenue reserves.

The results for the financial year ended 31st March, 2015 reflect the effect of the Scheme. Consequently, the figures for the current year are not strictly comparable.

(viii) Pursuant to the enactment of the Companies Act 2013, (the 'Act'), the Company has, effective 1st April 2014, reviewed and revised the estimated useful lives of its fixed assets, in accordance with the provisions of Schedule II of the Act. In respect of assets, whose useful life is exhausted as at 1st April, 2014, the related carrying amount aggregating to Rs. 48.32 Crores (net of deferred tax of Rs. 24.88 Crores) has been adjusted against opening balance of Surplus in the Statement of Profit and Loss. The consequential impact on the depreciation charged to the Statement of Profit and Loss during the year on account of the aforesaid change in useful lives is not material.

(ix) a) Details of Opening and Closing Stock of Finished Goods (manufactured) and Stock-in-Trade (goods purchased for resale)

(x) Liability for earlier years towards Rates and Taxes and Interest thereon of Rs. 157.91 Crores and Rs. 34.77 Crores respectively have been written back as no longer required during the financial year ended 31st March, 2014, based on a favourable High Court Order (Refer Notes 27 and 28). Segment Results of FMCG-Cigarettes and Finance Costs include the effects of such write back (Refer Note 32) during the financial year ended 31st March, 2014.

(xi) Information regarding Employee Stock Option Scheme :

1) Method used to account for share-based payment plans :

The employee compensation cost has been calculated using the intrinsic value method of accounting for Options issued under the Company's Employee Stock Option Schemes. The employee compensation cost as per the intrinsic value method for the financial year 2014-15 is Nil.

2) Nature and extent of employee share based payment plans that existed during the period including the general terms and conditions of each plan :

Each Option entitles the holder thereof to apply for and be allotted ten Ordinary Shares of the Company of Rs. 1.00 each upon payment of the exercise price during the exercise period. The exercise period commences from the date of vesting of the Options and expires at the end of five years from (i) the date of grant in respect of Options granted under the ITC Employee Stock Option Scheme (introduced in 2001) and (ii) the date of vesting in respect of Options granted under the ITC Employee Stock Option Scheme - 2006 & the ITC Employee Stock Option Scheme - 2010.

The vesting period for conversion of Options is as follows:

- On completion of 12 months from the date of grant of the Options : 30% vests

- On completion of 24 months from the date of grant of the Options : 30% vests

- On completion of 36 months from the date of grant of the Options : 40% vests

The Company granted 68,26,355 Options during 2014-15 (2014 - 67,90,925) to the eligible employees of the Company and some of its subsidiary companies.

The Pricing Formula, as approved by the Shareholders of the Company, is such price which is no lower than the closing price of the Company's Share on the National Stock Exchange of India Limited ('the NSE') on the date of grant, or the average price of the Company's Share in the six months preceding the date of grant based on the daily closing price on the NSE, or the 'Market Price' as defined from time to time under the erstwhile Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as determined by the Nomination & Compensation Committee.

The Options have been granted at 'market price' as defined from time to time under the aforesaid Guidelines.

In the financial year 2014-15, Options were granted at Rs. 3572.00 per Option.

4) The Options were exercised throughout the year and weighted average share price of Shares arising upon exercise of Options, based on the closing market price on NSE on the date of exercise of Options (i.e. the date of allotment of shares by the Securityholders Relationship Committee) for the year ended 31st March, 2015 was Rs. 357.59 (31st March, 2014 - Rs. 333.70).

7) The volatility used in the Black Scholes Option Pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time. The period considered for the working is commensurate with the expected life of the options and is based on the daily volatility of the Company's stock price on NSE.

8) Difference between the employee compensation cost so computed at (1) above and the employee compensation cost that shall have been recognised if it had used the fair value of the Options.

Rs. 529.44 crores

(xii) Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification/ disclosure.

2. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS: i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) WelcomHotels Lanka (Private) Limited, Sri Lanka

e) Landbase India Limited

f) Russell Credit Limited and its subsidiary

Greenacre Holdings Limited

g) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary Technico Horticultural (Kunming) Co. Limited, China h) Wimco Limited i) Pavan Poplar Limited 1 j) Prag Agro Farm Limited 1 k) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary Pyxis Solutions, LLC, USA l) Wills Corporation Limited m) Gold Flake Corporation Limited n) ITC Investments & Holdings Limited and its subsidiary

MRR Trading & Investment Company Limited (w.e.f. 30.03.2015) o) Surya Nepal Private Limited p) King Maker Marketing, Inc., USA q) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited (upto 29.03.2015) r) North East Nutrients Private Limited The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

1 Pursuant to the Scheme of Arrangement [Refer Note 31(x)]

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Company's subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited

Joint Venture of the Company's subsidiary

a) ITC Essentra Limited

- being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel:

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director

K. N. Grant Executive Director

A. Baijal2 Non-Executive Director

S. Banerjee1 Non-Executive Director (w.e.f. 24.07.2014)

A. Duggal2 Non-Executive Director (w.e.f. 15.09.2014)

S. H. Khan2 Non-Executive Director

A. V. Girija Kumar Non-Executive Director

R. Lerwill Non-Executive Director

S. B. Mainak Non-Executive Director (w.e.f. 25.04.2014)

S. B. Mathur2 Non-Executive Director

P. B. Ramanujam2 Non-Executive Director

S. S. H. Rehman2 Non-Executive Director

A. Ruys Non-Executive Director (ceased w.e.f. 24.07.2014) M. Shankar2 Non-Executive Director

K. Vaidyanath Non-Executive Director

1 Appointed as Independent Director w.e.f. 30.07.2014

2 Appointed as Independent Director w.e.f. 15.09.2014

Members - Corporate Management Committee

B. B. Chatterjee A. Nayak

S. Puri (w.e.f. 01.11.2014) T. V. Ramaswamy S. Sivakumar K. S. Suresh R. Tandon

b) Relatives of Key Management Personnel:

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar) Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee) Mrs. S. Rehman (wife of Mr. S. S. H. Rehman)

iii) Employee Trusts where there is significant influence:

a) IATC Provident Fund

b) IATC Staff X Provident Fund (merged with IATC Provident Fund w.e.f. 01.08.2014)

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund 'C'

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Gratuity Fund

k) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

l) ITC Bhadrachalam Paperboards Limited Gratuity Fund 'A'

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund 'C'

n) ITC Hotels Limited Employees Superannuation Scheme


Mar 31, 2014

(i) Contingent liabilities and commitments:

(a)Contingent liabilities

Claims against the Company not acknowledged as debts Rs. 361.50 Crores (2013 - Rs. 466.54 Crores). These comprise:

- Excise duty, sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 254.99 Crores (2013 - Rs. 377.74 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 63.62 Crores (2013 - Rs. 45.16 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 37.36 Crores (2013 - Rs. 39.07 Crores).

- Other matters Rs. 5.53 Crores (2013 - Rs. 4.57 Crores).

It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any, in respect of the above.

(b)Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs. 1528.10 Crores (2013 - Rs. 1656.29 Crores).

- Uncalled liability on shares partly paid Rs. 26.40 Crores (2013 - Rs. 26.40 Crores).

(iii) Research and Development expenses for the year amount to Rs. 117.18 Crores (2013 - Rs. 109.22 Crores).

(v) Micro, Small and Medium scale business entities:

A sum of Rs. 23.25 Crores is payable to Micro and Small Enterprises as at 31st March, 2014 (2013 - Rs. 15.12 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2014. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(vi) The Company''s significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Note 28.

(ix) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this year''s Annexure to the Report of the Directors are treated as an annexure to these accounts.

