Bharti Airtel Ltd. நிறுவனத்தின் கணக்கியல் கொள்கைகள்
Mar 31, 2023
1. Corporate information
Bharti Airtel Limited (âthe Companyâ) is domiciled and incorporated in India as a public limited company listed on the National Stock Exchange of India Limited and the BSE Limited. The registered office of the Company is situated at Airtel Center, Plot no. 16, Udyog Vihar, Phase - IV, Gurugram - 122 015, Haryana, India.
The Company is principally engaged in provision of telecommunication services in India. The details as to the services provided by the Company are further provided in note 23.
2. Summary of significant accounting policies Basis of preparation
These Standalone Financial Statements (âFinancial Statementsâ) have been prepared to comply in all material respects with the Indian Accounting Standards (âInd ASâ) as notified by the Ministry of Corporate Affairs (âMCAâ) under Section 133 of the Companies Act, 2013 (âActâ), read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and other accounting principles generally accepted in India.
The Financial Statements are approved for issue by the Companyâs Board of Directors on May 16, 2023.
The Financial Statements are based on the classification provisions contained in Ind AS 1, âPresentation of Financial Statementsâ and Division II of Schedule III (as amended) to the Act. Further, for the purpose of clarity, various items are aggregated in the Standalone Balance Sheet (âBalance Sheetâ) and, Standalone Statement of Profit and Loss (âStatement of Profit and Lossâ). Nonetheless, these items are disaggregated separately in the notes to the Financial Statements, where applicable or required.
All the amounts included in the Financial Statements are reported in millions of Indian Rupee (âRupeeâ or â Hâ) and are rounded off to the nearest million, except per share data and unless stated otherwise. Further, due to rounding off, certain amounts are appearing as â0â.
The preparation of the said Financial Statements requires the use of certain critical accounting estimates and judgements. It also requires the management to exercise judgement in the process of applying the Companyâs accounting policies. The areas where estimates are significant to the Financial Statements, or areas involving a higher degree of judgement or complexity, are disclosed in note 3.
The accounting policies, as set out in the following paragraphs of this note, have been consistently applied, by the Company, to all the periods presented in the said
Financial Statements, except in case of adoption of any new standards and amendments during the year.
To provide more reliable and relevant information about the effect of certain items in the Balance Sheet and Statement of Profit and Loss, the Company has changed the classification of certain items.
New amendments adopted during the year
Amendments to Ind AS
MCA vide notification no. G.S.R. 255(E) dated March 23, 2022 has issued the Companies (Indian Accounting Standards) Amendment Rules, 2022 which amends following Ind AS (as applicable to the Company):
⢠Ind AS 103, Business Combinations
⢠Ind AS 109, Financial Instruments
⢠Ind AS 16, Property, Plant and Equipment
⢠Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets
The amendments are applicable for annual periods beginning on or after April 1, 2022, however, these do not have material impact on the Financial Statements of the Company.
Amendments to Ind AS issued but not yet effective
MCA vide notification no. G.S.R. 242(E) dated March 31, 2023 has issued the Companies (Indian Accounting Standards) Amendment Rules, 2023 which amends following Ind AS (as applicable to the Company):
⢠Ind AS 102, Share-based Payments
⢠Ind AS 103, Business Combinations
⢠Ind AS 107, Financial Instruments: Disclosures
⢠Ind AS 109, Financial Instruments
⢠Ind AS 115, Revenue from Contracts with Customers
⢠Ind AS 1, Presentation of Financial Statements
⢠Ind AS 12, Income Taxes
⢠Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors
⢠Ind AS 34, Interim Financial Reporting
The amendments are applicable for annual periods beginning on or after April 1, 2023. The Company has evaluated the amendments and the impact is not expected to be material.
The Financial Statements have been prepared on the accrual and going concern basis, and the historical cost convention except where the Ind AS requires a different accounting treatment. The principal variations from the historical cost convention relate to financial instruments classified as FVTPL or fair value through other comprehensive income (âFVTOCIâ) (refer note 2.9(b)) and liability for cash-settled awards (refer note 2.15) - which are measured at fair value.
Fair value measurement
Fair value is the price at the measurement date, at which an asset can be sold or a liability can be transferred, in an orderly transaction between market participants. The Companyâs accounting policies require, measurement of certain financial instruments at fair values (either on a recurring or non-recurring basis).
The Company is required to classify the fair valuation method of the financial / non-financial assets and liabilities, either measured or disclosed at fair value in the Financial Statements, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurement). Accordingly, the Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The three levels of the fair-value-hierarchy are described below:
Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets
Level 2: Significant inputs to the fair value measurement are directly or indirectly observable
Level 3: Significant inputs to the fair value measurement are unobservable.
The Company accounts for business combinations using the acquisition method of accounting. Accordingly, the identifiable assets acquired and the liabilities assumed of the business are recorded at their acquisition date fair values (except certain assets and liabilities which are required to be measured as per the applicable standard). The consideration transferred for the acquisition of a business is aggregation of the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Company in exchange for control of the business.
The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Any contingent consideration transferred is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is subsequently measured at fair value with changes in fair value recognised in Statement of Profit and Loss. Contingent consideration that is classified as equity is not re-measured and its subsequent settlement is accounted for within equity.
Acquisition-related costs are expensed in the period in which the costs are incurred.
I f the initial accounting for a business combination is incomplete as at the reporting date in which the combination occurs, the identifiable assets and liabilities acquired in a business combination are measured at their provisional fair values at the date of acquisition. Subsequently adjustments to the provisional values are made retrospectively within the measurement period, if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date or would have resulted in the recognition of those assets and liabilities as of that date; otherwise the adjustments are recorded in the period in which they occur.
A contingent liability recognised in a business combination is initially measured at its fair value. Subsequent to initial recognition, it is measured at the higher of:
(i) the amount that would be recognised in accordance with Ind AS 37, âProvisions, Contingent Liabilities and Contingent Assetsâ, and
(ii) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with Ind AS 115 âRevenue from Contracts with Customersâ.
2.3 Common control transactions
Transactions arising from transfers of assets / liabilities, interest in entities or businesses between entities that are under the common control, are accounted at their carrying amounts. The difference, between any consideration paid / received and the aggregate carrying amounts of assets / liabilities and interests in entities acquired / disposed (other than impairment, if any), is recorded in capital reserve / retained earnings, as applicable.
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Categories |
Years |
|
Buildings |
20 |
|
Building on leased land |
Lease term or 20 years, whichever is less |
|
Leasehold improvements |
Lease term or 20 years, whichever is less |
|
Plant and equipment |
|
|
- Network equipment (including passive infrastructure) |
3 - 25 |
|
- Customer premise equipments |
3 - 5 |
|
Computers and servers |
3 - 5 |
|
Furniture & fixtures and office equipments |
2 - 5 |
|
Vehicles |
3 - 5 |
The useful lives, residual values and depreciation method of PPE are reviewed, and adjusted appropriately, at least as at each financial year end so as to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives, residual values and / or depreciation method are accounted prospectively, and accordingly the depreciation is calculated over the PPEâs remaining revised useful life. The cost and the accumulated depreciation for PPE sold, scrapped, retired or otherwise disposed off are derecognised from the Balance Sheet and the resulting gains / losses are included in the Statement of Profit and Loss within other income / other expenses.
2.7 Intangible assets
I ntangible assets are recognised when the Company controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Company and the cost of the asset can be measured reliably.
Goodwill represents the cost of the acquired business in excess of the fair value of identifiable net assets purchased (refer note 2.2). Goodwill is not amortised; however it is tested annually for impairment and whenever there is an indication that the unit may be impaired (refer note 2.8), and carried at cost less any accumulated impairment losses. The gains / (losses) on the disposal of a cash-generating-unit (âCGUâ) include the carrying amount of goodwill relating to the CGU sold (in case goodwill has been allocated to group of CGUs; it is determined on the basis of the relative fair value of operations sold).
The intangible assets that are acquired in a business combination are recognised at its fair value. Other intangible assets are initially recognised at cost. Those assets having finite useful life are carried at cost less accumulated amortisation and impairment losses, if any.
2.4 Foreign currency transactions
a) Functional and presentation currency
The Financial Statements are presented in Indian Rupee which is the functional and presentation currency of the Company.
b) Transactions and balances
Transactions in foreign currencies are initially recorded in the relevant functional currency at the exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate prevailing as at the reporting date with the resulting foreign exchange differences, on subsequent re-statement / settlement, recognised in the Statement of Profit and Loss. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevalent, at the date of initial recognition (in case they are measured at historical cost) or at the date when the fair value is determined (in case they are measured at fair value) - the resulting foreign exchange difference, on subsequent re-statement / settlement, recognised in the Statement of Profit and Loss, except to the extent that it relates to items recognised in the other comprehensive income (âOCIâ) or directly in equity.
The equity items denominated in foreign currencies are translated at historical cost.
2.5 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
Deferred tax assets and liabilities, and all other assets and liabilities which are not current (as discussed in the below paragraphs) are classified as non-current assets and liabilities.
An asset is classified as current when it is expected to be realised or intended to be sold or consumed in normal operating cycle, held primarily for the purpose of trading, expected to be realised within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
A liability is classified as current when it is expected to be settled in normal operating cycle, it is held primarily for the purpose of trading, it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
Separated embedded derivatives are classified basis the host contract.
2.6 Property, plant and equipment (âPPEâ)
An item is recognised as an asset, if and only if, it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. PPE are initially recognised at cost. The initial cost of PPE comprises its purchase price (including non-refundable duties and taxes but excluding any trade discounts and rebates), assets retirement obligations (refer note 2.16 (b)) and any directly attributable cost of bringing the asset to its working condition and location for its intended use. Further, it includes assets installed on the premises of customers as the associated risks, rewards and control remain with the Company.
Subsequent to initial recognition, PPE are stated at cost less accumulated depreciation and impairment losses, if any. When significant parts of PPE are required to be replaced at regular intervals, the Company recognises such parts as separate component of assets. When an item of PPE is replaced, then its carrying amount is derecognised from the Balance Sheet and cost of the new item of PPE is recognised. Further, in case the replaced part was not being depreciated separately, the cost of the replacement is used as an indication to determine the cost of the replaced part at the time it was acquired.
Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work-in-progress, advances given towards acquisition of PPE outstanding at each balance sheet date are disclosed under other non- current assets.
The expenditures that are incurred after the item of PPE has been available for use such as repairs and maintenance, are normally charged to the Statement of Profit and Loss in the period in which such costs are incurred. However, in situations where the said expenditure can be measured reliably and is probable that future economic benefits associated with it will flow to the Company, it is included in the assetâs carrying value or as a separate asset, as appropriate.
Depreciation on PPE is computed using the straight-line method over the estimated useful lives. The management basis its past experience and technical assessment has estimated the useful lives, which is at variance with the life prescribed in Part C of Schedule II to the Act and has accordingly, depreciated the assets over such useful lives. Freehold land is not depreciated as it has an unlimited useful life. The Company has established the estimated range of useful lives for different categories of PPE as follows:
Amortisation is computed using the straight-line method over the expected useful life of intangible assets.
Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, is recognised in profit or loss as incurred.
The Company has established the estimated useful lives of different categories of intangible assets as follows:
a) Software
Software are amortised over the period of license, generally not exceeding five years.
b) Licenses (including spectrum)
Acquired licenses and spectrum are amortised commencing from the date when the related network is available for intended use in the relevant jurisdiction. The useful life of acquired licenses and spectrum range upto twenty years.
The revenue-share based fee on licenses / spectrum is charged to the Statement of Profit and Loss in the period such cost is incurred.
c) Other acquired intangible assets
Other acquired intangible assets include the following:
Rights acquired for unlimited license access: Over the period of the agreement which ranges upto five years
Non-compete fee: Over the period of the agreement which ranges upto five years
The useful lives and amortisation method are reviewed, and adjusted appropriately, at least at each financial year end so as to ensure that the method and period of amortisation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives and / or amortisation method is accounted for prospectively, and accordingly the amortisation is calculated over the remaining revised useful life.
Further, the cost of intangible assets under development (âIAUDâ) includes the following:
(a) the amount of spectrum allotted to the Company and related costs (including borrowing costs) that are directly attributable to the acquisition or construction of qualifying assets (refer note 6), if any, for which services are yet to be rolled out and are presented separately in the Balance Sheet.
(b) the amount of software / IT platform under development.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
2.8 Impairment of non-financial assets
a) Goodwill
Goodwill is tested for impairment, at least annually and whenever circumstances indicate that it may be impaired. For the purpose of impairment testing, the goodwill is allocated to a CGU or group of CGUs, which are expected to benefit from the acquisition-related synergies and represent the lowest level within the entity at which the goodwill is monitored for internal management purposes, within an operating segment. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.
I mpairment occurs when the carrying value of a CGU / CGUs including the goodwill, exceeds the estimated recoverable amount of the CGU / CGUs. The recoverable amount of a CGU / CGUs is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of future cash flows expected to be derived from the CGU / CGUs.
The total impairment loss of a CGU / CGUs is allocated first to reduce the carrying value of goodwill allocated to that CGU / CGUs and then to the other assets of that CGU / CGUs - on pro-rata basis of the carrying value of each asset.
b) PPE, right-of-use assets (âROUâ), intangible assets and IAUD
PPE (including Capital work-in-progress (CWIP)), ROU and intangible assets with definite lives, are reviewed for impairment, whenever events or changes in circumstances indicate that their carrying values may not be recoverable. IAUD is tested for impairment, at least annually and whenever circumstances indicate that it may be impaired.
For the purpose of impairment testing, the recoverable amount (that is, higher of the fair value less costs to sell and the value in use) is determined on an individual asset basis, unless the asset does not generate cash flows that are largely independent of those from other assets, in which case the recoverable amount is determined at the CGU level to which the said asset belongs. If such individual assets or CGU are considered to be impaired, the impairment to be recognised in the Statement of Profit and Loss is measured by the amount by which the carrying value of the asset / CGU exceeds their
estimated recoverable amount and allocated on prorata basis.
Reversal of impairment losses
I mpairment loss in respect of goodwill is not reversed. Other impairment losses are reversed in the Statement of Profit and Loss and the carrying value is increased to its revised recoverable amount provided that this amount does not exceed the carrying value that would have been determined had no impairment loss been recognised for the said asset / CGU previously.
a) Recognition, classification and presentation
The financial instruments are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the financial instrument.
The Company determines the classification of its financial instruments at initial recognition.
The Company recognises its investment in subsidiaries, associates and joint ventures at cost less any impairment losses. The said investments are tested for impairment whenever circumstances indicate that their carrying values may exceed the recoverable amount (viz. higher of the fair value less costs to sell and the value in use).
The Company classifies its financial assets in the following categories: a) those to be measured subsequently at FVTPL, and b) those to be measured at amortised cost. The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
The Company has classified all the non-derivative financial liabilities as measured at amortised cost.
The entire hybrid contract, financial assets with embedded derivatives, are considered in their entirety for determining the contractual terms of the cash flow and accordingly the embedded derivatives are not separated. However, derivatives embedded in nonfinancial instrument / financial liabilities (measured at amortised cost) host contracts are classified as separate derivatives if their economic characteristics and risks are not closely related to those of the host contracts.
Financial assets and liabilities arising from different transactions are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, the Company currently has a legally enforceable right to set-off the related recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
b) Measurement - Non-derivative financial instruments
I. Initial measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at FVTPL, transaction costs that are attributable to the acquisition of the financial asset. However, trade receivables that do not contain a significant financing component are measured at transaction price. All financial liabilities are recognised initially at fair value, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Other transaction costs are expensed as incurred in the Statement of Profit and Loss.
The liability component of a compound financial instrument is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
II. Subsequent measurement - financial assets
The subsequent measurement of the non-derivative financial assets depends on their classification as follows:
i. Financial assets measured at amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost using the effective-interest rate (âEIRâ) method (if the impact of discounting / any transaction costs is significant). Interest income from these financial assets is included in other income.
ii. Financial assets at fair value through OCI (âFVTOCIâ)
Equity investments which are not held for trading and for which the Company has elected to present the change in the fair value in OCI and debt instruments that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flow represent solely payment of principal and interest, are measured at FVTOCI.
The changes in fair value are taken to OCI, except the impairment (on debt instruments), interest (basis EIR method), dividend and foreign exchange differences which are recognised in the Statement of Profit and Loss.
iii. Financial assets measured at FVTPL
All financial assets that do not meet the criteria for amortised cost are measured at FVTPL. Interest (basis
EIR method) and dividend income from financial assets at FVTPL is recognised in the Statement of Profit and Loss within other income separately from the other gains / losses arising from changes in the fair value.
Impairment
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition. If credit risk has not increased significantly, twelve month expected credit loss (ECL) is used to provide for impairment loss, otherwise lifetime ECL is used.
However, only in case of trade receivables, the Company applies the simplified approach which requires expected lifetime losses to be recognised from initial recognition of the receivables.
III. Subsequent measurement - financial liabilities
Any off-market financial guarantees are amortised over the life of the guarantee and are measured at each reporting date at the higher of (i) the remaining unamortised balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the obligation at the end of the reporting period. Other financial liabilities are subsequently measured at amortised cost using the EIR method (if the impact of discounting / any transaction costs is significant), except for contingent consideration and financial liability under option arrangements recognised in a business combination which is subsequently measured at FVTPL. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate the fair value due to the short maturity of these instruments.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured. Interest related to the financial liability is recognised in profit or loss under finance cost. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognised.
c) Measurement - derivative financial instruments
Derivative financial instruments, including separated embedded derivatives are classified as financial instruments at FVTPL - Held for trading. Such derivative financial instruments are initially recognised at fair value. They are subsequently measured at their fair value, with changes in fair value being recognised in the Statement of Profit and Loss.
d) Derecognition
The financial assets are de-recognised from the Balance Sheet when the rights to receive cash flows from the financial assets have expired, or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The financial liabilities are derecognised from the Balance Sheet when the underlying obligations are extinguished, discharged, lapsed, cancelled, expires or legally released. The resultant impact of derecognition is recognised in the Statement of Profit and Loss.
The Company, at the inception of a contract, assesses the contract as, or containing, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether the contract involves the use of an identified asset, the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and the Company has the right to direct the use of the asset.