(x) The Board of Directors of the Company, at its meeting held on 28th August, 2013, proposed a Scheme of Arrangement under Sections 391 and 394 read with Sections 78, 80, 100 and other applicable provisions of the Companies Act, 1956, between its subsidiary, Wimco Limited (''Wimco'') and the Company and their respective shareholders (''the Scheme'') for demerger of the Non-Engineering business of Wimco to the Company on a going concern basis with effect from 1st April, 2013. The Members of the Company approved the Scheme on 24th March, 2014. The Hon''ble High Courts at Bombay and Calcutta have also sanctioned the Scheme on 10th April, 2014 and 14th May, 2014, respectively. Certified copies of the Orders from the Courts are awaited. The Scheme would become effective upon filing of such certified copies of the Orders with the respective Registrar of Companies. Pending this, the Scheme has not been given effect to in these financial statements.

(xiv) Value of Raw materials, Spare parts and Components consumed during the year

(xvii) Liability for earlier years towards Rates and Taxes and Interest thereon of Rs. 157.91 Crores and Rs. 34.77 Crores respectively have been written back as no longer required, based on a favourable High Court Order (Refer Notes 27 and 28). Segment Results of FMCG-Cigarettes and Finance Costs include the effects of such write back (Refer Note 32).

(xviii) Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/ disclosure.

33. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) WelcomHotels Lanka (Private) Limited, Sri Lanka

e) Landbase India Limited

f) Russell Credit Limited and its subsidiary

Greenacre Holdings Limited

g) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary Technico Horticultural (Kunming) Co. Limited, China h) Wimco Limited and its subsidiaries Pavan Poplar Limited Prag Agro Farm Limited i) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary Pyxis Solutions, LLC, USA j) Wills Corporation Limited k) Gold Flake Corporation Limited l) ITC Investments & Holdings Limited m) Surya Nepal Private Limited n) King Maker Marketing, Inc., USA o) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited p) North East Nutrients Private Limited (w.e.f. 06.02.2014) The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Company''s subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited

Joint Venture of the Company''s subsidiary

a) ITC Essentra Limited (formerly known as ITC Filtrona Limited) - being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel:

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director

K. N. Grant Executive Director

A. Baijal Non-Executive Director

S. Banerjee Non-Executive Director (upto 26.03.2014)

S. H. Khan Non-Executive Director

A. V. Girija Kumar Non-Executive Director

R. Lerwill Non-Executive Director (w.e.f. 18.11.2013)

S. B. Mathur Non-Executive Director

D. K. Mehrotra Non-Executive Director (upto 27.10.2013)

H. G. Powell Non-Executive Director (upto 30.07.2013)

P. B. Ramanujam Non-Executive Director

S. S. H. Rehman Non-Executive Director

A. Ruys Non-Executive Director

B. Sen Non-Executive Director (upto 27.08.2013)

M. Shankar Non-Executive Director

K. Vaidyanath Non-Executive Director

B. Vijayaraghavan Non-Executive Director (upto 27.08.2013)

Members - Corporate Management Committee

B. B. Chatterjee

A. Nayak

T. V. Ramaswamy

S. Sivakumar

K. S. Suresh

R. Tandon

b) Relatives of Key Management Personnel:

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar) Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee)

iii) Employee Trusts where there is significant influence:

a) IATC Provident Fund

b) IATC Staff X Provident Fund

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund ''C''

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Gratuity Fund

k) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

l) ITC Bhadrachalam Paperboards Limited Gratuity Fund ''A''

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund ''C''

n) ITC Hotels Limited Employees Superannuation Scheme


Mar 31, 2013

Terms and Conditions of Options Granted

Each Option entitles the holder thereof to apply for and be allotted ten Ordinary Shares of the Company of Rs. 1.00 each upon payment of the exercise price during the exercise period. The exercise period commences from the date of vesting of the Options and expires at the end of five years from (i) the date of grant in respect of Options granted under the ITC Employee Stock Option Scheme (introduced in 2001) and (ii) the date of vesting in respect of Options granted under the ITC Employee Stock Option Scheme -2006 & the ITC Employee Stock Option Scheme -2010.

Term loans from Banks

Repayable in equated periodic instalments upto a 5 year period from the date of respective loan. These are repayable by 2014-15 and carry an interest of 11.25% p.a.

Sales tax deferment loans

Repayable after a period of 10 to 14 years from the end of the month of respective loans. These are repayable by 2025-26 and are interest free.

* Represents dividend amounts either not claimed or kept in abeyance in accordance with Section 206A of the Companies Act, 1956, or such amounts in respect of which Prohibitory / Attachment Orders are on record with the Company.

** Represents amounts which are subject matter of pending legal disputes, details in respect of which are on record with the Company, including an amount of Rs. 0.30 Crore (2012 - Rs. 0.30 Crore) maintained with a bank for which the Company has filed a suit.

(i) Exchange difference in respect of forward exchange contracts to be recognised in the Statement of Profit and Loss in the subsequent accounting period amounts to Rs. 0.88 Crore (2012 - Rs. 0.78 Crore).

(ii) Contingent liabilities and commitments:

(a)Contingent liabilities

Claims against the Company not acknowledged as debts Rs. 466.54 Crores (2012 - Rs. 287.08 Crores). These comprise:

- Excise duty, sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 377.74 Crores (2012 - Rs. 199.23 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 45.16 Crores (2012 - Rs. 47.35 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 39.07 Crores (2012 - Rs. 37.26 Crores).

- Other matters Rs. 4.57 Crores (2012 - Rs. 3.24 Crores).

It is not practicable for the Company to estimate the timings of cash flows, if any, in respect of the above.

(b) Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs. 1656.29 Crores (2012 - Rs. 2246.53 Crores).

- Uncalled liability on shares partly paid Rs. 26.40 Crores (2012 - Rs. 26.40 Crores).

(iii) The status on excise matters which is treated as an annexure to these accounts are as outlined in this years Report of the Directors & Management Discussion and Analysis under the Excise section. In the opinion of the Directors, the Company does not accept any further liability.

(iv) Research and Development expenses for the year amount to Rs. 109.22 Crores (2012 - Rs. 87.84 Crores).

(v) Micro, Small and Medium scale business entities:

A sum of Rs. 15.12 Crores is payable to Micro and Small Enterprises as at 31st March, 2013 (2012 - Rs. 12.42 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2013. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(vi) The Companys significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Note 28.

(vii) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this years Annexure to the Report of the Directors are treated as an annexure to these accounts.

(viii) Previous years figures have been regrouped / reclassified wherever necessary to correspond with the current years classification/ disclosure.

1. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) WelcomHotels Lanka (Private) Limited, Sri Lanka

e) Landbase India Limited

f) Russell Credit Limited and its subsidiary

Greenacre Holdings Limited

g) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary

Technico Horticultural (Kunming) Co. Limited, China

h) Wimco Limited and its subsidiaries

Pavan Poplar Limited

Prag Agro Farm Limited

i) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary

Pyxis Solutions, LLC, USA

j) Wills Corporation Limited

k) Gold Flake Corporation Limited

l) ITC Investments & Holdings Limited

m) Surya Nepal Private Limited

n) King Maker Marketing, Inc., USA

o) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited

The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS

i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Companys subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited

Joint Venture of the Companys subsidiary

a) ITC Filtrona Limited

- being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel:

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director

K. N. Grant Executive Director

A. Baijal Non-Executive Director

S. Banerjee Non-Executive Director

S. H. Khan Non-Executive Director

A. V. Girija Kumar Non-Executive Director

S. B. Mathur Non-Executive Director

D. K. Mehrotra Non-Executive Director

H. G. Powell Non-Executive Director

P. B. Ramanujam Non-Executive Director

S. S. H. Rehman (w.e.f. 27.07.2012) Non-Executive Director

A. Ruys Non-Executive Director

B. Sen Non-Executive Director

M. Shankar (w.e.f. 06.09.2012) Non-Executive Director

K. Vaidyanath Non-Executive Director

B. Vijayaraghavan Non-Executive Director

Members - Corporate Management Committee

B. B. Chatterjee

A. Nayak

T. V. Ramaswamy

S. Sivakumar

K. S. Suresh

R. Tandon

b) Relatives of Key Management Personnel:

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar)

Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee)

iii) Employee Trusts where there is significant influence:

a) IATC Provident Fund

b) IATC Staff X Provident Fund

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund C

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Provident Fund

k) Tribeni Tissues Limited Gratuity Fund

l) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund A

n) ITC Bhadrachalam Paperboards Limited Gratuity Fund C

o) ITC Bhadrachalam Paperboards Limited Staff Provident Fund

p) ITC Hotels Limited Employees Superannuation Scheme

q) ITC Hotels Limited Employees Gratuity Fund


Mar 31, 2012

1. Additional Notes to the Financial Statements

(i) The revised Schedule VI has become effective from 1st April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

(ii) Exchange difference in respect of forward exchange contracts to be recognised in the Statement of Profit and Loss in the subsequent accounting period amounts to Rs 0.78 Crore (2011 - Rs 0.26 Crore).

(iii) Contingent liabilities and commitments:

(a) Contingent liabilities

Claims against the Company not acknowledged as debts Rs 287.08 Crores (2011 - Rs 255.17 Crores). These comprise:

- Excise duty, sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs 199.23 Crores (2011 - Rs 182.87 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs 47.35 Crores (2011 - Rs 33.83 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs 37.26 Crores (2011 - Rs 35.08 Crores).

- Other matters Rs 3.24 Crores (2011 - Rs 3.39 Crores).

(b)Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs 2246.53 Crores (2011 - Rs 1976.62 Crores).

- Uncalled liability on shares partly paid Rs 26.40 Crores (2011 - Rs 26.40 Crores).

(iv) The status on excise matters which is treated as an annexure to these accounts are as outlined in this year's Report of the Directors & Management Discussion and Analysis under the Excise section. In the opinion of the Directors, the Company does not accept any further liability.

(v) Research and Development expenses for the year amount to Rs 87.84 Crores (2011 - Rs 90.24 Crores).

(vi) Micro, Small and Medium scale business entities: A sum of Rs 12.42 Crores is payable to Micro and Small Enterprises as at 31st March, 2012 (2011 - Rs 4.60 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2012. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(vii) The Company's significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Note 25.

(viii) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this year's Annexure to the Report of the Directors are treated as an annexure to these accounts.

(ix) Gross Revenue from sale of products and services comprise*

NOTES : (1) The Company's corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The Company is currently focused on four business groups: FMCG, Hotels, Paperboards, Paper and Packaging and Agri Business. The Company's organisational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

(2) The business groups comprise the following:

FMCG : Cigarettes – Cigarettes, Cigars and Smoking Mixtures.

: Others – Branded Packaged Foods (Staples, Biscuits, Confectionery, Snack Foods, Pasta & Noodles, Ready to Eat Foods), Garments, Educational and other Stationery products, Matches, Agarbattis and Personal Care products.

Hotels – Hoteliering. Paperboards,

Paper and Packaging – Paperboards, Paper including Specialty Paper and Packaging including Flexibles.

Agri Business – Agri commodities such as soya, spices, coffee and leaf tobacco.

(3) The geographical segments considered for disclosure are:

– Sales within India.

– Sales outside India.

(4) Segment results of 'FMCG: Others' are after considering significant business development, brand building and gestation costs of Branded Packaged Foods and Personal Care Products businesses.

(5) The Company's Agri Business markets agri commodities in the export and domestic markets; supplies agri raw materials to the Branded Packaged Foods Business and sources leaf tobacco for the Cigarettes Business. The segment results for the year are after absorbing costs relating to the strategic e-Choupal initiative.

2. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) Russell Credit Limited and its subsidiary Greenacre Holdings Limited

e) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary

Technico Horticultural (Kunming) Co. Limited, China

f) Wimco Limited and its subsidiaries

Pavan Poplar Limited

Prag Agro Farm Limited

g) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary

Pyxis Solutions, LLC

h) Wills Corporation Limited

i) Gold Flake Corporation Limited

j) Landbase India Limited

k) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited

l) Surya Nepal Private Limited

m) King Maker Marketing, Inc., USA

The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS

i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Company's subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited (w.e.f. 27.09.2011)


Mar 31, 2011

(i) Exchange difference in respect of forward exchange contracts to be recognised in the Profit and Loss Account in the subsequent accounting period amounts to Rs. 0.26 Crore (2010 - Rs. 0.54 Crore).

(ii) (a) Claims against the Company not acknowledged as debts Rs. 255.17 Crores (2010 - Rs. 258.73 Crores). These comprise:

- Excise Duty, Sales Taxes and other Indirect Taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 182.87 Crores (2010 - Rs. 193.74 Crores).

- Local Authority Taxes/Cess/Royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 33.83 Crores (2010 - Rs. 33.49 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 35.08 Crores (2010 -Rs. 29.22 Crores).

- Other matters Rs. 3.39 Crores (2010 - Rs. 2.28 Crores).

* After considering Bonus issue.

During the year Bonus Shares in the ratio of 1:1 were allotted on 6th August, 2010. Previous year figures have been restated

for the purpose of computation of Earnings per share.

(iv) The status on excise matters which is treated as an annexure to these accounts are as outlined in this years Report of the Directors & Management Discussion and Analysis under the Excise section. In the opinion of the Directors, the Company does not accept any further liability.

(v) Research and Development expenses for the year amount to Rs. 90.24 Crores (2010 - Rs. 77.08 Crores).

(vii) Micro and Medium scale business entities :

There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2011. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(viii) The Companys significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Schedule 17.

(ix) The following donations were made to political parties during the year : Indian National Congress – Rs. 0.50 Crore (2010 – Rs. 2.50 Crores), Bharatiya Janata Party – Rs. Nil (2010 – Rs. 2.50 Crores), Samajwadi Party – Rs. Nil (2010 – Rs. 0.42 Crore), Rashtriya Janata Dal – Rs. Nil (2010 – Rs. 0.33 Crore), Dravida Munnetra Kazhagam – Rs. Nil (2010 – Rs. 0.22 Crore), Shiv Sena Rs. Nil (2010 – Rs. 0.17 Crore) and Nationalist Congress Party – Rs. Nil (2010 – Rs. 0.14 Crore).

(xi) DIRECTORS REMUNERATION

The above (a) excludes contribution to the approved group pension and gratuity funds and provisions for leave encashment, which are actuarially determined on an overall Company basis and (b) includes Rs. 0.89 Crore, in respect of two Executive Directors, Mr. P. V. Dhobale and Mr. N. Anand, whose appointment by the Board of Directors for tenures commencing from 3rd January, 2011 are subject to approval of the Members at the forthcoming Annual General Meeting.

(xii) Derivative Instruments :

The Company uses Forward Exchange Contracts and Currency Options to hedge its exposures in foreign currency related to firm commitments and highly probable forecasted transactions. The information on Derivative Instruments is as follows :

* Figures in brackets indicate Open Exports. Figures without brackets indicate Open Imports.

(xiii) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this years Annexure to the Report of the Directors are treated as an annexure to these accounts.

(xv) ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPHS 3, 4C AND 4D OF PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956.

a) The "Registered/Licensed Capacity" (including as approved by "Letters of Intent") is exclusive of additional capacities permissible under the policy of the Government of India.

b) Includes production meant for internal consumption.

c) Based on Capacity rated by equipment manufacturers/project consultants at the time of installation. N.A. - Not Applicable

* Relates to the Companys main products and the principal raw materials.