Company as a lessee
The Company recognises a ROU and a corresponding lease liability with respect to all lease agreements in which it is the lessee in the Balance Sheet. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the incremental borrowing rate (as the rate implicit in the lease cannot be readily determined). Lease liabilities include the net present value of fixed payments (including any in-substance fixed payments) and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Subsequently, the lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments including or when the lease contract is modified and the lease modification is not accounted for as a separate lease. The corresponding adjustment is made to the carrying amount of the ROU, or is recorded in profit or loss if the carrying amount of the related ROU has been reduced to zero and there is a further reduction in the measurement of the lease liability.
ROU are measured at cost, comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date and any initial direct costs less any lease incentives received.
Subsequent to initial recognition, ROU are stated at cost less accumulated depreciation and any impairment losses and adjusted for certain remeasurements of the lease liability. Depreciation is computed using the straight-line method from the commencement date to the end of the useful life of the underlying asset or the end of the lease term, whichever is shorter. The estimated useful lives of ROU are determined on the same basis as those of the underlying asset.
I n the Balance Sheet, the ROU and lease liabilities are presented separately. In the Statement of Profit and Loss, interest expense on lease liabilities are presented separately from the depreciation charge for the ROU. Interest expense on the lease liability is a component of finance costs, which are presented separately in the Statement of Profit or Loss. In the statement of cash flows, cash payments for the principal portion of lease payments and the interest portion of lease liability are presented as financing activities, and shortterm lease payments and payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liability, if any, as operating activities.
When a contract includes lease and non-lease components, the Company allocates the consideration in the contract on the basis of the relative stand-alone prices of each lease component and the aggregate stand-alone price of the non-lease components.
Short-term leases and leases of low-value assets
The Company has elected not to recognise ROU and lease liabilities for short-term leases that have a lease term of twelve months or less and leases of low value assets. The Company recognises lease payments associated with these leases as an expense on a straightline basis over the lease term.
Company as a lessor
Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Amounts due from lessees under a finance lease are recognised as receivables at an amount equal to the net investment in the leased assets. Finance lease income is allocated to the periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the finance lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of
the leased asset and recognised on a straight-line basis over the lease term.
When a contract includes lease and non-lease components, the Company applies Ind AS 115 âRevenue from Contracts with Customersâ to allocate the consideration under the contract to each component.
The Company enters into âIndefeasible right to useâ (âIRUâ) arrangements wherein the right to use the assets is given over the substantial part of the asset life. However, as the title to the assets and the significant risks associated with the operation and maintenance of these assets remains with the Company, such arrangements are recognised as operating lease. The contracted price is recognised as revenue during the tenure of the agreement. Unearned IRU revenue received in advance is presented as deferred revenue within liabilities in the Balance Sheet.
The income tax expense comprises of current and deferred income tax. Income tax is recognised in the Statement of Profit and Loss, except to the extent that it relates to items recognised in the OCI or directly in equity, in which case the related income tax is also recognised accordingly.
a) Current tax
The current tax is calculated on the basis of the tax rates, laws and regulations, which have been enacted or substantively enacted as at the reporting date. The payment made in excess / (shortfall) of the Companyâs income tax obligation for the period are recognised in the balance sheet under assets as income tax assets / under current liabilities as current tax liabilities.
Any interest, related to accrued liabilities for potential tax assessments are not included in income tax charge or (credit), but are rather recognised within finance costs.
The Company periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation. The Company considers whether it is probable that a taxation authority will accept an uncertain tax treatment. If the Company concludes it is probable that the taxation authority will accept an uncertain tax treatment, it determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. If the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the entity reflects the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
b) Deferred tax
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the Financial Statements. Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax assets / liabilities recognised for temporary differences and unused carry forward losses arising from a business combination, affect the amount of goodwill or the bargain purchase gain that the Company recognises. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred tax is not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The Company considers the projected future taxable income and tax planning strategies in making this assessment.
The unrecognised deferred tax assets / carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised or the liability is settled.
Deferred tax assets and liabilities are off-set where there is a legally enforceable right to enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.
Inventories are stated at the lower of cost (determined using the first-in-first-out method) and net realisable value. The costs comprise its purchase price and any directly attributable cost of bringing the inventories to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of
but excludes the impact of any service and non-market performance vesting conditions. However, the nonmarket performance vesting and service conditions are considered in the assumption as to the number of options that are expected to vest. The forfeitures are estimated at the time of grant and reduce the said expense rateably over the vesting period.
The expense so determined is recognised over the requisite vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. As at each reporting date, the Company revises its estimates of the number of options that are expected to vest, if required.
I t recognises the impact of any revision to original estimates in the period of change. Accordingly, no expense is recognised for awards that do not ultimately vest, except for which vesting is conditional upon a market performance / non-vesting condition. These are treated as vested irrespective of whether or not the market / non-vesting condition is satisfied, provided that service conditions and all other non-market performance are satisfied.
Where the terms of an award are modified, in addition to the expense pertaining to the original award, an incremental expense is recognised for any modification that results in additional fair value, or is otherwise beneficial to the employee as measured at the date of modification.
Where an award is cancelled (including due to nonvesting conditions not being met), it is treated as if it is vested thereon, and any un-recognised expense for the award is recognised immediately.
2.16 Provisions
a) General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the said obligation, and the amounts of the said obligation can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the relevant obligation (if the impact of discounting is significant), using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to unwinding of interest over passage of time is recognised within finance costs.
The Company is involved in various legal and taxation matters, and the matter are in legal course. Management, in consultation with legal, tax and other
business, less the estimated costs of completion and the estimated costs necessary to make the sale.
2.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank balances and any deposits with original maturities of three months or less (that are readily convertible to known amounts of cash and cash equivalents and subject to an insignificant risk of changes in value). However, for the purpose of the Statement of Cash Flows, in addition to above items, any bank overdrafts / cash credits that are integral part of the Companyâs cash management, are also included as a component of cash and cash equivalents.
Ordinary shares are classified as Equity when the Company has an un-conditional right to avoid delivery of cash or another financial asset, that is, when the dividend and repayment of capital are at the sole and absolute discretion of the Company and there is no contractual obligation whatsoever to that effect.
The Companyâs employee benefits mainly include wages, salaries, bonuses, defined contribution plans, defined benefits plans, compensated absences, deferred compensation and share-based payments. The employee benefits are recognised in the year in which the associated services are rendered by the Company employees. Short-term employee benefits are recognised in Statement of Profit and Loss at undiscounted amounts during the period in which the related services are rendered.
a. Defined Contribution plans
The contributions to defined contribution plans are recognised in profit or loss as and when the services are rendered by employees. The Company has no further obligations under these plans beyond its periodic contributions.
b. Defined benefits plans
I n accordance with the local laws and regulations, all the employees in India are entitled for the Gratuity plan. The said plan requires a lump-sum payment to eligible employees (meeting the required vesting service condition) at retirement or termination of employment, based on a pre-defined formula.
The Company provides for the liability towards the said plans on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method.
The obligation towards the said benefits is recognised in the Balance Sheet, at the present value of the defined benefits obligations. The present value of the said obligation is determined by discounting the estimated future cash outflows, using interest rates of government bonds.
The interest income / (expense) are calculated by applying the above mentioned discount rate to the plan assets and defined benefit obligations. The net interest income / (expense) on the net defined benefit obligations is recognised in the Statement of Profit and Loss. However, the related re-measurements of the net defined benefit obligations are recognised directly in the OCI in the period in which they arise. The said remeasurements comprise of actuarial gains and losses (arising from experience adjustments and changes in actuarial assumptions), the return on plan assets (excluding interest). Re-measurements are not reclassified to the Statement of Profit and Loss in any of the subsequent periods.
c. Other long-term employee benefits
The employees of the Company are entitled to compensated absences as well as other long-term benefits. Compensated absences benefits comprises of encashment and availment of leave balances that were earned by the employees over the period of past employment.
The Company provides for the liability towards the said benefits on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method. The related re-measurements are recognised in the Statement of Profit and Loss in the period in which they arise.
d. Share-based payments
The Company operates equity-settled employee share-based compensation plans, under which the Company receives services from employees as consideration for stock options towards shares of the Company.
The fair value of stock options (at grant date) is recognised as an expense in the Statement of Profit and Loss within employee benefits as employee share-based payment expenses over the vesting period, with a corresponding increase in share-based payment reserve (a component of equity).
The total amount so expensed is determined by reference to the grant date fair value of the stock options granted, which includes the impact of any market performance conditions and non-vesting conditions advisers, assesses the likelihood that a pending claim will succeed. The Company recognises a provision in cases where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations arising from such claims.
b) Asset retirement obligations (âAROâ)
ARO are recognised for those lease arrangements where the Company has an obligation at the end of the lease period to restore the leased premises in a condition similar to inception of lease. ARO are provided at the present value of expected costs to settle the obligation and are recognised as part of the cost of that particular asset. The estimated future costs of decommissioning are reviewed annually and any changes in the estimated future costs or in the discount rate applied are adjusted from the cost of the asset.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent asset is not recognised and is disclosed only where an inflow of economic benefits are probable.
Revenue is recognised upon transfer of control of promised products or services to the customer at the amount of transaction price (net of variable consideration) which the Company has received or expects to receive in exchange of those products or services, net of any taxes / duties, discounts and process waivers. When determining the consideration to which the Company is entitled for providing promised products or services via intermediaries, the Company assesses whether it is primarily responsible for fulfilling the performance obligation and whether it controls the promised service before transfer to customers. To the extent that the intermediary is considered a principal, the consideration to which the Company is entitled is determined to be that received from the intermediary.
Revenue is recognised when, or as, each distinct performance obligation is satisfied. The main categories of revenue and the basis of recognition are as follows:
a) Service revenue
Service revenues mainly pertain to usage, subscription and customer onboarding charges for voice, data, messaging and value added services. It also includes revenue from interconnection / roaming charges for usage of the Companyâs network by other operators for voice, data, messaging and signaling services.
Telecommunication services (comprising voice, data and SMS) are considered to represent a single performance obligation as all are provided over the Companyâs network and transmitted as data representing a digital signal on the network. The transmission consumes network bandwidth and therefore, irrespective of the nature of the communication, the customer ultimately receives access to the network and the right to consume network bandwidth.
The Company recognises revenue from these services as they are provided. Revenue is recognised based on actual units of telecommunication services provided during the reporting period as a proportion of the total units of telecommunication services to be provided. Subscription charges are recognised over the subscription pack validity period. Customer onboarding revenue is recognised upon successful onboarding of customer i.e. upfront. Revenues in excess of invoicing are classified as unbilled revenue while invoicing / collection in excess of revenue are classified as deferred revenue / advance from customers.
Service revenues also includes revenue from interconnection / roaming charges for usage of the Companyâs network by other operators for voice, data, messaging and signaling services. These are recognised upon transfer of control of services over time.
Certain business services revenues include revenue from registration and installation, which are amortised over the period of agreement since the date of activation of service.
Revenues from long distance operations comprise of voice services and bandwidth services (including installation), which are recognised on provision of services over the period of respective arrangements.
b) Multiple element arrangements
The Company has entered into certain multiple-element revenue arrangements which involve the delivery or performance of multiple products, services or rights to use assets. At the inception of the arrangement, all the deliverables therein are evaluated to determine whether they represent distinct performance obligations, and if so, they are accounted for separately. Total consideration related to the multiple element arrangements is allocated to each performance obligation based on their standalone selling prices. The stand-alone selling prices are determined based on the list prices at which the Company sells equipment and network services separately.
c) Equipment sales
Equipment sales mainly pertain to sale of telecommunication equipment and related accessories for which revenue is recognised when the control of equipment is transferred to the customer, i.e. transferred at a point in time. However, in case of equipment sale forming part of multiple-element revenue arrangements which is not a distinct performance obligation, revenue is recognised over the customer relationship period.
d) Interest income
The interest income is recognised using the EIR method. For further details, refer note 2.9.
e) Costs to obtain or fulfill a contract with a customer
The Company incurs certain costs to obtain or fulfill contracts with customers viz. intermediary commission, etc. The Company has estimated that the average customer life derived from customer churn rate is longer than 12 months and, thus, such costs are recognised over the average expected customer life.
f) Dividend income
Dividend income is recognised when the Companyâs right to receive the payment is established. For futher details, refer note 2.9.
Grants from the government are recognised where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognised in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of PPE are included in non-current liabilities as deferred income and are credited to Statement of Profit and Loss on a straightline basis over the expected lives of the related assets.
Borrowing costs consist of interest and other ancillary costs that the Company incurs in connection with the borrowing of funds. The borrowing costs directly attributable to the acquisition or construction of any asset that takes a substantial period of time to get ready for its intended use or sale are capitalised. All other borrowing costs are recognised in the Statement of Profit and Loss within finance costs in the period in which they are incurred.
Exceptional items refer to items of income or expense within the Statement of Profit and Loss from ordinary activities which are non-recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.
Dividend to shareholders is recognised as a liability on the date of approval by the shareholders. However, interim dividend is recorded as a liability on the date of declaration by the Companyâs Board of Directors.
2.23 Earnings per share (âEPSâ)
The Company presents the Basic and Diluted EPS.
Basic EPS is computed by dividing the profit for the period attributable to the shareholders of the Company by the weighted average number of shares outstanding during the period.
Diluted EPS is computed by adjusting, the profit for the year attributable to the shareholders and the weighted average number of shares considered for deriving Basic EPS, for the effects of all the shares that could have been issued upon conversion of all dilutive potential shares. The dilutive potential shares are adjusted for the proceeds receivable had the shares been actually issued at fair value. Further, the dilutive potential shares are deemed converted as at beginning of the period, unless issued at a later date during the period.
3. Key sources of estimation uncertainties and Critical judgements
The estimates and judgements used in the preparation of the said Financial Statements are continuously eva
Mar 31, 2022
Financial Statements, except in case of adoption of any new standards and amendments during the year.
To provide more reliable and relevant information about the effect of certain items in the Balance Sheet and Statement of Profit and Loss, the Company has changed the classification of certain items.
New amendments adopted during the year
a) Amendments to Ind AS
MCA vide notification no. G.S.R. 419(E) dated June 18, 2021 has issued the Companies (Indian Accounting Standards) Amendment Rules, 2021 which amends following Ind AS (as applicable to the Company):
- Ind AS 102, Share-based Payments
- Ind AS 116, Leases
- Ind AS 103, Business Combinations
- Ind AS 105, Non-Current Assets Held for Sale and Discontinued Operations
- Ind AS 107, Financial Instruments: Disclosures
- Ind AS 109, Financial Instruments
- Ind AS 27, Separate Financial Statements
- Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets
- Ind AS 38, Intangible Assets
- Ind AS 111, Joint Arrangements
- Ind AS 115, Revenue from Contracts with Customers
- Ind AS 1, Presentation of Financial Statements
- Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors
- Ind AS 12, Income Taxes
- Ind AS 16, Property, Plant and Equipment
- Ind AS 28, Investments in Associates and Joint Ventures
The amendments are applicable for annual periods beginning on or after April 1, 2021, however, these do not have material impact on the Financial Statements of the Company.
b) Amendments to Schedule III Division II
MCA vide notification dated March 24, 2021, has amended disclosure requirements to Division II of Schedule III to the Act. The amendments are applicable from April 1, 2021.
Amendments to Ind AS issued but not yet effective
MCA vide notification no. G.S.R. 255(E) dated March 23, 2022 has issued the Companies (Indian Accounting Standards) Amendment Rules, 2022 which amends following Ind AS (as applicable to the Company):
Bharti Airtel Limited (âthe Companyâ) is domiciled and incorporated in India as a public limited company with its equity shares listed on the National Stock Exchange of India Limited and the BSE Limited. The registered office of the Company is situated at Airtel Center, Plot no. 16, Udyog Vihar, Phase - IV, Gurugram - 122015, Haryana, India.
The Company is principally engaged in provision of telecommunication services in India. The details as to the services provided by the Company are further provided in note 23.
2. Summary of significant accounting policies
Basis of preparation
These Standalone Financial Statements (âFinancial Statementsâ) have been prepared to comply in all material respects with the Indian Accounting Standards (âInd ASâ) as notified by the Ministry of Corporate Affairs (âMCAâ) under section 133 of the Companies Act, 2013 (âActâ), read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and other accounting principles generally accepted in India.
The Financial Statements are approved for issue by the Companyâs Board of Directors on May 17, 2022.
The Financial Statements are based on the classification provisions contained in Ind AS 1, âPresentation of Financial Statementsâ and Division II of Schedule III (as amended) to the Act. Further, for the purpose of clarity, various items are aggregated in the Standalone Balance Sheet (âBalance Sheetâ), Standalone Statement of Profit and Loss (âStatement of Profit and Lossâ), Standalone Statement of Changes in Equity (âStatement of Changes in Equityâ) and Standalone Statement of Cash Flows (âStatement of Cash Flowsâ). Nonetheless, these items are disaggregated separately in the notes to the Financial Statements, where applicable or required.
All the amounts included in the Financial Statements are reported in millions of Indian Rupee (âRupeeâ or T) and are rounded off to the nearest million, except per share data and unless stated otherwise. Further, due to rounding off, certain amounts are appearing as â0â.
The preparation of the said Financial Statements requires the use of certain critical accounting estimates and judgements. It also requires the management to exercise judgement in the process of applying the Companyâs accounting policies. The areas where estimates are significant to the Financial Statements, or areas involving a higher degree ofjudgement or complexity, are disclosed in note 3.
The accounting policies, as set out in the following paragraphs of this note, have been consistently applied, by the Company, to all the periods presented in the said
- Ind AS 103, Business Combinations
- Ind AS 109, Financial Instruments
- Ind AS 16, Property, Plant and Equipment
- Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets
The amendments are applicable for annual periods beginning on or after April 1, 2022. The Company has evaluated the amendments and the impact is not expected to be material.
2.1 Basis of measurement
The Financial Statements have been prepared on the accrual and going concern basis, and the historical cost convention except where the Ind AS requires a different accounting treatment. The principal variations from the historical cost convention relate to financial instruments classified as FVTPL (refer note 2.9) and liability for cash-settled awards (refer note 2.15) - which are measured at fair value.
Fair value measurement
Fair value is the price at the measurement date, at which an asset can be sold or a liability can be transferred, in an orderly transaction between market participants. The Companyâs accounting policies require, measurement of certain financial instruments at fair values (either on a recurring or non-recurring basis).