# Others primarily include Hotel Consumables, Spices, Skimmed Milk Powder, Fabrics, Agri Inputs etc.

Note : The Board of Directors of the Company have specifically consented to the continued disclosure of certain items individually constituting less than 10% of the total value of turnover, purchases, opening and closing stocks, and raw materials consumed, covered in (B), (C) and (D), as appropriate, in the Additional Information provided above.

NOTES :

(1) The Companys corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The Company is currently focused on four business groups : FMCG, Hotels, Paperboards, Paper & Packaging and Agri Business. The Companys organisational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

(2) The business groups comprise the following :

FMCG : Cigarettes - Cigarettes, Cigars and Smoking Mixtures.

: Others - Branded Packaged Foods (Staples, Biscuits, Confectionery, Snack Foods, Noodles, Ready to Eat Foods), Garments, Educational and other Stationery products, Matches, Agarbattis and Personal Care products.

Hotels - Hoteliering.

Paperboards, Paper and Packaging - Paperboards, Paper including Specialty Paper and Packaging including Flexibles.

Agri Business - Agri commodities such as rice, soya, coffee and leaf tobacco.

(3) The geographical segments considered for disclosure are :

- Sales within India.

- Sales outside India.

(4) Segment results of ‘FMCG : Others are after considering significant business development, brand building and gestation costs of Branded Packaged Foods and Personal Care Products businesses.

(5) The Companys Agri Business markets agri commodities in the export and domestic markets; supplies agri raw materials to the Branded Packaged Foods Business and sources leaf tobacco for the Cigarettes Business. The segment results for the year are after absorbing costs relating to the strategic e-Choupal initiative.

21. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries :

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) Russell Credit Limited and its subsidiaries

Greenacre Holdings Limited

Wimco Limited and its subsidiaries

Pavan Poplar Limited

Prag Agro Farm Limited

Technico Pty Limited, Australia and its subsidiaries

Technico ISC Pty Limited, Australia (deregistered on 03.11.2010)

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary

Technico Horticultural (Kunming) Co. Limited, China

e) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary

Pyxis Solutions, LLC

f) Wills Corporation Limited

g) Gold Flake Corporation Limited h) Landbase India Limited

i) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited

j) Surya Nepal Private Limited

k) King Maker Marketing, Inc.

The above list does not include :

a) ITC Global Holdings Pte. Limited, Singapore (in liquidation) and its subsidiaries

Hup Hoon Traders Pte. Limited, Singapore (struck off w.e.f. 31.03.2011 by the Registrar of Companies, Singapore)

AOZT "Hup Hoon", Moscow

Hup Hoon Impex SRL, Romania, and

b) BFIL Securities Limited (a subsidiary of BFIL Finance Limited) which is under voluntary winding up proceedings.

ii) Other entities under control of the Company :

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS

i) Associates & Joint Ventures : Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Companys Subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited (w.e.f. 24.09.2010)

- being joint ventures of the Company

Joint Venture of the Companys subsidiary

a) ITC Filtrona Limited

- being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel (KMP) :

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director (KMP w.e.f. 26.07.2010)

K. N. Grant Executive Director

A. Singh Executive Director (upto 23.07.2010)

A. Baijal Non-Executive Director

S. Banerjee Non-Executive Director

S. H. Khan Non-Executive Director

A. V. Girija Kumar Non-Executive Director

S. B. Mathur Non-Executive Director

D. K. Mehrotra Non-Executive Director

H. G. Powell Non-Executive Director

P. B. Ramanujam Non-Executive Director

A. Ruys Non-Executive Director

B. Sen Non-Executive Director

K. Vaidyanath Non-Executive Director

B. Vijayaraghavan Non-Executive Director

Members - Corporate Management Committee

A. Nayak

S. Sivakumar

T. V. Ramaswamy

R. Tandon

B. B. Chatterjee

K. S. Suresh

b) Relatives of Key Management Personnel :