The Company is required to classify the fair valuation method of the financial / non-financial assets and liabilities, either measured or disclosed at fair value in the Financial Statements, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurement). Accordingly, the Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The three levels of the fair-value-hierarchy are described below:
Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets
Level 2: Significant inputs to the fair value measurement are directly or indirectly observable
Level 3: Significant inputs to the fair value measurement are unobservable
2.2 Business combinations
The Company accounts for business combinations using the acquisition method of accounting. Accordingly, the identifiable assets acquired and the liabilities assumed of the business are recorded at their acquisition date fair values (except certain assets and liabilities which are
required to be measured as per the applicable standard). The consideration transferred for the acquisition of a business is aggregation of the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Company in exchange for control of the business.
The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Any contingent consideration transferred is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is subsequently measured at fair value with changes in fair value recognised in Statement of Profit and Loss. Contingent consideration that is classified as equity is not re-measured and its subsequent settlement is accounted for within equity.
Acquisition-related costs are expensed in the period in which the costs are incurred.
If the initial accounting for a business combination is incomplete as at the reporting date in which the combination occurs, the identifiable assets and liabilities acquired in a business combination are measured at their provisional fair values at the date of acquisition. Subsequently adjustments to the provisional values are made retrospectively within the measurement period, if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date or would have resulted in the recognition of those assets and liabilities as of that date; otherwise the adjustments are recorded in the period in which they occur.
A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with Ind AS 37, âProvisions, Contingent Liabilities and Contingent Assetsâ, or amount initially recognised less, when appropriate, cumulative income recognised in accordance with Ind AS 115 âRevenue from Contracts with Customersâ.
2.3 Common control transactions
Transactions arising from transfers of assets / liabilities, interest in entities or businesses between entities that are under the common control, are accounted at their carrying amounts. The difference, between any consideration paid / received and the aggregate carrying amounts of assets / liabilities and interests in entities acquired / disposed (other than impairment, if any), is recorded in capital reserve / retained earnings, as applicable.
2.4 Foreign currency transactions
The Financial Statements are presented in Indian Rupee which is the functional and presentation currency of the Company.
Transactions in foreign currencies are initially recorded in the relevant functional currency at the exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate prevailing as at the reporting date with the resulting foreign exchange differences, on subsequent re-statement / settlement, recognised in the Statement of Profit and Loss. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevalent, at the date of initial recognition (in case they are measured at historical cost) or at the date when the fair value is determined (in case they are measured at fair value) - the resulting foreign exchange difference, on subsequent re-statement / settlement, recognised in the Statement of Profit and Loss, except to the extent that it relates to items recognised in the other comprehensive income or directly in equity.
The equity items denominated in foreign currencies are translated at historical cost.
2.5 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
Deferred tax assets and liabilities, and all other assets and liabilities which are not current (as discussed in the below paragraphs) are classified as non-current assets and liabilities.
An asset is classified as current when it is expected to be realised or intended to be sold or consumed in normal operating cycle, held primarily for the purpose of trading, expected to be realised within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
A liability is classified as current when it is expected to be settled in normal operating cycle, it is held primarily for the purpose of trading, it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
Separated embedded derivatives are classified basis the host contract.
2.6 Property, plant and equipment (âPPEâ)
An item is recognised as an asset, if and only if, it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. PPE are initially recognised at cost. The initial cost of PPE comprises its purchase price (including non-refundable duties and taxes but excluding any trade
discounts and rebates), assets retirement obligations (refer note 2.16 (b)) and any directly attributable cost of bringing the asset to its working condition and location for its intended use.
Subsequent to initial recognition, PPE are stated at cost less accumulated depreciation and impairment losses, if any. When significant parts of PPE are required to be replaced at regular intervals, the Company recognises such parts as separate component of assets. When an item of PPE is replaced, then its carrying amount is derecognised from the Balance Sheet and cost of the new item of PPE is recognised. Further, in case the replaced part was not being depreciated separately, the cost of the replacement is used as an indication to determine the cost of the replaced part at the time it was acquired.
Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work-in-progress, advances given towards acquisition of PPE outstanding at each balance sheet date are disclosed under other noncurrent assets.
The expenditures that are incurred after the item of PPE has been available for use such as repairs and maintenance, are normally charged to the Statement of Profit and Loss in the period in which such costs are incurred. However, in situations where the said expenditure can be measured reliably and is probable that future economic benefits associated with it will flow to the Company, it is included in the assetâs carrying value or as a separate asset, as appropriate.
Depreciation on PPE is computed using the straight-line method over the estimated useful lives. The management basis its past experience and technical assessment has estimated the useful lives, which is at variance with the life prescribed in Part C of Schedule II to the Act and has accordingly, depreciated the assets over such useful lives. Freehold land is not depreciated as it has an unlimited useful life. The Company has established the estimated range of useful lives for different categories of PPE as follows:
|
Categories |
Years |
|
Building |
20 |
|
Building on leased land |
Lease term or 20 years, whichever is less |
|
Leasehold improvements |
Lease term or 20 years, whichever is less |
|
Plant and equipment |
|
|
- Network equipment (including passive infrastructure) |
o CN 1 CO |
|
- Customer premise equipments |
3 - 5 |
|
Computers and servers |
3 - 5 |
|
Furniture & fixtures and office equipment |
2 - 5 |
|
Vehicles |
3 - 5 |
The useful lives, residual values and depreciation method of PPE are reviewed, and adjusted appropriately, at least as at each financial year end so as to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives, residual values and / or depreciation method are accounted prospectively, and accordingly the depreciation is calculated over the PPEâs remaining revised useful life. The cost and the accumulated depreciation for PPE sold, scrapped, retired or otherwise disposed off are derecognised from the Balance Sheet and the resulting gains / losses are included in the Statement of Profit and Loss within other income / other expenses.
2.7 Intangible assets
I ntangible assets are recognised when the Company controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Company and the cost of the asset can be measured reliably.
The intangible assets are initially recognised at cost. Those assets having finite useful life are carried at cost less accumulated amortisation and impairment losses, if any. Amortisation is computed using the straight-line method over the expected useful life of intangible assets.
The intangible assets that are acquired in a business combination are recognised at its fair value. Other intangible assets are initially recognised at cost. Those assets having finite useful life are carried at cost less accumulated amortisation and impairment losses, if any. Amortisation is computed using the straight-line method over the expected useful life of intangible assets.
The Company has established the estimated useful lives of different categories of intangible assets as follows:
a. Software
Software are amortised over the period of license, generally not exceeding five years.
b. Licenses (including spectrum)
Acquired licenses and spectrum are amortised commencing from the date when the related network is available for intended use in the relevant jurisdiction. The useful life of acquired licenses and spectrum range upto twenty years.
The revenue-share based fee on licenses / spectrum is charged to the Statement of Profit and Loss in the period such cost is incurred.
c. Other acquired intangible assets
Other acquired intangible assets include the following:
Rights acquired for unlimited license access: Over the period of the agreement which ranges upto five years
Non-compete fee: Over the period of the agreement which ranges upto five years
The useful lives and amortisation method are reviewed, and adjusted appropriately, at least at each financial year end so as to ensure that the method and period of amortisation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives and / or amortisation method is accounted for prospectively, and accordingly the amortisation is calculated over the remaining revised useful life.
Further, the cost of intangible assets under development includes the following:
(a) the amount of spectrum allotted to the Company and related costs (including borrowing costs) that are directly attributable to the acquisition or construction of qualifying assets (refer note 6), if any, for which services are yet to be rolled out and are presented separately in the Balance Sheet.
(b) the amount of software / IT platform under development.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
2.8 Impairment of non-financial assets a. Goodwill
Goodwill recognised is excess of consideration transferred over the net of the value of identifiable assets acquired and the liabilities assumed. Goodwill is not amortised; however it is tested annually for impairment and whenever there is an indication that the unit may be impaired and carried at cost less any accumulated impairment losses.
For the purpose of impairment testing, the goodwill is allocated to a cash-generating-unit (âCGUâ) or group of CGUs (âCGUsâ), which are expected to benefit from the acquisition-related synergies and represent the lowest level within the entity at which the goodwill is monitored for internal management purposes, within an operating segment. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.
Impairment occurs when the carrying value of a CGU / CGUs including the goodwill, exceeds the estimated recoverable amount of the CGU / CGUs. The recoverable amount of a CGU / CGUs is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of future cash flows expected to be derived from the CGU / CGUs.
The total impairment loss of a CGU / CGUs is allocated first to reduce the carrying value of goodwill allocated to that CGU / CGUs and then to the other assets of that CGU / CGUs - on pro-rata basis of the carrying value of each asset.
the contractual terms of the cash flow and accordingly the embedded derivatives are not separated. However, derivatives embedded in non-financial instrument / financial liabilities (measured at amortised cost) host contracts are classified as separate derivatives if their economic characteristics and risks are not closely related to those of the host contracts.
Financial assets and liabilities arising from different transactions are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, the Company currently has a legally enforceable right to set-off the related recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
b. Measurement - Non-derivative financial instruments
I. Initial measurement
At initial recognition, the Company measures the nonderivative financial instruments (except off-market financial guarantee and trade receivables which are initially measured at transaction price determined under Ind AS 115) at its fair value plus, in the case of financial instruments not at FVTPL, transaction costs. Otherwise transaction costs are expensed in the Statement of Profit and Loss. Any off-market financial guarantees, issued in relation to obligations of subsidiaries, are initially recognised at fair value (as part of the cost of the investment in the subsidiary).
The liability component of a compound financial instrument is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
II. Subsequent measurement - financial assets
The subsequent measurement of the non-derivative financial assets depends on their classification as follows:
i. Financial assets measured at amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost using the effective-interest rate (âEIRâ) method (if the impact of discounting / any transaction costs is significant). Interest income from these financial assets is included in other income.
ii. Financial assets at FVTPL
All financial assets that do not meet the criteria for amortised cost are measured at FVTPL. Interest (basis EIR method) and dividend income from financial assets at FVTPL is recognised in the Statement of Profit and Loss
b. PPE, right-of-use assets (âROUâ), intangible assets and intangible assets under development
PPE (including Capital work-in-progress (CWIP)), ROU and intangible assets with definite lives, are reviewed for impairment, whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Intangible assets under development is tested for impairment, at least annually and whenever circumstances indicate that it may be impaired.
For the purpose of impairment testing, the recoverable amount (that is, higher of the fair value less costs to sell and the value in use) is determined on an individual asset basis, unless the asset does not generate cash flows that are largely independent of those from other assets, in which case the recoverable amount is determined at the CGU level to which the said asset belongs. If such individual assets or CGU are considered to be impaired, the impairment to be recognised in the Statement of Profit and Loss is measured by the amount by which the carrying value of the asset / CGU exceeds their estimated recoverable amount and allocated on pro-rata basis.
Reversal of impairment losses
Impairment loss in respect of goodwill is not reversed. Other impairment losses are reversed in the Statement of Profit and Loss and the carrying value is increased to its revised recoverable amount provided that this amount does not exceed the carrying value that would have been determined had no impairment loss been recognised for the said asset / CGU previously.
2.9 Financial instruments
a. Recognition, classification and presentation
The financial instruments are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the financial instrument.
The Company determines the classification of its financial instruments at initial recognition.
The Company recognises its investment in subsidiaries, associates and joint ventures at cost less any impairment losses. The said investments are tested for impairment whenever circumstances indicate that their carrying values may exceed the recoverable amount (viz. higher of the fair value less costs to sell and the value in use).
The Company classifies its financial assets in the following categories: a) those to be measured subsequently at FVTPL, and b) those to be measured at amortised cost. The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
The Company has classified all the non-derivative financial liabilities as measured at amortised cost.
The entire hybrid contract, financial assets with embedded derivatives, are considered in their entirety for determining
within other income separately from the other gains / losses arising from changes in the fair value.
Impairment
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition. If credit risk has not increased significantly, twelve month expected credit loss (ECL) is used to provide for impairment loss, otherwise lifetime ECL is used.
However, only in case of trade receivables, the Company applies the simplified approach which requires expected lifetime losses to be recognised from initial recognition of the receivables.
III. Subsequent measurement - financial liabilities
Any off-market financial guarantees are amortised over the life of the guarantee and are measured at each reporting date at the higher of (i) the remaining unamortised balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the obligation at the end of the reporting period. Other financial liabilities are subsequently measured at amortised cost using the EIR method (if the impact of discounting / any transaction costs is significant), except for contingent consideration and financial liability under option arrangements recognised in a business combination which is subsequently measured at FVTPL. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate the fair value due to the short maturity of these instruments.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured. Interest related to the financial liability is recognised in profit or loss under finance cost. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognised.
c. Measurement - derivative financial instruments
Derivative financial instruments, including separated embedded derivatives are classified as financial instruments at FVTPL - Held for trading. Such derivative financial instruments are initially recognised at fair value. They are subsequently measured at their fair value, with changes in fair value being recognised in the Statement of Profit and Loss.
d. Derecognition
The financial assets are de-recognised from the Balance Sheet when the rights to receive cash flows from the financial assets have expired, or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The financial liabilities are derecognised from the Balance Sheet when the underlying
obligations are extinguished, discharged, lapsed, cancelled, expires or legally released. The resultant impact of derecognition is recognised in the Statement of Profit and Loss.
2.10 Leases
The Company, at the inception of a contract, assesses the contract as, or containing, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether the contract involves the use of an identified asset, the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and the Company has the right to direct the use of the asset.
Company as a lessee
The Company recognises a ROU and a corresponding lease liability with respect to all lease agreements in which it is the lessee in the Balance Sheet. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the incremental borrowing rate (as the rate implicit in the lease cannot be readily determined). Lease liabilities include the net present value of fixed payments (including any in-substance fixed payments) and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Subsequently, the lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments including or when the lease contract is modified and the lease modification is not accounted for as a separate lease. The corresponding adjustment is made to the carrying amount of the ROU, or is recorded in profit or loss if the carrying amount of the related ROU has been reduced to zero and there is a further reduction in the measurement of the lease liability.
ROU are measured at cost, comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date and any initial direct costs less any lease incentives received.
Subsequent to initial recognition, ROU are stated at cost less accumulated depreciation and any impairment losses and adjusted for certain remeasurements of the lease liability. Depreciation is computed using the straight-line method from the commencement date to the end of the useful life of the underlying asset or the end of the lease term, whichever is shorter. The estimated useful lives of ROU are determined on the same basis as those of the underlying asset.
I n the Balance Sheet, the ROU and lease liabilities are presented separately. In the Statement of Profit and
manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The Company considers the projected future taxable income and tax planning strategies in making this assessment.
The unrecognised deferred tax assets / carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised or the liability is settled.
Income tax assets and liabilities are off-set against each other and the resultant net amount is presented in the Balance Sheet, if and only when, (a) the Company currently has a legally enforceable right to set-off the current income tax assets and liabilities, and (b) when it relate to income tax levied by the same taxation authority and where there is an intention to settle the current income tax balances on net basis.
2.12 Inventories
I nventories are stated at the lower of cost (determined using the first-in-first-out method) and net realisable value. The costs comprise its purchase price and any directly attributable cost of bringing the inventories to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
2.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank balances and any deposits with original maturities of three months or less (that are readily convertible to known amounts of cash and cash equivalents and subject to an insignificant risk of changes in value). However, for the purpose of the Statement of Cash Flows, in addition to above items, any bank overdrafts / cash credits that are integral part of the Companyâs cash management, are also included as a component of cash and cash equivalents.
2.14 Equity share capital
Ordinary shares are classified as Equity when the Company has an un-conditional right to avoid delivery of cash or another financial asset, that is, when the dividend and repayment of capital are at the sole and absolute discretion of the Company and there is no contractual obligation whatsoever to that effect.
Loss, interest expense on lease liabilities are presented separately from the depreciation charge for the ROU. Interest expense on the lease liability is a component of finance costs, which are presented separately in the Statement of Profit or Loss. In the statement of cash flows, cash payments for the principal portion of lease payments and the interest portion of lease liability are presented as financing activities, and short-term lease payments and payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liability, if any, as operating activities.
When a contract includes lease and non-lease components, the Company allocates the consideration in the contract on the basis of the relative stand-alone prices of each lease component and the aggregate stand-alone price of the non-lease components.
Short-term leases and leases of low-value assets
The Company has elected not to recognise ROU and lease liabilities for short term leases that have a lease term of twelve months or less and leases of low value assets. The Company recognises lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Company as a lessor
Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Amounts due from lessees under a finance lease are recognised as receivables at an amount equal to the net investment in the leased assets. Finance lease income is allocated to the periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the finance lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
When a contract includes lease and non-lease components, the Company applies Ind AS 115 âRevenue from Contracts with Customersâ to allocate the consideration under the contract to each component.
The Company enters into âIndefeasible right to useâ (âIRUâ) arrangements wherein the right to use the assets is given over the substantial part of the asset life. However, as the title to the assets and the significant risks associated with the operation and maintenance of these assets remains with the Company, such arrangements are recognised as operating lease. The contracted price is recognised as revenue during the tenure of the agreement. Unearned
IRU revenue received in advance is presented as deferred revenue within liabilities in the Balance Sheet.
2.11 Taxes
The income tax expense comprises of current and deferred income tax. Income tax is recognised in the Statement of Profit and Loss, except to the extent that it relates to items recognised in the other comprehensive income or directly in equity, in which case the related income tax is also recognised accordingly.
a. Current tax
The current tax is calculated on the basis of the tax rates, laws and regulations, which have been enacted or substantively enacted as at the reporting date. The payment made in excess / (shortfall) of the Companyâs income tax obligation for the period are recognised in the balance sheet under assets as income tax assets / under current liabilities as current tax liabilities.
Any interest, related to accrued liabilities for potential tax assessments are not included in income tax charge or (credit), but are rather recognised within finance costs.
The Company periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation. The Company considers whether it is probable that a taxation authority will accept an uncertain tax treatment. If the Company concludes it is probable that the taxation authority will accept an uncertain tax treatment, it determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. If the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the entity reflects the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates.
b. Deferred tax
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the Financial Statements. Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax assets / liabilities recognised for temporary differences and unused carry forward losses arising from a business combination, affect the amount of goodwill or the bargain purchase gain that the Company recognises. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred tax is not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
2.15 Employee benefits
The Companyâs employee benefits mainly include wages, salaries, bonuses, defined contribution plans, defined benefits plans, compensated absences, deferred compensation and share-based payments. The employee benefits are recognised in the year in which the associated services are rendered by the Company employees. Shortterm employee benefits are recognised in Statement of Profit and Loss at undiscounted amounts during the period in which the related services are rendered.
i. Defined Contribution plans
The contributions to defined contribution plans are recognised in profit or loss as and when the services are rendered by employees. The Company has no further obligations under these plans beyond its periodic contributions.
ii. Defined benefits plans
I n accordance with the local laws and regulations, all the employees in India are entitled for the Gratuity plan. The said plan requires a lump-sum payment to eligible employees (meeting the required vesting service condition) at retirement or termination of employment, based on a pre-defined formula.
The Company provides for the liability towards the said plans on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method.
The obligation towards the said benefits is recognised in the Balance Sheet, at the present value of the defined benefits obligations. The present value of the said obligation is determined by discounting the estimated future cash outflows, using interest rates of government bonds.
The interest expenses are calculated by applying the above mentioned discount rate to defined benefits obligations. The interest expenses on the defined benefits obligations are recognised in the Statement of Profit and Loss. However, the related re-measurements of the defined benefits obligations are recognised directly in the other comprehensive income in the period in which they arise. The said re-measurements comprise of actuarial gains and losses (arising from experience adjustments and changes in actuarial assumptions). Re-measurements are not re-classified to the Statement of Profit and Loss in any of the subsequent periods.
a. Other long-term employee benefits
The employees of the Company are entitled to compensated absences as well as other long-term benefits. Compensated absences benefits comprises of encashment and availment of leave balances that were earned by the employees over the period of past employment.
The Company provides for the liability towards the said benefits on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent
qualified actuary using the projected-unit-credit method. The related re-measurements are recognised in the Statement of Profit and Loss in the period in which they arise.
b. Share-based payments
The Company operates equity-settled and cash-settled employee share-based compensation plans, under which the Company receives services from employees as consideration for stock options either towards shares of the Company or cash settled units.
I n case of equity-settled awards, the fair value of stock options (at grant date) is recognised as an expense in the Statement of Profit and Loss within employee benefits as employee share-based payment expenses over the vesting period, with a corresponding increase in share-based payment reserve (a component of equity).
However, in case of cash-settled awards, the credit is recognised as a liability within other non-financial liabilities over the vesting period. Subsequently, at each reporting period, until the liability is settled, and at the date of settlement, liability is re-measured at fair value through Statement of Profit and Loss.
The total amount so expensed is determined by reference to the grant date fair value of the stock options granted, which includes the impact of any market performance conditions and non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. However, the non-market performance vesting and service conditions are considered in the assumption as to the number of options that are expected to vest. The forfeitures are estimated at the time of grant and reduce the said expense rateably over the vesting period.
The expense so determined is recognised over the requisite vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. As at each reporting date, the Company revises its estimates of the number of options that are expected to vest, if required.
It recognises the impact of any revision to original estimates in the period of change. Accordingly, no expense is recognised for awards that do not ultimately vest, except for which vesting is conditional upon a market performance / non-vesting condition. These are treated as vested irrespective of whether or not the market / non-vesting condition is satisfied, provided that service conditions and all other non-market performance are satisfied.
Where the terms of an award are modified, in addition to the expense pertaining to the original award, an incremental expense is recognised for any modification that results in additional fair value, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled (including due to non-vesting conditions not being met), it is treated as if it is vested thereon, and any un-recognised expense for the
award is recognised immediately. In case of cancellation of cash-settled award, change in the value of the liability, if any, is recognised in Statement of Profit and Loss.
2.16 Provisions
a. General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the said obligation, and the amounts of the said obligation can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the relevant obligation (if the impact of discounting is significant), using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to unwinding of interest over passage of time is recognised within finance costs.
The Company is involved in various legal and taxation matters, and the matter are in legal course. Management, in consultation with legal, tax and other advisers, assesses the likelihood that a pending claim will succeed. The Company recognises a provision in cases where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations arising from such claims.
b. Asset retirement obligations (âAROâ)
ARO are recognised for those lease arrangements where the Company has an obligation at the end of the lease period to restore the leased premises in a condition similar to inception of lease. ARO are provided at the present value of expected costs to settle the obligation and are recognised as part of the cost of that particular asset. The estimated future costs of decommissioning are reviewed annually and any changes in the estimated future costs or in the discount rate applied are adjusted from the cost of the asset.
2.17 Contingencies
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent asset is not recognised and is disclosed only where an inflow of economic benefits are probable.
2.18 Revenue recognition
Revenue is recognised upon transfer of control of promised products or services to the customer at the consideration which the Company has received or expects to receive in exchange of those products or services, net of any taxes / duties, discounts and process waivers. When determining
the consideration to which the Company is entitled for providing promised products or services via intermediaries, the Company assesses whether it is primarily responsible for fulfilling the performance obligation and whether it controls the promised service before transfer to customers. To the extent that the intermediary is considered a principal, the consideration to which the Company is entitled is determined to be that received from the intermediary.
Revenue is recognised when, or as, each distinct performance obligation is satisfied. The main categories of revenue and the basis of recognition are as follows:
a. Service revenue
Service revenues mainly pertain to usage, subscription and customer onboarding charges for voice, data, messaging and value added services. It also includes revenue from interconnection / roaming charges for usage of the Companyâs network by other operators for voice, data, messaging and signaling services.
Telecommunication services (comprising voice, data and SMS) are considered to represent a single performance obligation as all are provided over the Companyâs network and transmitted as data representing a digital signal on the network. The transmission consumes network bandwidth and therefore, irrespective of the nature of the communication, the customer ultimately receives access to the network and the right to consume network bandwidth.
The Company recognises revenue from these services as they are provided. Revenue is recognised based on actual units of telecommunication services provided during the reporting period as a proportion of the total units of telecommunication services to be provided. Subscription charges are recognised over the subscription pack validity period. Customer onboarding revenue is recognised upon successful onboarding of customer i.e. upfront. Revenues in excess of invoicing are classified as unbilled revenue while invoicing / collection in excess of revenue are classified as deferred revenue / advance from customers.
Service revenues also includes revenue from interconnection / roaming charges for usage of the Companyâs network by other operators for voice, data, messaging and signaling services. These are recognised upon transfer of control of services over time.
Certain business services revenues include revenue from registration and installation, which are amortised over the period of agreement since the date of activation of service.
Revenues from long distance operations comprise of voice services and bandwidth services (including installation), which are recognised on provision of services over the period of respective arrangements.
b. Multiple element arrangements
The Company has entered into certain multiple-element revenue arrangements which involve the delivery or performance of multiple products, services or rights to
use assets. At the inception of the arrangement, all the deliverables therein are evaluated to determine whether they represent distinct performance obligations, and if so, they are accounted for separately. Total consideration related to the multiple element arrangements is allocated to each performance obligation based on their standalone selling prices. The stand-alone selling prices are determined based on the list prices at which the Company sells equipment and network services separately.
c. Equipment sales
Equipment sales mainly pertain to sale of telecommunication equipment and related accessories for which revenue is recognised when the control of equipment is transferred to the customer, i.e. transferred at a point in time. However, in case of equipment sale forming part of multiple-element revenue arrangements which is not a distinct performance obligation, revenue is recognised over the customer relationship period.
d. Interest income
The interest income is recognised using the EIR method. For further details, refer note 2.9.
e. Costs to obtain or fulfill a contract with a customer
The Company incurs certain costs to obtain or fulfill contracts with customers viz. intermediary commission, etc. The Company has estimated that the average customer life derived from customer churn rate is longer than 12 months and, thus, such costs are recognised over the average expected customer life.
f. Dividend income
Dividend income is recognised when the Companyâs right to receive the payment is established.
2.19 Government grants
Grants from the government are recognised where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions.
Government grants relating to income are deferred and recognised in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of PPE are included in non-current liabilities as deferred income and are credited to Statement of Profit and Loss on a straightline basis over the expected lives of the related assets.
2.20 Borrowing costs
Borrowing costs consist of interest and other ancillary costs that the Company incurs in connection with the borrowing of funds. The borrowing costs directly attributable to the acquisition or construction of any asset that takes a substantial period of time to get ready for its intended use or sale are capitalised. All other borrowing costs are
In the said assessment, both the legal form and substance of the agreement are reviewed to determine each partyâs role in the transaction.
4. Significant transactions / new developments
i. During the year ended March 31, 2022, the Company has partnered with Google International LLC (âGoogleâ) on January 28, 2022 for investment of upto USD One billion by Google comprising (a) investment of ''52,243.80 (approx. USD 700 Mn) vide issuance of upto 71,176,839 equity shares of face value of ''5/- each by the Company to Google on a preferential basis in accordance with Chapter V of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended and other applicable laws, at a price of ''734/- per equity share; and (b) investment of upto USD 300 Mn towards implementing commercial agreements, which will include investments in scaling Companyâs offerings that cover a range of devices to consumers via innovative affordability programs as well as other offerings aimed at accelerating access and digital inclusion across Indiaâs digital ecosystem. As on the date of these financial statements, the transaction(s) is subject to applicable statutory / regulatory approvals.
ii. During the year ended March 31, 2021, the Honâble National Company Law Tribunal, New Delhi, subject to the applicable sectoral approval, approved the composite Scheme of arrangement under Sections 230 to 232 of the Companies Act, 2013 (âSchemeâ) for transfer of Very Small Aperture Terminal (âVSATâ) business of the Company and Bharti Airtel Services Limited, a subsidiary of the Comp
Mar 31, 2021
Significant transactions
i. The Company announced a new corporate structure on April 14, 2021 to sharpen its focus on driving the rapidly unfolding digital opportunity in India while enabling it to unlock value. To give effect to this proposed rearrangement, the Board of Directors of the Company, in its meeting held on April 14, 2021, has approved the composite scheme of arrangement (âSchemeâ) between the Company, Nettle Infrastructure Investments Limited, Airtel Digital Limited, Telesonic Networks Limited and Airtel Limited and their respective shareholders and creditors under Sections 230 to 232 and other applicable provisions of the Act for (a) amalgamation of Nettle Infrastructure Investments Limited, Airtel Digital Limited and Telesonic Networks Limited, wholly owned subsidiaries with and into Bharti Airtel Limited; and (b) demerger of the Telecom Business Undertaking of Bharti Airtel Limited and vesting of the same with Airtel Limited, its wholly owned subsidiary on a going concern basis, subsequent to the completion of the aforesaid amalgamations. As on the date of financial statement, the Scheme is subject to the applicable statutory / regulatory approvals and the effect of the Scheme will be accounted after obtaining such approvals.
ii. On October 24, 2019, the Honâble Supreme Court of India delivered a judgement in relation to a long outstanding industry-wide case upholding the view of the Department of Telecommunications (âDoTâ) in respect of the definition of Adjusted Gross Revenue (âAGRâ) (âCourt Judgementâ).
Subsequent to the Court Judgement, DoT issued letters dated November 13, 2019 and February 3, 2020 to the Company to carry out own-assessment of the liability and afforded certain guidelines / clarifications to compute the amounts payable based on the Honâble Supreme Court Judgement. Accordingly, in February 2020, the Company based on its interpretation and assessment of the guidelines / clarifications, and the principles laid down in the Court Judgement, made payments aggregating ''119,020 to the DoT, and an additional ''49,500 as a deposit (subject to subsequent refund / adjustment) to cover differences resulting from re-verification / reconciliation by DoT.
On March 16, 2020, DoT filed an application with respect to giving reasonable time to the affected parties (a period of 20 years with 8% interest on unpaid amounts to duly protect the net present value) and to cease the currently applicable interest after a particular date. The Honâble Supreme Court, in a hearing on March 18, 2020, ordered that no exercise of self-assessment / re-assessment is to be done and the dues which were placed before the Court have to be paid including interest and penalty.
I n the absence of any potential reliefs, the Company provided for ''346,951 for the periods upto March 31, 2020 which was computed on the basis of demands received and the period for which demands have not been received having regard to assessments carried out in earlier years and the guidelines / clarifications in respect of License Fees and Spectrum Usage Charges (âAGR Provisionâ).
On July 20, 2020, the Honâble Supreme Court, observed that the amounts of AGR dues given by DoT in their modification application is to be treated as final (âDoT Demandâ) and there can be no scope of re-assessment or recalculation.
Consequently, without prejudice and out of prudence, during the three months ended June 30, 2020 the Company has further recorded an incremental provision of ''106,890 (including interest on total provision created considering interest rate as per the modification application filed by DoT on March 16, 2020 with effect from the date of Court Judgement) to give effect of the differential amount between the AGR provision and the DoT Demand along with provision for subsequent periods for which demands have not been received, computed on the basis of the License Agreement read with the guidelines / clarifications and the Court judgement, which has been presented as exceptional item (refer note 30(i)(d)). During the period from July 1, 2020 to March 31, 2021, the Company has continued to recognise its AGR obligations based on
Court Judgement and guidelines / clarifications received from DoT in respect of License Fees and Spectrum Usage Charges.
Further, in its judgement dated, September 1, 2020 (âAGR September Judgementâ) the Honâble Supreme Court reaffirmed that the Demand raised by the DoT and stated in its modification application as final and no dispute or re-assessment shall be undertaken. In addition, Honâble Supreme Court directed that the Telecom Operators shall make a payment of 10% of the total dues as demanded by DoT by March 31, 2021 and remaining dues in yearly instalments commencing April 1, 2021 till March 31, 2031 and payable by March 31 of every succeeding financial year. The Company has represented to DoT that it has already paid more than 10% of the total dues as demanded by DoT and will ensure ongoing compliance with the Honâble Supreme Courtâs orders and accordingly filed a compliance affidavit with Honâble Supreme Court confirming compliance with payment of 10% of the total dues by March 31, 2021. The Company has filed an application before the Honâble Supreme Court inter-alia highlighting basic arithmetical, clerical and computational errors in the DoT demand. The application is pending adjudication.
iii. During the year ended March 31, 2021, the Company has issued unsubordinated, direct, unconditional and unsecured senior notes of USD 750 Mn (''54,795) at an issue price of USD 99.908, due on June 3, 2031. The notes bear interest at a rate of 3.25% per annum payable semi-annually in arrears. These senior notes have been classified as debt instruments.
During the year ended March 31, 2021, Network i2i Limited (a wholly owned subsidiary of the Company) has issued subordinated perpetual securities of USD 500 Mn (''36,358) at an issue price of USD 99.888 which are guaranteed by the Company. The notes bear interest at a rate of 3.975% per annum payable semi-annually in arrears. The interest payments on these securities may be deferred in a cumulative, non-compounding manner, subject to certain restrictions including on distributions and payment of dividend by the Company and Network i2i Limited until such cumulative interest remains unpaid.
iv. During the year ended March 31, 2021, the Company has been declared as successful bidder for 319.25 MHz of spectrum across Sub GHz and mid bands for a total consideration of ''185,158 Mn in the auction conducted by the DoT, Government of India. The Company has opted for the deferred payment option and has paid an advance of ''62,412 on March 18, 2021. Out of the total upfront payment of ''69,005, an additional amount of ''1,532 was paid to DoT on April 12, 2021 for immediate allocation of spectrum in some service areas in which the spectrum was to be allocated at a later date and the remaining upfront amount of ''5,061 will be paid in the coming months depending on the date of allocation of spectrum by DoT.
The balance amount of ''116,153 is payable along with interest of 7.3% per annum in 16 equal annual installments after a moratorium of two years. Pending the allocation of spectrum by the Government of India, the balance amount has been disclosed under capital commitments (refer note 22(b)).
v. During the year ended March 31, 2021, Company acquired 20% of the equity share capital of Bharti Telemedia Limited (âBTLâ, a subsidiary of the Company) from Lion Meadow Investment Limited to increase its ownership in BTL to 100% (along with its subsidiary) by issuing 36,469,913 equity share of the Company on a preferential basis (face value of ''5 each fully paid share including a premium of ''595 per equity share) and cash consideration of ''9,378, resulting in total consideration of ''31,260. Additionally, the Company has considered contingent consideration (not exceeding ''1,000 Mn), which will be mutually agreed (refer note 7).
vi. During the year ended March 31, 2021, the Honâble National Company Law Tribunal, New Delhi approved the Composite Scheme of arrangement under Sections 230 to 232 of the Companies Act, 2013 (âSchemeâ) for transfer of Very Small Aperture Terminal (âVSATâ) business of the Company and Bharti Airtel Services Limited, a subsidiary of the Company, on a going concern basis by way of slump sale and vesting of the same with Hughes Communications India Private Limited and HCIL Comtel Private Limited respectively. The Scheme is subject to the applicable sectoral approvals and the effect of the Scheme will be accounted after obtaining such approval.
vii. On April 25, 2018, Indus Towers Limited (the âTransferee Companyâ), (formerly known as Bharti Infratel Limited, which was a subsidiary of the Company) and erstwhile Indus Towers Limited (the âTransferor Companyâ) and their respective shareholders and creditors had entered into a proposed scheme of amalgamation and arrangement (under Sections 230 to 232 and other applicable provisions of the Act) (âSchemeâ) to create a pan-India tower company operating across all 22 telecom service areas. Over time, the Scheme had received all the necessary approvals from the authorities and a certified copy of the National Company Law Tribunal order was filed with the Registrar of Companies on November 19, 2020 i.e. the effective date of merger. Upon the Scheme becoming effective, the Transferor Company stood dissolved without being wound-up.
The merger has resulted in a loss of control of the Company over the Transferee Company w.e.f. November 19, 2020 and led to a formation of a joint venture with joint control being shared between the Company along with its subsidiaries and Vodafone Group with a shareholding of 36.73% and 28.12% respectively and the balance of 35.15% being owned by other shareholders. The Company continues to recognise its investment in the
Transferee Company at the carrying amount in line with the its accounting policy to record investments in joint ventures at cost.
Subsequently, on December 2, 2020 and December 28, 2020, the Company has acquired an additional stake of 4.935180% and 0.064816%, respectively, in the Transferee Company, which has been recognised at cost (refer note 7).
viii. The Company, after considering its current business plans, likely adoption of lower income tax rate permitted under Section 115BAA of the Income-Tax Act, 1961 as introduced by the Taxation Laws (Amendment) Act, 2019, future projections and timing of taxable income, has re-assessed the carrying amounts of its deferred tax balances, including the Minimum Alternate Tax (MAT) credit available.
Simultaneously, the Company has opted for âVivad se Vishwas Scheme 2020â, an income tax amnesty scheme to settle tax related litigations / disputes. The Company has decided to settle its disputes pertaining from assessment years 2010-11 to assessment years 2016-17.