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar)

Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee)

iii) Employee Trusts where there is significant influence :

a) IATC Provident Fund

b) IATC Staff X Provident Fund

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund ‘C

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Provident Fund

k) Tribeni Tissues Limited Gratuity Fund

l) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘A

n) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘B

o) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘C

p) ITC Bhadrachalam Paperboards Limited Staff Provident Fund

q) ITC Hotels Limited Employees Superannuation Scheme

r) ITC Hotels Limited Employees Gratuity Fund


Mar 31, 2010

Employee Benefits

To make regular monthly contributions to various Provident Funds which are in the nature of defined contribution scheme and such paid / payable amounts are charged against revenue. To administer such Funds through duly constituted and approved independent trusts with the exception of Provident Fund and Family Pension contributions in respect of Unionised Staff which are statutorily deposited with the Government.

To administer through duly constituted and approved independent trusts, various Gratuity and Pension Funds which are in the nature of defined benefit/contribution schemes. To determine the liabilities towards such schemes, as applicable, and towards employee leave encashment by an independent actuarial valuation as per the requirements of Accounting Standard - 15 (revised 2005) on “Employee Benefits”. To determine actuarial gains or losses and to recognise such gains or losses immediately in Profit and Loss Account as income or expense.

To charge against revenue, actual disbursements made, when due, under the Workers’ Voluntary Retirement Scheme.

Lease Rentals

To charge Rentals in respect of leased equipment to the Profit and Loss Account.

Research and Development

To write off all expenditure other than capital expenditure on Research and Development in the year it is incurred.

Capital expenditure on Research and Development is included under Fixed Assets.

Taxes on Income

To provide Current tax as the amount of tax payable in respect of taxable income for the period, measured using the applicable tax rates and tax laws.

To provide Deferred tax on timing differences between taxable income and accounting income subject to consideration of prudence, measured using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date.

Not to recognise Deferred tax assets on unabsorbed depreciation and carry forward of losses unless there is virtual certainty that there will be sufficient future taxable income available to realise such assets.

Foreign Currency Translation

To account for transactions in foreign currency at the exchange rate prevailing on the date of transactions. Gains / Losses arising out of fluctuations in the exchange rates are recognised in the Profit and Loss Account in the period in which they arise.

To account for differences between the forward exchange rates and the exchange rates at the date of transactions, as income or expense over the life of the contracts.

To account for profit/loss arising on cancellation or renewal of forward exchange contracts as income/expense for the period.

To account for premium paid on currency options in the Profit and Loss Account at the inception of the option.

To account for profit / loss arising on settlement or cancellation of currency option as income/expense for the period.

To recognise the net mark to market losses in the Profit and Loss Account on the outstanding portfolio of options as at the Balance Sheet date, and to ignore the net gain, if any.

To account for gains / losses in the Profit and Loss Account on foreign exchange rate fluctuations relating to monetary items at the year end.

Claims

To disclose claims against the Company not acknowledged as debts after a careful evaluation of the facts and legal aspects of the matter involved.

Segment Reporting

To identify segments based on the dominant source and nature of risks and returns and the internal organisation and management structure.

To account for inter-segment revenue on the basis of transactions which are primarily market led.

To include under “Unallocated Corporate Expenses” revenue and expenses which relate to the enterprise as a whole and are not attributable to segments.

Financial and Management Information Systems

To practise an Integrated Accounting System which unifies both Financial Books and Costing Records. The books of account and other records have been designed to facilitate compliance with the relevant provisions of the Companies Act on one hand, and meet the internal requirements of information and systems for Planning, Review and Internal Control on the other. To ensure that the Cost Accounts are designed to adopt Costing Systems appropriate to the business carried out by the Division with each Division incorporating into its Costing System, the basic tenets and principles of Standard Costing, Budgetary Control and Marginal Costing as appropriate.

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