The Income-Tax Authorities on July 21, 2020, have approved the Companyâs application for all the assessment years and all required formalities in relation to this have been duly completed. As a result of the above, tax expense for the year ended March 31, 2021 includes the impact of reversal of current tax liability relating to earlier years of ''1,312, and net deferred tax charge of ''71,417 (including provision against MAT credit ''48,081) aggregating to ''70,105.
ix. The Code on Social Security, 2020 (âCodeâ) relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. The Ministry of Labour and Employment (âMinistryâ) has issued draft of the Code on Social Security (Central) Rules, 2020 on November 13, 2020 and has invited suggestions from stakeholders which are under active consideration by the Ministry. However, the date on which the Code will come into effect has not been notified. The Company is assessing the impact of the Code and will record any related impact in the period in which the Code becomes effective.
x. During the year ended March 31, 2020, the Company had successfully raised ''215,017 of additional Long term financing through a combination of ''144,000 in the form of qualified institutional placement of equity shares (approximately 323.60 Mn fully paid up equity shares of face value ''5 each were issued and allotted at a price of ''445 per equity share) and ''71,017 in the form of 1.50% FCCB offerings (issued at par and repayable in 2025 at 102.66% of their outstanding principal amount).
xi. During the year ended March 31, 2020, the Company had transferred on a going concern basis its operations pertaining to optical fiber undertaking to Telesonic Network Limited with effect from August 3, 2019 (being the effective and appointed date of the Scheme of Arrangement under Section 230 to Section 232 of the Act). Accordingly, for the said common control transaction, the excess of consideration amounting to ''51,139 over the net assets (including the related deferred tax liability), amounting to ''4,063 had been recognised as Capital reserve, a component of equity.
xii. During the year ended March 31, 2020, the Company gave effect to the merger of consumer mobile businesses of Tata Teleservices Limited (âTTSLâ) and Tata Teleservices (Maharashtra) Limited (âTTMLâ) with the Company, on July 1, 2019 (being the effective and appointed date of the Scheme of Arrangement under Section 230 to Section 232 of the Act). As part of the said transaction, the Company is indemnified, for the ramifications of past liabilities (viz. for the period prior to the completion of the transaction). Considering that the said merger had been completed and as a consequence of the Court Judgement, the incremental liabilities of TTSL / TTML pertaining to AGR as per the estimates available have been recorded in the books of the Company with a corresponding indemnity asset (included in Other current financial assets) for the same. As the said incremental liabilities pertains to the period before the acquisition, TTSL / TTML reserve their rights as available to them under law to take appropriate action vis-a-vis the authorities.
The Company, on the basis of the Telecom Disputes Settlement and Appellate Tribunal (âTDSATâ) orders directing the operationalisation of the spectrum and taking all consequent actions and based on the final approval by Tribunal and Registrar of Companies believes that the required approvals were in place for the Scheme to be effective. Accordingly, the said merger is accounted in accordance with Ind AS 103, âBusiness Combinationsâ. Consequently, the excess of net assets over purchase consideration, amounting to ''12,301 had been recognised as Capital reserve, a component of equity. While the merger is completed in the books of the Company, the same had also been taken on record by the DoT on February 6, 2020.
Out of the above, land & building included in Property, plant and equipment amounting to ''2,865 (refer note 5) and land and building included in right-of-use assets (Refer note 34) amounting to ''250, the title deed and lease agreements respectively are held in the name of TTSL / TTML and are pending to be transferred in the name of Company.
xiii. During the year ended March 31, 2020, Network i2i Limited (a wholly owned subsidiary of the Company) on October 15, 2019 issued subordinated perpetual securities (original securities) of USD 750 Mn (''53,489) at an issue price of USD 200,000 which were guaranteed by the Company. Subsequently, on February 18, 2020, Network i2i Limited issued subordinated perpetual securities (additional securities) of USD 250 Mn (''17,894) at an issue price of USD 201,300 plus accrued interest from October 15, 2019. The interest payments on these securities (original securities and additional securities) may be deferred in a cumulative, non-compounding manner, subject to certain restrictions including on distributions and payment of dividend by the Company and Network i2i Limited till such cumulative interest remains unpaid.
Mar 31, 2019
Notes to Standalone Financial Statements
(All amounts are in millions of Indian Rupee; unless stated otherwise)
1. Corporate information
Bharti Airtel Limited (''the Company'') is domiciled and incorporated in India as a limited liability company with its shares being listed on the National Stock Exchange and the Bombay Stock Exchange. The registered office of the Company is situated at Bharti Crescent, 1, Nelson Mandela Road, Vasant Kunj, Phase-II, New Delhi - 110070.
The Company is principally engaged in provision of telecommunication services in India. The details as to the services provided by the Company are further provided in note 33. For details as to the group entities, refer note 34.
2. Summary of significant accounting policies
2.1 Basis of preparation
These standalone financial statements (''financial statements'') have been prepared to comply in all material respects with the Indian Accounting Standard (''Ind AS'') as notified by the Ministry of Corporate Affairs (''MCA'') under section 133 of the Companies Act, 2013 (Act), read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and other relevant provisions of the Act.
The financial statements are approved for issue by the Company''s Board of Directors on May 6, 2019.
The financial statements are based on the classification provisions contained in Ind AS 1, ''Presentation of Financial statements'' and division II of schedule III ofthe Companies Act 2013. Further, for the purpose of clarity, various items are aggregated in the statement of profit and loss and balance sheet. Nonetheless, these items are dis-aggregated separately in the notes to the financial statements, where applicable or required.
All the amounts included in the financial statements are reported in millions of Indian Rupee (''Rupee'' or Rs.'') and are rounded to the nearest million, except per share data and unless stated otherwise. Further, amounts which are less than a million are appearing as ''0''.
The preparation ofthe said financial statements requires the use of certain critical accounting estimates and judgements. It also requires the management to exercise judgement in the process of applying the Company''s accounting policies. The areas where estimates are significant to the financial statements, or areas involving a higher degree of judgement or complexity, are disclosed in note 3.
The accounting policies, as set out in the following paragraphs of this note, have been consistently applied, by the Company, to all the periods presented in the said financial statements, except in case of adoption of any new standards during the year.
2.2 Basis of measurement
The financial statements have been prepared on the accrual and going concern basis, and the historical cost convention except where the Ind AS requires a different accounting treatment. The principal variations from the historical cost convention relate to financial instruments classified as fair value through profit or loss and liability for cash-settled awards (refer note 2.16) - which are measured at fair value.
Fair value measurement
Fair value is the price at the measurement date, at which an asset can be sold or paid to transfer a liability, in an orderly transaction between market participants. The Company''s accounting policies require, measurement of certain financial / non-financial assets and liabilities at fair values (either on a recurring or non-recurring basis). Also, the fair values of financial instruments measured at amortised cost are required to be disclosed in the said financial statements.
The Company is required to classify the fair valuation method ofthe financial / non-financial assets and liabilities, either measured or disclosed at fair value in the financial statements, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurement). Accordingly, the Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The three levels of the fair-value-hierarchy are described below:
Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets
Level 2: Significant inputs to the fair value measurement are directly or indirectly observable
Level 3: Significant inputs to the fair value measurement are unobservable
2.3 Business combinations
The Company accounts for business combinations using the acquisition method of accounting, and accordingly, the identifiable assets acquired and the liabilities assumed in the business are recorded at their acquisition date fair values (except certain assets and liabilities which are required to be measured as per the applicable standard). The consideration transferred for the acquisition of a business is aggregation ofthe fair values ofthe assets transferred, the liabilities incurred and the equity interests issued by the Company in exchange for control ofthe business.
The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Any contingent consideration transferred is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is subsequently measured at fair value with changes in fair value recognised in statements of profit or loss. Contingent consideration that is classified as equity is not re-measured and its subsequent settlement is accounted for within equity.
Acquisition-related costs are expensed in the period in which the costs are incurred.
If the initial accounting for a business combination is incomplete as at the reporting date in which the combination occurs, the identifiable assets and liabilities acquired in a business combination are measured at their provisional fair values at the date of acquisition. Subsequently adjustments to the provisional values are made within the measurement period, if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date; otherwise the adjustments are recorded in the period in which they occur.
A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with Ind AS 37, ''Provisions, Contingent Liabilities and Contingent Assets'', or amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with Ind AS 115 "Revenue from Contracts with Customers".
2.4 Common control transactions
Business combinations arising from transfers of interest / business in entities that are under the common control, are accounted at historical cost. The difference, between any consideration paid / received and the aggregate historical carrying amounts of underlying assets and liabilities acquired / disposed (other than impairment, if any), is recorded in retained earnings, a component of equity.
2.5 Foreign currency transactions
The financial statements are presented in Indian Rupee which is the functional and presentation currency of the Company.
Transactions in foreign currencies are initially recorded in the relevant functional currency at the rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate prevailing as at the reporting date with the resulting foreign exchange differences, on subsequent re-statement / settlement, recognised in the statement of profit and loss within finance costs / finance income. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevalent, at the date of initial recognition (in case they are measured at historical cost) or at the date when the fair value is determined (in case they are measured at fair value) - the resulting foreign exchange difference, on subsequent re-statement/ settlement, recognised in the statement of profit and loss, except to the extent that it relates to items recognised in the other comprehensive income or directly in equity.
The equity items denominated in foreign currencies are translated at historical cost.
2.6 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
Deferred tax assets and liabilities, and all other assets and liabilities which are not current (as discussed in the below paragraphs) are classified as non-current assets and liabilities.
An asset is classified as current when it is expected to be realised or intended to be sold or consumed in normal operating cycle, held primarily for the purpose of trading, expected to be realised within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
A liability is classified as current when it is expected to be settled in normal operating cycle, it is held primarily for the purpose of trading, it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
Separated embedded derivatives are classified basis the host contract.
2.7 Property, plant and equipment (''PPE'')
An item is recognised as an asset, if and only if, it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. PPE are initially recognised at cost. The initial cost of PPE comprises its purchase price (including non-refundable duties and taxes but excluding any trade discounts and rebates), assets retirement obligations (refer note 2.17 (b)) and any directly attributable cost of bringing the asset to its working condition and location for its intended use.
Subsequent to initial recognition, PPE are stated at cost less accumulated depreciation and any impairment losses. When significant parts of PPE are required to be replaced at regular intervals, the Company recognises such parts as separate component of assets. When an item of PPE is replaced, then its carrying amount is de-recognised from the balance sheet and cost of the new item of PPE is recognised. Further, in case the replaced part was not being depreciated separately, the cost of the replacement is used as an indication to determine the cost of the replaced part at the time it was acquired.
The expenditures that are incurred after the item of PPE has been put to use, such as repairs and maintenance, are normally charged to the statement of profit and loss in the period in which such costs are incurred. However, in situations where the said expenditure can be measured reliably, and is probable that future economic benefits associated with it will flow to the Company, it is included in the asset''s carrying value or as a separate asset, as appropriate.
Depreciation on PPE is computed using the straight-line method over the estimated useful lives. Freehold land is not depreciated as it has an unlimited useful life. The Company has established the estimated range of useful lives for different categories of PPE as follows:
|
Categories |
Years |
|
Leasehold land |
Period of lease |
|
Building |
20 |
|
Building on leased land |
20 |
|
Leasehold improvements |
Period of lease or 10 |
|
years, whichever is less |
|
|
Plant and equipment - Network equipment (including passive infrastructure) |
3-25 |
|
- Customer premise equipment |
3-5 |
|
Computers / servers |
3-5 |
|
Furniture & fixtures and office equipments |
2 -5 |
|
Vehicles |
3-5 |
The useful lives, residual values and depreciation method of PPE are reviewed, and adjusted appropriately, at-least as at each financial year end so as to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives, residual values and / or depreciation method are accounted prospectively, and accordingly the depreciation is calculated over the PPE''s remaining revised useful life. The cost and the accumulated depreciation for PPE sold, scrapped, retired or otherwise disposed off are de-recognised from the balance sheet and the resulting gains / losses are included in the statement of profit and loss within other expenses / other income.
The management basis its past experience and technical assessment has estimated the useful life, which is at variance with the life prescribed in Part C of Schedule II of the Companies Act, 2013 and has accordingly, depreciated the assets over such useful life.
The cost of capital work-in-progress (CWIP) is presented separately in the balance sheet.
2.8 Intangible assets
Identifiable intangible assets are recognised when the Company controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Company and the cost of the asset can be measured reliably.
The intangible assets are initially recognised at cost. These assets having finite useful life are carried at cost less accumulated amortisation and any impairment losses. Amortisation is computed using the straight-line method over the expected useful life of intangible assets.
The Company has established the estimated useful lives of different categories of intangible assets as follows:
a. Software
Software are amortised over the period of license, generally not exceeding five years.
b. Bandwidth
Bandwidth is amortised over the period of the agreement.
c. Licenses (including spectrum)
Acquired licenses and spectrum are amortised commencing from the date when the related network is available for intended use in the relevant jurisdiction. The useful lives range from two to twenty years.
The revenue-share based fee on licenses / spectrum is charged to the statement of profit and loss in the period such cost is incurred.
d. Other acquired intangible assets
Other acquired intangible assets include the following:
Rights acquired for unlimited license access: Over the period of the agreement which ranges upto five years.
Customer base: Over the estimated life of such relationships.
Non-compete fee: Over the period of the agreement which ranges upto five years.
The useful lives and amortisation method are reviewed, and adjusted appropriately, at least at each financial year end so as to ensure that the method and period of amortisation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives and / or amortisation method is accounted prospectively, and accordingly the amortisation is calculated over the remaining revised useful life.
Further, the cost of intangible assets under development includes the amount of spectrum allotted to the Company and related costs (including borrowing costs that are directly attributable to the acquisition or construction of qualifying assets (refer note 7), if any, for which services are yet to be rolled out and are presented separately in the balance sheet.
2.9 Impairment of non-financial assets
PPE, intangible assets and intangible assets under development
PPE (including CWIP) and intangible assets with definite lives, are reviewed for impairment, whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Intangible assets under development is tested for impairment, at-least annually and whenever circumstances indicate that it may be impaired.
For the purpose of impairment testing, the recoverable amount (that is, higher of the fair value less costs to sell and the value-in-use) is determined on an individual asset basis, unless the asset does not generate cash flows that are largely independent of those from other assets, in which case the recoverable amount is determined at the cash-generating-unit (''CGU'') level to which the said asset belongs. If such individual assets or CGU are considered to be impaired, the impairment to be recognised in the statement of profit and loss is measured by the amount by which the carrying value of the asset / CGU exceeds their estimated recoverable amount and allocated on pro-rata basis.
Reversal of impairment losses
Impairment losses are reversed in the statement of profit and loss and the carrying value is increased to its revised recoverable amount provided that this amount does not exceed the carrying value that would have been determined had no impairment loss been recognised for the said asset/ CGU in previous years.
2.10 Financial instruments
a. Recognition, classification and presentation
The financial instruments are recognised in the balance sheet when the Company becomes a party to the contractual provisions of the financial instrument.
The Company determines the classification of its financial instruments at initial recognition.
The Company recognises its investment in subsidiaries, associates and joint ventures at cost less any impairment losses. The said investments are tested for impairment whenever circumstances indicate that their carrying values may exceed the recoverable amount (viz. higher of the fair value less costs to sell and the value-in-use).
The Company classifies its financial assets in the following categories: a) those to be measured subsequently at fair value through profit or loss, and b) those to be measured at amortised cost. The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
The Company has classified all the non-derivative financial liabilities as measured at amortised cost.
The entire hybrid contract, financial assets with embedded derivatives, are considered in their entirety for determining the contractual terms of the cash flow and accordingly the embedded derivatives are not separated. However, derivatives embedded in non-financial instrument/financial liabilities (measured at amortised cost) host contracts are classified as separate derivatives if their economic characteristics and risks are not closely related to those of the host contracts.
Financial assets and liabilities arising from different transactions are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, the Company currently has a legally enforceable right to set-off the related recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
b. Measurement - Non-derivative financial instruments
I. Initial measurement
At initial recognition, the Company measures the non-derivative financial instruments (except off-market financial guarantee) at its fair value plus, in the case of a financial instruments not at fair value through profit or loss, transaction costs. Otherwise transaction costs are expensed in the statement of profit and loss. Any off-market financial guarantees, issued in relation to obligations of subsidiaries, are initially recognised at fair value (as part of the cost of the investment in the subsidiary).
II. Subsequent measurement - financial assets
The subsequent measurement of the non-derivative financial assets depends on their classification as follows:
i. Financial assets measured at amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost using the effective-interest rate (''EIR'') method (if the impact of discounting / any transaction
costs is significant). Interest income from these financial assets is included in finance income.
ii. Financial assets at fair value through profit or loss (''FVTPL'')
All financial assets that do not meet the criteria for amortised cost are measured at FVTPL. Interest (basis EIR method) and dividend income from financial assets at FVTPL is recognised in the statement of profit and loss within finance income/finance costs separately from the other gains/ losses arising from changes in the fair value.
Impairment
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition. If credit risk has not increased significantly, twelve month, expected credit loss (ECL) is used to provide for impairment loss, otherwise lifetime ECL is used.
However, only in case of trade receivables, the Company applies the simplified approach which requires expected lifetime losses to be recognised from initial recognition of the receivables.
III. Subsequent measurement -financial liabilities
Any off-market financial guarantees are amortised over the life of the guarantee and are measured at each reporting date at the higher of (i) the remaining unamortised balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the obligation at the end of the reporting period. Other financial liabilities are subsequently measured at amortised cost using the EIR method (if the impact of discounting / any transaction costs is significant).
c. Measurement - derivative financial instruments
Derivative financial instruments, including separated embedded derivatives are classified as financial instruments at fair value through profit or loss - Held for trading. Such derivative financial instruments are initially recognised at fair value. They are subsequently measured at their fair value, with changes in fair value being recognised in the statement of profit and loss within finance income/finance costs.
d. Derecognition
The financial liabilities are de-recognised from the balance sheet when the under-lying obligations are extinguished, discharged, lapsed, cancelled, expires or legally released. The financial assets are de-recognised from the balance sheet when the rights to receive cash flows from the financial assets have expired, or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The difference in the carrying amount is recognised in the statement of profit and loss.
2.11 Leases
The determination of whether an arrangement is a lease is based on whether fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases where the lessor transfers substantially all the risks and rewards of ownership of the leased asset are classified as finance lease and other leases are classified as operating lease.
Operating lease receipts / payments are recognised as an income / expense on a straight-line basis over the lease term unless the lease payments increase in line with expected general inflation.
a. Company as a lessee
Assets acquired under finance leases are capitalised at the lease inception at lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between finance charges (recognised in the statement of profit and loss) and reduction of the lease liability so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period.
b. Company as a lessor
Assets leased to others under finance lease are recognised as receivables at an amount equal to the net investment in the leased assets. Finance lease income is allocated to periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the finance lease.
Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised in statement of profit and loss on a straight-line basis over the lease term.
The Company enters into ''Indefeasible right to use'' (''IRU'') arrangement wherein the assets are given on lease over the substantial part of the asset life. However, the title to the assets and significant risk associated with the operation and maintenance of these assets remains with the Company. Hence, such arrangements are recognised as operating lease. The contracted price is recognised as revenue during the tenure of the agreement. Unearned IRU revenue received in advance is presented as deferred revenue within liabilities in the balance sheet.
2.12 Taxes
The income tax expense comprises of current and deferred income tax. Income tax is recognised in the statement of profit and loss, except to the extent that it relates to items recognised in the other comprehensive income or directly in equity, in which case the related income tax is also recognised accordingly.
a. Current tax
The current tax is calculated on the basis of the tax rates, laws and regulations, which have been enacted or substantively enacted as at the reporting date. The payment made in excess / (shortfall) of the Company''s income tax obligation for the period are recognised in the balance sheet under non-current assets as income tax assets/under current liabilities as current tax liabilities.
Any interest, related to accrued liabilities for potential tax assessments are not included in Income tax charge or (credit), but are rather recognised within finance costs.
b. Deferred tax
Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, deferred tax are not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
The unrecognised deferred tax assets/carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Income tax assets and liabilities are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, (a) the Company currently has a legally enforceable right to set-off the current income tax assets and liabilities, and (b) when it relate to income tax levied by the same taxation authority and where there is an intention to settle the current income tax balances on net basis.
2.13 Inventories
Inventories are stated at the lower of cost (determined using the first-in-first-out method) and net realisable value. The costs comprise its purchase price and any directly attributable cost of bringing to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated variable costs necessary to make the sale.
2.14 Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank balances and any deposits with original maturities of three months or less (that are readily convertible to known amounts of cash and cash equivalents and subject to an insignificant risk of changes in value). However, for the purpose of the statement of cash flows, in addition to above items, any bank overdrafts / cash credits that are integral part of the Company''s cash management, are also included as a component of cash and cash equivalents.
2.15 Share capital / securities premium account
Ordinary shares are classified as Equity when the Company has an un-conditional right to avoid delivery of cash or another financial asset, that is, when the dividend and repayment of capital are at the sole and absolute discretion of the Company and there is no contractual obligation whatsoever to that effect.
2.16 Employee benefits
The Company''s employee benefits mainly include wages, salaries, bonuses, defined contribution to plans, defined benefits plans, compensated absences, deferred compensation and share-based payments. The employee benefits are recognised in the year in which the associated services are rendered by the Company employees.
i. Defined Contribution plans
The contributions to defined contribution plans are recognised in profit or loss as and when the services are rendered by employees. The Company has no further obligations under these plans beyond its periodic contributions.
ii. Defined benefits plans
In accordance with the local laws and regulations, all the employees in India are entitled for the Gratuity plan. The said plan requires a lump-sum payment to eligible employees (meeting the required vesting service condition) at retirement or termination of employment, based on a pre-defined formula.
The Company provides for the liability towards the said plans on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method.
The obligation towards the said benefits is recognised in the balance sheet, at the present value of the defined benefits obligations. The present value of the said obligation is determined by discounting the estimated future cash outflows, using interest rates of government bonds.
The interest expenses are calculated by applying the above mentioned discount rate to defined benefits obligations. The interest expenses on the defined benefits obligations are recognised in the statement of profit and loss. However, the related re-measurements of the defined benefits obligations are recognised directly in the other comprehensive income in the period in which they arise. The said re-measurements comprise of actuarial gains and losses (arising from experience adjustments and changes in actuarial assumptions). Re-measurements are not re-classified to the statement of profit and loss in any of the subsequent periods.
iii. Other long-term employee benefits
The employees of the Company are entitled to compensated absences as well as other long-term benefits. Compensated absences benefits comprises of encashment and availment of leave balances that were earned by the employees over the period of past employment.
The Company provides for the liability towards the said benefits on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method. The related re-measurements are recognised in the statement of profit and loss in the period in which they arise.
iv. Share-based payments
The Company operates equity-settled and cash-settled, employee share-based compensation plans, under which the Company receives services from employees as consideration for stock options either towards shares of the Company / cash settled units.
In case of equity-settled awards, the fair value is recognised as an expense in the statement of profit and loss within employee benefits as employee share-based payment expenses, with a corresponding increase in share-based payment reserve (a component of equity).
However, in case of cash-settled awards, the credit is recognised as a liability within other non-financial liabilities. Subsequently, at each reporting period, until the liability is settled, and at the date of settlement, liability is re-measured at fair value through statement of profit and loss.
The total amount so expensed is determined by reference to the grant date fair value of the stock options granted, which includes the impact of any market performance conditions and non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. However, the non-market performance vesting and service conditions are considered in the assumption as to the number of options that are expected to vest. The forfeitures are estimated at the time of grant and reduce the said expense rateably over the vesting period.
The expense so determined is recognised over the requisite vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. As at each reporting date, the Company revises its estimates of the number of options that are expected to vest, if required.
It recognises the impact of any revision to original estimates in the period of change. Accordingly, no expense is recognised for awards that do not ultimately vest, except for which vesting is conditional upon a market performance / non-vesting condition. These are treated as vesting irrespective of whether or not the market / non-vesting condition is satisfied, provided that service conditions and all other non-market performance are satisfied.
Where the terms of an award are modified, in addition to the expense pertaining to the original award, an incremental expense is recognised for any modification that results in additional fair value, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled (including due to non-vesting conditions not being met), it is treated as if it is vested thereon, and any un-recognised expense for the award is recognised immediately.
2.17 Provisions a. General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the said obligation, and the amounts of the said obligation can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the relevant obligation, using a pre-tax rate that reflects current market assessments of the time value of money (if the impact of discounting is significant) and the risks specific to the obligation. The increase in the provision due to un-winding of discount over passage of time is recognised within finance costs.
b. Asset retirement obligations (''ARO'')
ARO are recognised for those operating lease arrangements where the Company has an obligation at the end of the lease period to restore the leased premises in a condition similar to inception of lease. ARO are provided at the present value of expected costs to settle the obligation and are recognised as part of the cost of that particular asset. The estimated future costs of decommissioning are reviewed annually and any changes in the estimated future costs or in the discount rate applied are adjusted from the cost of the asset.
2.18 Contingencies
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
2.19 Revenue recognition
Effective April 1, 2018 the Company has adopted Ind AS 115, ''Revenue from Contracts with Customers.'' Further during the quarter ended March 31, 2019, the Company has finalised the transition method as the fully retrospective method applied retrospectively. The effect on adoption of the said standard is insignificant on these financial and hence the comparative has not been restated.
Revenue is recognised upon transfer of control of promised products or services to the customer at the consideration which the Company has received or expects to receive in exchange of those products or services, net of any taxes / duties, discounts and process waivers. When determining the consideration to which the Company is entitled for providing promised products or services via intermediaries, the Company assesses whether it is primarily responsible for fulfilling the performance obligation and whether it controls the promised service before transfer to customers. To the extent that the intermediary is considered a principal, the consideration to which the Company is entitled is determined to be that received from the intermediary.
Revenue is recognised when, or as, each distinct performance obligation is satisfied. The main categories of revenue and the basis of recognition are as follows:
a. Service revenue
Service revenues mainly pertain to usage, subscription and customer onboarding charges for voice, data, messaging and value added services. It also includes revenue from interconnection / roaming charges for usage of the Company''s network by other operators for voice, data, messaging and signaling services.
Telecommunication services (comprising voice, data and SMS) are considered to represent a single performance obligation as all are provided over the Company''s network and transmitted as data representing a digital signal on the network. The transmission consumes network bandwidth and therefore, irrespective of the nature of the communication, the customer ultimately receives access to the network and the right to consume network bandwidth.
The Company recognises revenue from these services as they are provided. Revenue is recognised based on actual units of telecommunication services provided during the reporting period as a proportion of the total units of telecommunication services to be provided. Subscription charges are recognised over the subscription pack validity period. Customer onboarding revenue and associated cost is recognised upon successful onboarding of customer i.e. upfront. Revenues in excess of invoicing are classified as unbilled revenue while invoicing / collection in excess of revenue are classified as deferred revenue/advance from customers.
Service revenues also includes revenue from interconnection / roaming charges for usage of the Company''s network by other operators for voice, data, messaging and signaling services. These are recognised upon transfer of control of services being transferred overtime.
Certain business services revenues include revenue from registration and installation, which are amortised over the period of agreement since the date of activation of service.
Revenues from long distance operations comprise of voice services and bandwidth services (including installation), which are recognised on provision of services and over the period of respective arrangements.
b. Multiple element arrangements
The Company has entered into certain multiple-element revenue arrangements which involve the delivery or performance of multiple products, services or rights to use assets. At the inception of the arrangement, all the deliverables therein are evaluated to determine whether they represent distinct performance obligations, and if so, they are accounted for separately. Total consideration related to the multiple element arrangements is allocated to each performance obligation based on their standalone selling prices. The stand-alone selling prices are determined based on the list prices at which the Company sells equipment and network services separately.
c. Equipment sales
Equipment sales mainly pertain to sale of telecommunication equipment and related accessories for which revenue is recognised when the control of equipment is transferred to the customer, i.e. transferred at a point in time. However, in case of equipment sale forming part of multiple-element revenue arrangements which is not a distinct performance obligation, revenue is recognised over the customer relationship period.
d. Interest income
The interest income is recognised using the EIR method. For further details, refer note 2.9.
e. Dividend income
Dividend income is recognised when the Company''s right to receive the payment is established.
2.20 Borrowing costs
Borrowing costs consist of interest and other ancillary costs that the Company incurs in connection with the borrowing of funds. The borrowing costs directly attributable to the acquisition or construction of any asset that takes a substantial period of time to get ready for its intended use or sale are capitalised. All the other borrowing costs are recognised in the statement of profit and loss within finance costs of the period in which they are incurred.
2.21 Exceptional items
Exceptional items refer to items of income or expense within the statement of profit and loss from ordinary activities which are non-recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.
2.22 Non-operating expense
Non-operating expense comprises regulatory levies applicable to finance income.
2.23 Dividends paid
Dividend to shareholders is recognised as a liability and deducted from equity, in the year in which the dividends are approved by the shareholders. However, interim dividends declared by the Board of directors, which does not need shareholders'' approval, are recognised as a liability and deducted from retained earnings, in the year in which the dividends are so declared.
2.24 Earnings per share (''EPS'')
The Company presents the Basic and Diluted EPS data.
Basic EPS is computed by dividing the profit for the period attributable to the shareholders of the Company by the weighted average number of shares outstanding during the period.
Diluted EPS is computed by adjusting, the profit for the year attributable to the shareholders and the weighted average number of shares considered for deriving Basic EPS, for the effects of all the shares that could have been issued upon conversion of all dilutive potential shares. The dilutive potential shares are adjusted for the proceeds receivable had the shares been actually issued at fair value. Further, the dilutive potential shares are deemed converted as at beginning of the period, unless issued at a later date during the period.
3. Critical accounting estimates, assumptions and judgements
The estimates and judgements used in the preparation of the said financial statements are continuously evaluated by the Company, and are based on historical experience and various other assumptions and factors (including expectations of future events), that the Company believes to be reasonable under the existing circumstances. The said estimates and judgements are based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date.
Although the Company regularly assesses these estimates, actual results could differ materially from these estimates - even if the assumptions under-lying such estimates were reasonable when made, if these results differ from historical experience or other assumptions do not turn out to be substantially accurate. The changes in estimates are recognised in the financial statements in the year in which they become known.
3.1 Critical accounting estimates and assumptions
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
a. Impairment reviews
PPE (including CWIP) and intangible assets with definite lives, are reviewed for impairment, whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Similarly, intangible assets under development is tested for impairment, at-least annually and whenever circumstances indicate that it may be impaired. For details as to the impairment policy, refer note 2.9. Accordingly the Company has performed impairment reviews for the above assets. However, the said reviews did not result in any impairment charge.
In calculating the value in use, the Company is required to make significant judgements, estimates and assumptions inter-alia concerning the earnings before interest, taxes, depreciation and amortization (''EBITDA'') margins, capital expenditure, long-term growth rates and discount rates to reflect the risks involved.
The Company operates in developing market and in such market, the plan for shorter duration is not indicative of the long-term future performance. Considering this and the consistent use of such robust ten year information for management reporting purpose, the Company uses ten year plans for the purpose of impairment testing.
The Company conducts impairment reviews of investments in subsidiaries / associates/ joint arrangements whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Determining whether an asset
is impaired requires an estimation of the recoverable amount, which requires the Company to estimate the value in use which base on future cash flows, after taking into account past experience management''s best estimate about future developments. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
b. Taxes
Deferred tax assets are recognised for the unused tax losses and minimum alternate tax credits for which there is probability of utilisation against the future taxable profit. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, future tax planning strategies and recent business performances and developments.
c. Property, plant and equipment
Refer note 2.7 and 6 for the estimated useful life and carrying value of property, plant and equipment respectively.
During the year ended March 31, 2019, the Company has reassessed useful life of certain categories of network assets based on internal assessment and technical evaluation, and accordingly has revised the estimate of its useful life from 18 years to 25 years in respect of those assets. The impact of above change on the depreciation charge for the current and future years are as follows:
|
For the Year Ended March 31, 2019| |
FortheYear Ended March 31, 2020 |
For the Year Ended March 31, 2021 |
For the Year Ended March 31, 2022 |
Future period till end of life |
|
|
mpact on depreciation |
(2,538) |
(2,477) |
(2,122) |
(1,689) |
8,826 |
d. Allowance for impairment of trade receivables
The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. The receivables are assessed on an individual basis or grouped into homogeneous groups and assessed for impairment collectively, depending on their significance. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances
e. Contingent liabilities and provisions
The Company is involved in various legal, tax and regulatory matters, the outcome of which may not be favourable to the Company. Management in consultation with the legal, tax and other advisers assess the likelihood that a pending claim will succeed. The Company has applied its judgement and has recognised liabilities based on whether additional amounts will be payable and has included contingent liabilities where economic outflows are considered possible but not probable.
4. Standards issued but not effective until the date of authorisation for issuance of the said financial statements
The new significant standards, amendments to Standards that are issued but not yet effective until the date of authorisation for issuance of the said financial statements are discussed below. The Company has not early adopted these amendments and intends to adopt when they become effective.
Ind AS 116,''Leases''
In March 2019, MCA has notified the Ind AS 116, Leases. It will replace the existing leases Standard, Ind AS 17''Leases'', and related interpretations. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. It introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. A lease is required to recognise a right-of-use asset representing its right to use and the underlying leased assets and a lease liability representing its obligation to make lease payments.
The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019. The Company is in the process of evaluating its impact on the financial statements.
The following pronouncements, which are potentially relevant to the Company, have been issued and are effective for annual periods beginning on or after April 1, 2019.
Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments : According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The Company does not expect that the adoption of the said amendment will have any significant impact on the financial Statements.
Amendment to Ind AS 12 - Income taxes : The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity accordingly to where the entity originally recognised those past transactions or events whereas hitherto it was being recognised in equity.
5. Significant transactions / new developments
i. Subsequent to the balance sheet date, on May 03, 2019, the Company has launched a rights issue of approximately 1,134 Mn fully paid up equity shares (face value ? 5 each) at a price of Rs. 220/- per share aggregating to ? 249,390. The right issue will close on May 17, 2019. The rights entitlement is determined as 19 equity shares for every 67 equity shares held.
ii. During the year ended March 31, 2019, the Company has transferred its 16.76% equity stake of Bharti Infratel Limited to Nettle Infrastructure Investments Limited, against a consideration of Rs. 100,526. Accordingly the deficit of cost of investments over the proceeds amounting to ? 13,069 has been recognised in other equity.
iii. During the year ended March 31, 2017, the Company had entered into a scheme of amalgamation for the merger of Telenor (India) Communications Private Limited with the Company. Further, during the year ended March 31, 2019, as the closing conditions for the said merger have been fulfilled, the said transaction is consummated. The difference of 5,315 between the purchase consideration (issuance of five equity shares and working capital adjustments) and fair value of net assets has been recognised as capital reserve, a component of equity.
The fair values of the assets and liabilities recognised at the date of acquisition are as follows:
|
Non-current assets |
|
|
Property, plant and equipment |
4,264 |
|
(including capital-work-in-progress |
|
|
of Rs. 94) |
|
|
Other intangible assets |
17,684 |
|
Indemnification assets |
8,835 |
|
Others |
6,309 |
|
Current assets |
|
|
Cash and cash equivalents |
6,931 |
|
Others |
7,661 |
|
Non-current liabilities |
|
|
Borrowings |
14,842 |
|
Others |
955 |
|
Current liabilities |
|
|
Borrowings |
1,229 |
|
Trade payables |
17,301 |
|
Others |
12,592 |
|
Net assets acquired |
4,765 |
iv. During the year ended March 31, 2019, the Company''s Board of Directors at its meeting held on October 25, 2018, has paid interim dividend for the financial year 2018-19 of Rs. 2.50/- per equity share (face value : Rs. 5/- each).
v. During the year ended March 31, 2019, the Company has invested Rs. 2,382 in non-cumulative 0.0001% Compulsorily Convertible Preference Shares (CCPS'') of Airtel Payment Bank Limited (''APBL'', a subsidiary of the Company) having face value of ? 10 each at par. The said CCPS carries discretionary dividend and each CCPS is convertible into one equity share any time after April 1, 2021 but no later than March 31, 2022. The CCPS being equity instrument is considered as addition to Company''s existing investments in APBL and hence will be carried at cost.
vi. During the year ended March 31, 2019, the Company has transferred its 100% equity stake in Bharti Airtel (USA) Limited to Bharti International (Singapore) Pte. Limited (''BISPL''), an indirect subsidiary of the Company against a consideration of ? 2,726. Accordingly, the excess of cost of investments over the proceeds amounting to ? 729 has been recognised in other equity.
vii. During the year ended March 31, 2019, the Company has transferred its operations pertaining to passive infrastructure at the core locations to Nxtra Data Limited, a wholly owned subsidiary, against a consideration of ? 3,245. Accordingly, the excess of cost of net assets over the proceeds amounting to ? 189 has been recognised in retained earnings.
viii. During the year ended March 31, 2018, the Company had transferred its 100% equity stake in Bharti Airtel (Hong Kong) Limited and 37.03% equity stake in Bharti Airtel (UK) Limited to Bharti International (Singapore) Pte. Limited (''BISPL''), an indirect subsidiary of the Company against a consideration of Rs. 429 and ? 1,806 respectively and 44% stake in Bharti Telemedia Limited, a subsidiary of the Company to Nettle Infrastructure Investments Limited, another subsidiary of the Company, against a consideration of ? 47,632. Accordingly the excess of cost of investments over the proceeds amounting to ? 28,498 has been recognised in other equity.
ix. During the year ended March 31, 2018, the Company had increased its equity investment in Indo Teleports Limited from 95% to 100% for a consideration of Rs. 23.
x. During the year ended March 31, 2018, an understanding for demerger of consumer mobile businesses of Tata Teleservices Limited and Tata Teleservices Maharashtra Limited into the Company was entered into. Further, the board of directors have approved the scheme(s) of arrangement under section 230 to section 232 of the Companies Act, 2013 for the said demerger. The said transaction is subject to requisite regulatory approvals.
xi. During the year ended March 31, 2018, the Board of Directors approved a scheme of arrangement, under section 230 to section 232 of the Companies Act, 2013, for the transfer of the optical fiber cable business to the Telesonic Networks Limited, a wholly owned subsidiary of the Company. The said transaction is subject to requisite regulatory approvals.
xii. During the year ended March 31, 2018, the Company had completed the acquisition of 100% equity stake and compulsorily convertible debentures of Tikona Digital Networks Private Limited (TDNPL) as all necessary closing conditions have been fulfilled and filed an application under section 230 to section 232 of the Companies Act, 2013 before the Delhi bench of the National Company Law Tribunal for the merger of TDNPL with the Company.
xiii. During the year ended March 31, 2017, the Company had entered into an agreement to sell the investment in subsidiary BISPL and to its wholly owned subsidiary Network i2i Limited. Further, during the year ended March 31, 2018, as the closing conditions for consummation of the transaction have been fulfilled, the said transaction is consummated.
Mar 31, 2018
1. Corporate information
Bharti Airtel Limited (âthe Companyâ) is domiciled and incorporated in India as a limited liability company with its shares being listed on the National Stock Exchange and the Bombay Stock Exchange, The registered office of the Company is situated at Bharti Crescent, 1, Nelson Mandela Road, Vasant Kunj, Phase - II, New Delhi - 110070,
The Company is principally engaged in provision of telecommunication services in India, The details as to the services provided by the Company are further provided in note 33, For details as to the group entities, refer note 34,
2. Summary of significant accounting policies
2.1 Basis of preparation
These standalone financial statements (âfinancial statementsâ) have been prepared to comply in all material respects with the Indian Accounting Standard (âInd ASâ) as notified by the Ministry of Corporate Affairs (âMCAâ) under section 133 of the Companies Act, 2013 (âActâ), read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and other relevant provisions of the Act,
The financial statements are authorized for issue by the Companyâs Board of Directors on April 24, 2018,
The financial statements are based on the classification provisions contained in Ind AS 1, âPresentation of Financial Statementsâ and division II of schedule III of the Companies Act 2013, Further, for the purpose of clarity, various items are aggregated in the statement of profit and loss and balance sheet, Nonetheless, these items are dis-aggregated separately in the notes to the financial statements, where applicable or required,
All the amounts included in the financial statements are reported in millions of Indian Rupees (âRupeesâ or âHâ) and are rounded to the nearest million, except per share data and unless stated otherwise, Further, amounts which are less than a million are appearing as â0â,
The preparation of the said financial statements requires the use of certain critical accounting estimates and judgments, It also requires the management to exercise judgment in the process of applying the Companyâs accounting policies, The areas where estimates are significant to the financial statements, or areas involving a higher degree of judgment or complexity, are disclosed in note 3,
The accounting policies, as set out in the following paragraphs of this note, have been consistently applied, by the Company, to all the periods presented in the said financial statements, Further, previous year figures have been re-grouped, wherever necessary to conform to current yearâs classification,
2.2 Basis of measurement
The financial statements have been prepared on the accrual and going concern basis, and the historical cost convention except where the Ind AS requires a different accounting treatment, The principal variations from the historical cost convention relate to financial instruments classified as fair value through profit or loss and liability for cash-settled awards (refer note 2,16) - which are measured at fair value,
Fair value measurement
Fair value is the price at the measurement date, at which an asset can be sold or paid to transfer a liability, in an orderly transaction between market participants, The Companyâs accounting policies require, measurement of certain financial / non-financial assets and liabilities at fair values (either on a recurring or non-recurring basis), Also, the fair values of financial instruments measured at amortized cost are required to be disclosed in the said financial statements,
The Company is required to classify the fair valuation method of the financial / non-financial assets and liabilities, either measured or disclosed at fair value in the financial statements, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurement), Accordingly, the Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs,
The three levels of the fair-value-hierarchy are described below:
Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets Level 2: Significant inputs to the fair value measurement are directly or indirectly observable Level 3: Significant inputs to the fair value measurement are unobservable,
2.3 Foreign currency transactions
The financial statements are presented in Indian Rupees which is the functional and presentation currency of the Company.
Transactions in foreign currencies are initially recorded in the relevant functional currency at the rates prevailing at the date of the transaction,
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate prevailing as at the reporting date with the resulting foreign exchange differences, on subsequent restatement / settlement, recognized in the statement of profit and loss within finance costs / finance income, Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevalent, at the date of initial recognition (in case they are measured at historical cost) or at the date when the fair value is determined (in case they are measured at fair value) - the resulting foreign exchange difference, on subsequent re-statement / settlement, recognized in the statement of profit and loss, except to the extent that it relates to items recognized in the other comprehensive income or directly in equity
The equity items denominated in foreign currencies are translated at historical cost,
2.4 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification,
Deferred tax assets and liabilities, and all assets and liabilities which are not current (as discussed in the below paragraphs) are classified as non-current assets and liabilities,
An asset is classified as current when it is expected to be realized or intended to be sold or consumed in normal operating cycle, held primarily for the purpose of trading, expected to be realized within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period,
A liability is classified as current when it is expected to be settled in normal operating cycle, it is held primarily for the purpose of trading, it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period,
Separated embedded derivatives are classified basis the host contract,
2.5 Common control transactions
Business Combinations arising from transfers of interest in entities that are under the common control, are accounted at historical cost, The difference between any consideration paid /received and the aggregate historical carrying amounts of assets and liabilities of the interest acquired / disposed is recorded in retained earnings,
2.6 Property, plant and equipment (âPPEâ)
An item is recognized as an asset, if and only if, it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably, PPE are initially recognized at cost, The initial cost of PPE comprises its purchase price (including non-refundable duties and taxes but excluding any trade discounts and rebates), assets retirement obligations (refer note 2,17 (b)) and any directly attributable cost of bringing the asset to its working condition and location for its intended use,
Subsequent to initial recognition, PPE are stated at cost less accumulated depreciation and any impairment losses, When significant parts of PPE are required to be replaced at regular intervals, the Company recognizes such parts as separate component of assets, When an item of PPE is replaced, then its carrying amount is de-recognized from the balance sheet and cost of the new item of PPE is recognized, Further, in case the replaced part was not being depreciated separately, the cost of the replacement is used as an indication to determine the cost of the replaced part at the time it was acquired,
The expenditures that are incurred after the item of PPE has been put to use, such as repairs and maintenance, are normally charged to the statement of profit and loss in the period in which such costs are incurred, However, in situations where the said expenditure can be measured reliably, and is probable that future economic benefits associated with it will flow to the Company, it is included in the assetâs carrying value or as a separate asset, as appropriate,
The useful lives, residual values and depreciation method of PPE are reviewed, and adjusted appropriately, at-least as at each financial year so as to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets, The effect of any change in the estimated useful lives, residual values and / or depreciation method are accounted prospectively, and accordingly the depreciation is calculated over the PPEâs remaining revised useful life, The cost and the accumulated depreciation for PPE sold, scrapped, retired or otherwise disposed off are de-recognized from the balance sheet and the resulting gains / (losses) are included in the statement of profit and loss within other expenses / other income,
The management basis its past experience and technical assessment has estimated the useful life, which is at variance with the life prescribed in Part C of Schedule II of the Companies Act, 2013 and has accordingly, depreciated the assets over such useful life,
The cost of capital work-in-progress (CWIP) is presented separately in the balance sheet,
7 Intangible assets
Identifiable intangible assets are recognized when the Company controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Company and the cost of the asset can be measured reliably
The intangible assets are initially recognized at cost, These assets having finite useful life are carried at cost less accumulated amortization and any impairment losses, Amortization is computed using the straight-line method over the expected useful life of intangible assets,
The Company has established the estimated useful lives of different categories of intangible assets as follows:
a. Softwareâs
Softwares are amortized over the period of license, generally not exceeding three years,
b. Bandwidth
Bandwidth is amortized over the period of the agreement,
c. Licenses (including spectrum)
Acquired licenses and spectrum are amortized commencing from the date when the related network is available for intended use in the relevant jurisdiction, The useful lives range from two to twenty years,
The revenue-share based fee on licenses / spectrum is charged to the statement of profit and loss in the period such cost is incurred,
d. Other acquired intangible assets
Other acquired intangible assets include the following:
Rights acquired for unlimited license access: Over the period of the agreement which ranges upto five years, Customer base: Over the estimated life of such relationships,
Non-compete fee: Over the period of the agreement which ranges up to five years,
The useful lives and amortization method are reviewed, and adjusted appropriately, at least at each financial year end so as to ensure that the method and period of amortization are consistent with the expected pattern of economic benefits from these assets, The effect of any change in the estimated useful lives and / or amortization method is accounted prospectively, and accordingly the amortization is calculated over the remaining revised useful life,
Further, the cost of intangible assets under development includes the amount of spectrum allotted to the Company and related costs (including borrowing costs that are directly attributable to the acquisition or construction of qualifying assets (refer note 7)), if any, for which services are yet to be rolled out and are presented separately in the balance sheet,
2.8 Impairment of non-financial assets PPE, intangible assets and Intangible assets under development
PPE (including CWIP) and intangible assets with definite lives, are reviewed for impairment, whenever events or changes in circumstances indicate that their carrying values may not be recoverable, Intangible assets under development is tested for impairment, at-least annually and whenever circumstances indicate that it may be impaired,
For the purpose of impairment testing, the recoverable amount (that is, higher of the fair value less costs to sell and the value-in-use) is determined on an individual asset basis, unless the asset does not generate cash flows that are largely independent of those from other assets, in which case the recoverable amount is determined at the CGU level to which the said asset belongs, If such individual assets or CGU are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the asset / CGU exceeds their estimated recoverable amount and allocated on pro-rata basis,
Reversal of impairment losses
Impairment losses are reversed in the statement of profit and loss and the carrying value is increased to its revised recoverable amount provided that this amount does not exceed the carrying value that would have been determined had no impairment loss been recognized for the said asset / CGU in previous years,
2.9 Financial instruments
a. Recognition, classification and presentation
The financial instruments are recognized in the balance sheet when the Company becomes a party to the contractual provisions of the financial instrument,
The Company determines the classification of its financial instruments at initial recognition,
The Company recognizes its investment in subsidiaries, joint ventures and associates at cost less any impairment losses, The said investments are tested for impairment, at-least annually and whenever circumstances indicate that their carring values may exceed the recoverable amount (viz, higher of the fair value less costs to sell and the value-in-use),
The Company classifies its financial assets in the following categories: a) those to be measured subsequently at fair value through profit or loss, and b) those to be measured at amortized cost, The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows,
The Company has classified all the non-derivative financial liabilities as measured at amortized cost,
The entire hybrid contract, financial assets with embedded derivatives, are considered in their entirety for determining the contractual terms of the cash flow and accordingly the embedded derivatives are not separated, However, derivatives embedded in non-financial instrument / financial liabilities (measured at amortized cost) host contracts are classified as separate derivatives if their economic characteristics and risks are not closely related to those of the host contracts,
Financial assets and liabilities arising from different transactions are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, the Company currently has a legally enforceable right to set-off the related recognized amounts and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
b. Measurement - Non-derivative financial instruments
I. Initial measurement
At initial recognition, the Company measures the non-derivative financial instruments (except off-market financial guarantee) at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs, Otherwise transaction costs are expensed in the statement of profit and loss, Any off market financial guarantees, issued in relation to obligations of subsidiaries, are initially recognized at fair value (as part of the cost of the investment in the subsidiary),
II. Subsequent measurement - financial assets
The subsequent measurement of the non-derivative financial assets depends on their classification as follows:
i. Financial assets measured at amortized cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost using the effective-interest rate (âEIRâ) method (if the impact of discounting / any transaction costs is significant), Interest income from these financial assets is included in finance income,
ii. Financial assets at fair value through profit or loss (âFVTPLâ)
All financial assets that do not meet the criteria for amortized cost are measured at FVTPL, Interest (basis EIR method) and dividend income from financial assets at FVTPL is recognized in the statement of profit and loss within finance income / finance costs separately from the other gains / losses arising from changes in the fair value,
Impairment
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost, The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition, If credit risk has not increased significantly, twelve month, expected credit loss (ECL) is used to provide for impairment loss, otherwise lifetime ECL is used,
However, only in case of trade receivables, the Company applies the simplified approach which requires expected lifetime losses to be recognized from initial recognition of the receivables,
III. Subsequent measurement - financial liabilities
Any off-market financial guarantees are amortized over the life of the guarantee and are measured at each reporting date at the higher of (i) the remaining unamortized balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the obligation at the end of the reporting period, Other financial liabilities are subsequently measured at amortized cost using the EIR method (if the impact of discounting / any transaction costs is significant),
c. Measurement - derivative financial instruments
Derivative financial instruments, including separated embedded derivatives are classified as financial instruments at fair value through profit or loss - Held for trading, Such derivative financial instruments are initially recognized at fair value, They are subsequently measured at their fair value, with changes in fair value being recognized in the statement of profit and loss within finance income / finance costs,
d. Derecognition
The financial liabilities are de-recognized from the balance sheet when the under-lying obligations are extinguished, discharged, lapsed, cancelled, expires or legally released, The financial assets are de-recognized from the balance sheet when the rights to receive cash flows from the financial assets have expired, or have been transferred and the Company has transferred substantially all risks and rewards of ownership, The difference in the carrying amount is recognized in the statement of profit and loss,
2.10 Leases
The determination of whether an arrangement is a lease is based on whether fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement,
Leases where the less or transfers substantially all the risks and rewards of ownership of the leased asset are classified as finance lease and other leases are classified as operating lease,
Operating lease receipts / payments are recognized as an income / expense on a straight-line basis over the lease term unless the lease payments increase in line with expected general inflation,
a. Company as a lessee
Assets acquired under finance leases are capitalized at the lease inception at lower of the fair value of the leased asset and the present value of the minimum lease payments, Lease payments are apportioned between finance charges (recognized in the statement of profit and loss) and reduction of the lease liability so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period,
b. Company as a less or
Assets leased to others under finance lease are recognized as receivables at an amount equal to the net investment in the leased assets, Finance lease income is allocated to periods so as to reflect a constant rate of return on the net investment outstanding in respect of the finance lease,
Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized in statement of profit and loss on a straight-line basis over the lease term,
The Company enters into âIndefeasible right to useâ (âIRUâ) arrangement wherein the assets are given on lease over the substantial part of the asset life, However, the title to the assets and significant risk associated with the operation and maintenance of these assets remains with the Company, Hence, such arrangements are recognized as operating lease, The contracted price is recognized as revenue during the tenure of the agreement, Unearned IRU revenue received in advance is presented as deferred revenue within liabilities in the balance sheet,
2.11 Taxes
The income tax expense comprises of current and deferred income tax, Income tax is recognized in the statement of profit and loss, except to the extent that it relates to items recognized in the other comprehensive income or directly in equity, in which case the related income tax is also recognized accordingly
a. Current tax
The current tax is calculated on the basis of the tax rates, laws and regulations, which have been enacted or substantively enacted as at the reporting date, The payment made in excess / (shortfall) of the Companyâs income tax obligation for the period are recognized in the balance sheet under non-current assets as income tax assets / under current liabilities as current tax liabilities,
Any interest, related to accrued liabilities for potential tax assessments are not included in Income tax charge or (credit), but are rather recognized within finance costs,
b. Deferred tax
Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements, However, deferred tax are not recognized if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss,
Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized,
The unrecognized deferred tax assets / carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled,
Income tax assets and liabilities are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, (a) the Company currently has a legally enforceable right to set-off the current income tax assets and liabilities, and (b) when it relate to income tax levied by the same taxation authority and where there is an intention to settle the current income tax balances on net basis,
2.12 Inventories
Inventories are stated at the lower of cost (determined using the first-in-first-out method) and net realisable value, The costs comprise its purchase price and any directly attributable cost of bringing to its present location and condition, Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated variable costs necessary to make the sale,
2.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank balances and any deposits with original maturities of three months or less (that are readily convertible to known amounts of cash and cash equivalents and subject to an insignificant risk of changes in value), However, for the purpose of the statement of cash flows, in addition to above items, any bank overdrafts / cash credits that are integral part of the Companyâs cash management, are also included as a component of cash and cash equivalents,
2.14 Non-current assets held for sale
Non-current assets are classified as assets-held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable, The sale is considered highly probable only when the asset is available for immediate sale in its present condition, it is unlikely that the sale will be withdrawn and sale is expected within one year from the date of the classification, Assets classified as held for sale are stated at the lower of carrying amount and fair value less costs to sell,
Assets classified as held for sale are presented separately in the balance sheet,
Loss is recognized for any initial or subsequent write-down of the asset to fair value less costs to sell, A gain is recognized for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative loss previously recognized,
2.15 Share capital / securities premium account
Ordinary shares are classified as Equity when the Company has an un-conditional right to avoid delivery of cash or another financial asset, that is, when the dividend and repayment of capital are at the sole and absolute discretion of the Company and there is no contractual obligation whatsoever to that effect,
2.16 Employee benefits
The Companyâs employee benefits mainly include wages, salaries, bonuses, defined contribution to plans, defined benefit plans, compensated absences, deferred compensation and share-based payments, The employee benefits are recognized in the year in which the associated services are rendered by the Company employees,
a. Defined contribution plans
The contributions to defined contribution plans are recognized in profit or loss as and when the services are rendered by employees, The Company has no further obligations under these plans beyond its periodic contributions,
b. Defined benefit plans
In accordance with the local laws and regulations, all the employees in India are entitled for the Gratuity plan, The said plan requires a lump-sum payment to eligible employees (meeting the required vesting service condition) at retirement or termination of employment, based on a pre-defined formula,
The Company provides for the liability towards the said plans on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method,
The obligation towards the said benefits is recognized in the balance sheet, at the present value of the defined benefit obligations, The present value of the said obligation is determined by discounting the estimated future cash outflows, using interest rates of government bonds,
The interest expenses are calculated by applying the above mentioned discount rate to defined benefits obligations, The interest expenses on the net defined benefit liability is recognized in the statement of profit and loss, However, the related re-measurements of the net defined benefit liability are recognized directly in the other comprehensive income in the period in which they arise, The said re-measurements comprise of actuarial gains and losses (arising from experience adjustments and changes in actuarial assumptions), Re-measurements are not re-classified to the statement of profit and loss in any of the subsequent periods,
c. Other long-term employee benefits
The employees of the Company are entitled to compensated absences as well as other long-term benefits, Compensated absences benefit comprises of encashment and a ailment of leave balances that were earned by the employees over the period of past employment,
The Company provides for the liability towards the said benefit on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method, The related remeasurements are recognized in the statement of profit and loss in the period in which they arise,
d. Share-based payments
The Company operates equity-settled and cash-settled, employee share-based compensation plans, under which the Company receives services from employees as consideration for stock options either towards shares of the Company / cash settled units,
In case of equity-settled awards, the fair value is recognized as an expense in the statement of profit and loss within employee benefits as employee share-based payment expenses, with a corresponding increase in share-based payment reserve (a component of equity),
However, in case of cash-settled awards, the credit is recognized as a liability within other non-financial liabilities, Subsequently at each reporting period, until the liability is settled, and at the date of settlement, liability is re-measured at fair value through statement of profit and loss,
The total amount so expensed is determined by reference to the grant date fair value of the stock options granted, which includes the impact of any market performance conditions and non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions, However, the non-market performance vesting and service conditions are considered in the assumption as to the number of options that are expected to vest, The forfeitures are estimated at the time of grant and reduce the said expense ratably over the vesting period,
The expense so determined is recognized over the requisite vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. As at each reporting date, the Company revises its estimates of the number of options that are expected to vest, if required,
It recognizes the impact of any revision to original estimates in the period of change, Accordingly, no expense is recognized for awards that do not ultimately vest, except for which vesting is conditional upon a market performance / non-vesting condition, These are treated as vesting irrespective of whether or not the market / non-vesting condition is satisfied, provided that service conditions and all other non-market performance are satisfied,
Where the terms of an award are modified, in addition to the expense pertaining to the original award, an incremental expense is recognized for any modification that results in additional fair value, or is otherwise beneficial to the employee as measured at the date of modification,
Where an equity-settled award is cancelled (including due to non-vesting conditions not being met), it is treated as if it is vested thereon, and any un-recognized expense for the award is recognized immediately.
2.17 Provisions
a. General
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the said obligation, and the amounts of the said obligation can be reliably estimated,
Provisions are measured at the present value of the expenditures expected to be required to settle the relevant obligation, using a pre-tax rate that reflects current market assessments of the time value of money (if the impact of discounting is significant) and the risks specific to the obligation, The increase in the provision due to un-winding of discount over passage of time is recognized within finance costs,
b. Asset retirement obligation (âAROâ)
ARO are recognized for those operating lease arrangements where the Company has an obligation at the end of the lease period to restore the leased premises in a condition similar to inception of lease, ARO are provided at the present value of expected costs to settle the obligation and are recognized as part of the cost of that particular asset, The estimated future costs of decommissioning are reviewed annually and any changes in the estimated future costs or in the discount rate applied are adjusted from the cost of the asset,
2.18 Contingencies
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources, When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made,
2.19 Revenue recognition
Revenue is recognized when it is probable that the entity will receive the economic benefits associated with the transaction and the related revenue can be measured reliably, Revenue is recognized at the fair value of the consideration received or receivable, which is generally the transaction price, net of any taxes / duties, discounts and process waivers,
In order to determine if it is acting as a principal or as an agent, the Company assesses whether it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services,
a. Service revenues
Service revenues mainly pertain to usage, subscription and activation charges for voice, data, messaging and value added services, It also includes revenue towards interconnection/roaming charges for usage of the Companyâs network by other operators for voice, data, messaging and signaling services,
Usage charges are recognized based on actual usage, Subscription charges are recognized over the estimated customer relationship period or subscription pack validity period, whichever is lower, Customer on boarding revenue and associated cost is recognized upfront, Activation revenue and related activation costs are amortized over the estimated customer relationship period, However, any excess of activation costs over activation revenue are expensed as incurred,
The billing / collection in excess of revenue recognized is presented as deferred revenue in the balance sheet whereas unbilled revenue is recognized under other current financial assets,
Revenues from long distance operations comprise of voice services and bandwidth services (including installation), which are recognized on provision of services and over the period of arrangement respectively.
b. Multiple element arrangements
The Company has entered into certain multiple-element revenue arrangements which involve the delivery or performance of multiple products, services or rights to use assets, At the inception of the arrangement, all the deliverables therein are evaluated to determine whether they represent separately identifiable component basis it is perceived from the customer perspective to have value on standalone basis,
Total consideration related to the multiple element arrangements is allocated among the different components based on their relative fair values (i.e., ratio of the fair value of each element to the aggregated fair value of the bundled deliverables),
c. Equipment sales
Equipment sales mainly pertain to sale of telecommunication equipment and related accessories, Such transactions are recognized when the significant risks and rewards of ownership are transferred to the customer, However, in case of equipment sale forming part of multiple-element revenue arrangements which is not separately identifiable component, revenue is recognized over the customer relationship period,
d. Capacity swaps
The exchange of network capacity is recognized at fair value unless the transaction lacks commercial substance or the fair value of neither the capacity received nor the capacity given is reliably measurable,
e. Interest income
The interest income is recognized using the EIR method, For further details, refer note 2,9,
f. Dividend income
Dividend income is recognized when the Companyâs right to receive the payment is established,
2.20 Borrowing costs
Borrowing costs consist of interest and other ancillary costs that the Company incurs in connection with the borrowing of funds, The borrowing costs directly attributable to the acquisition or construction of any asset that takes a substantial period of time to get ready for its intended use or sale are capitalized, All the other borrowing costs are recognized in the statement of profit and loss within finance costs of the period in which they are incurred,
2.21 Exceptional items
Exceptional items refer to items of income or expense within the statement of profit and loss from ordinary activities which are non-recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.
2.22 Non-operating expense
Non-operating expense comprises regulatory levies applicable to finance income,
2.23 Dividends paid
Dividend to shareholders is recognized as a liability and deducted from equity, in the year in which the dividends are approved by the shareholders, However, interim dividends declared by the Board of directors, which does not need shareholdersâ approval, are recognized as a liability and deducted from retained earnings, in the year in which the dividends are so declared,
2.24 Earnings per share (âEPSâ)
The Company presents the Basic and Diluted EPS data,
Basic EPS is computed by dividing the profit for the period attributable to the shareholders of the Company by the weighted average number of shares outstanding during the period,
Diluted EPS is computed by adjusting, the profit for the year attributable to the shareholders and the weighted average number of shares considered for deriving Basic EPS, for the effects of all the shares that could have been issued upon conversion of all dilutive potential shares, The dilutive potential shares are adjusted for the proceeds receivable had the shares been actually issued at fair value, Further, the dilutive potential shares are deemed converted as at beginning of the period, unless issued at a later date during the period,
3. Critical accounting estimates, assumptions and judgments
The estimates and judgments used in the preparation of the said financial statements are continuously evaluated by the Company, and are based on historical experience and various other assumptions and factors (including expectations of future events), that the Company believes to be reasonable under the existing circumstances, The said estimates and judgments are based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date,
Although the Company regularly assesses these estimates, actual results could differ materially from these estimates - even if the assumptions under-lying such estimates were reasonable when made, if these results differ from historical experience or other assumptions do not turn out to be substantially accurate, The changes in estimates are recognized in the financial statements in the year in which they become known,
3.1 Critical accounting estimates and assumptions
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below,
a. Impairment reviews
PPE (including CWIP) and intangible assets with definite lives, are reviewed for impairment, whenever events or changes in circumstances indicate that their carrying values may not be recoverable, Similarly, intangible assets under development is tested for impairment, at-least annually and whenever circumstances indicate that it may be impaired, For details as to the impairment policy, refer note 2,8, Accordingly the Company has performed impairment reviews for the above assets, However, the said reviews did not result in any impairment charge,
In calculating the value in use, the Company is required to make significant judgments, estimates and assumptions inter-alia concerning the growth in EBITDA, long-term growth rates and discount rates to reflect the risks involved,
The Company operates in developing market and in such market, the plan for shorter duration is not indicative of the long-term future performance, Considering this and the consistent use of such robust ten year information for management reporting purpose, the Company uses ten year plans for the purpose of impairment testing,
b. Taxes
Deferred tax assets are recognized for the unused tax losses and minimum alternative tax credits for which there is probability of utilization against the taxable profit, Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits, future tax planning strategies and recent business performances and developments,
d. Allowance for impairment of trade receivables
The expected credit loss is mainly based on the ageing of the receivable balances and historical experience, The receivables are assessed on an individual basis or grouped into homogeneous groups and assessed for impairment collectively, depending on their significance, Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances
Mar 31, 2017
1.1 Basis of preparation
These standalone financial statements (âfinancial statementsâ) have been prepared to comply in all material respects with the Indian Accounting Standard (âInd ASâ) notified under section 133 of the Companies Act, 2013, read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 issued by the Ministry of Corporate Affairs (âMCAâ).
The said financial statements for the year ended March 31, 2017 are the first Ind AS financial statements of the Company. The transition to Ind AS has been carried out from accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (âIGAAPâ), which is considered as the Previous GAAP, for purposes of Ind AS 101. For details, refer Note 2.3.
The financial statements are authorized for issue by the Companyâs Board of Directors on May 09, 2017.
The accounting policies, as set out in the following paragraphs of this note, have been consistently applied, by the Company, to all the periods presented in the said financial statements.
The preparation of the said financial statements requires the use of certain critical accounting estimates and judgements. It also requires the management to exercise judgement in the process of applying the Companyâs accounting policies. The areas where estimates are significant to the financial statements, or areas involving a higher degree of judgement or complexity, are disclosed in Note 3.
The financial statements are based on the classification provisions contained in Ind AS 1, âPresentation of Financial Statementsâ and division II of schedule III of the Companies Act 2013. Further, for the purpose of clarity, various items are aggregated in the statement of profit and loss and balance sheet. Nonetheless, these items are dis-aggregated separately in the notes to the financial statements, where applicable or required.
All the amounts included in the financial statements are reported in millions of Indian Rupees (âRupeesâ or T) and are rounded to the nearest million, except per share data and unless stated otherwise.
1.2 Basis of measurement
The financial statements have been prepared on the accrual and going concern basis, and the historical cost convention except where the Ind AS requires a different accounting treatment. The principal variations from the historical cost convention relate to financial instruments classified as fair value through profit or loss and liability for cash-settled awards (refer Note 2.16) - which are measured at fair value.
Fair value measurement
Fair value is the price at the measurement date, at which an asset can be sold or paid to transfer a liability, in an orderly transaction between market participants. The Companyâs accounting policies require, measurement of certain financial / non-financial assets and liabilities at fair values (either on a recurring or non-recurring basis). Also, the fair values of financial instruments measured at amortised cost are required to be disclosed in the said financial statements.
The Company is required to classify the fair valuation method of the financial / non-financial assets and liabilities, either measured or disclosed at fair value in the financial statements, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurement). Accordingly, the Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The three levels of the fair-value-hierarchy are described below:
Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets
Level 2: Significant inputs to the fair value measurement are directly or indirectly observable
Level 3: Significant inputs to the fair value measurement are unobservable.
1.3 Basis of transition to Ind AS
The adoption of Ind AS is carried out in accordance with Ind AS 101 on April 1, 2015 being the transition date. Ind AS 101 requires that all Ind AS standards that are issued and effective for the year ending March 31, 2017, be applied retrospectively and consistently for all the periods presented. However, in preparing these financial statements, the Company has availed of certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under Ind AS and previous GAAP have been recognised directly in equity at the transition date.
In these financial statements, the Company has presented three balance sheets - as of March 31, 2017, March 31, 2016 and April 1, 2015. The Company has also presented two statements of profit and loss, two statements of changes in equity and two statements of cash flows for the year ended March 31, 2017 and 2016 along with the necessary and related notes.
Ind AS 101 allows first-time adopters certain optional exemptions and mandatory exceptions from the retrospective application of certain requirements under Ind AS.
Exemptions / exceptions from full retrospective application
(i) The Company has elected to apply the following optional exemption from full retrospective application of Ind AS:
The Company has elected the option of fair valuing the investments in certain subsidiaries to derive the carrying value of these investments (âdeemed costâ).
(ii) The following mandatory exceptions from retrospective application of Ind AS have applied by the Company :
a) Estimates exception - On an assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS (except for adjustments to reflect any difference in accounting policies), as there is no objective evidence that those estimates were in error However, estimates that were required under Ind AS but not required under Previous GAAP, are made by the Company for the relevant reporting dates, reflecting conditions existing as at that date without using any hindsight.
b) De-recognition of financial assets and liabilities exception - Financial assets and liabilities de-recognised before transition date are not re-recognised under Ind AS.
Reconciliations and explanations of the significant effect of the transition from Previous GAAP to Ind AS on the Companyâs equity, statement of profit and loss and statement of cash flows are provided in Note 38.
1.4 Foreign currency transactions
The financial statements are presented in Indian Rupees which is the functional and presentation currency of the Company.
Transactions in foreign currencies are initially recorded in the relevant functional currency at the rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate prevailing as at the reporting date with the resulting foreign exchange differences, on subsequent re-statement / settlement, recognised in the statement of profit and loss within finance costs / finance income. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevalent, at the date of initial recognition (in case they are measured at historical cost) or at the date when the fair value is determined (in case they are measured at fair value) - the resulting foreign exchange difference, on subsequent re-statement / settlement, recognised in the statement of profit and loss, except to the extent that it relates to items recognised in the other comprehensive income or directly in equity.
The equity items denominated in foreign currencies are translated at historical cost.
1.5 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
Deferred tax assets and liabilities, and all assets and liabilities which are not current (as discussed in the below paragraphs) are classified as non-current assets and liabilities.
An asset is classified as current when it is expected to be realised or intended to be sold or consumed in normal operating cycle, held primarily for the purpose of trading, expected to be realised within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
A liability is classified as current when it is expected to be settled in normal operating cycle, it is held primarily for the purpose of trading, it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
Separated embedded derivatives are classified basis the host contract.
1.6 Property, plant and equipment (âPPEâ)
An item is recognised as an asset, if and only if, it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. PPE are initially recognised at cost. The initial cost of PPE comprises its purchase price (including non-refundable duties and taxes but excluding any trade discounts and rebates), and any directly attributable cost of bringing the asset to its working condition and location for its intended use. In case of multiple element contracts whereby the vendor supplies PPE as well as other components, PPE is recorded on the basis of relative fair values.
Subsequent to initial recognition, PPE are stated at cost less accumulated depreciation and any impairment losses. When significant parts of property, plant and equipment are required to be replaced in regular intervals, the Company recognises such parts as separate component of assets. When an item of PPE is replaced, then its carrying amount is de-recognised from the balance sheet and cost of the new item of PPE is recognised. Further, in case the replaced part was not being depreciated separately, the cost of the replacement is used as an indication to determine the cost of the replaced part at the time it was acquired.
The expenditures that are incurred after the item of PPE has been put to use, such as repairs and maintenance, are normally charged to the statement of profit and loss in the period in which such costs are incurred. However, in situations where the said expenditure can be measured reliably, and is probable that future economic benefits associated with it will flow to the Company, it is included in the assetâs carrying value or as a separate asset, as appropriate.
Depreciation on PPE is computed using the straight-line method over the estimated useful lives. Freehold land is not depreciated as it has an unlimited useful life. The Company has established the estimated range of useful lives of different categories of PPE as follows:
The useful lives, residual values and depreciation method of PPE are reviewed, and adjusted appropriately at-least as at each reporting date so as to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives, residual values and / or depreciation method are accounted prospectively, and accordingly the depreciation is calculated over the PPEâs remaining revised useful life. The cost and the accumulated depreciation for PPE sold, scrapped, retired or otherwise disposed off are derecognised from the balance sheet and the resulting gains / (losses) are included in the statement of profit and loss within other expenses / other income.
The management basis its past experience and technical assessment has estimated the useful life, which is at variance with the life prescribed in Part C of Schedule II of the Companies Act, 2013 and has accordingly, depreciated the assets over such useful life.
The cost of capital work-in-progress is presented separately in the balance sheet.
1.7 Intangible assets
Identifiable intangible assets are recognised when the Company controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Company and the cost of the asset can be measured reliably.
The intangible assets are initially recognised at cost. These assets having finite useful life are carried at cost less accumulated amortisation and any impairment losses. Amortisation is computed using the straight-line method over the expected useful life of intangible assets.
The Company has established the estimated useful lives of different categories of intangible assets as follows:
a. Softwares
Softwares are amortised over the period of license, generally not exceeding three years.
b. Bandwidth
Bandwidth is amortised on straight-line basis over the period of the agreement.
c. Licenses (including spectrum)
Acquired licenses and spectrum are amortised commencing from the date when the related network is available for intended use in the relevant jurisdiction. The useful lives range from two to twenty years.
The revenue-share based fee on licenses / spectrum is charged to the statement of profit and loss in the period such cost is incurred.
d. Other acquired intangible assets
Other acquired intangible assets include the following:
Rights acquired for unlimited license access: Over the period of the agreement which ranges upto five years.
Customer base: Over the estimated life of such relationships.
Non-compete fee: Over the period of the agreement which ranges upto five years.
The useful lives and amortisation method are reviewed, and adjusted appropriately, at least at each financial year end so as to ensure that the method and period of amortisation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives and / or amortisation method is accounted prospectively, and accordingly the amortisation is calculated over the remaining revised useful life.
Further, the cost of Intangible Assets under Development (âIUDâ) includes the amount of spectrum allotted to the Company and related costs (including borrowing costs that are directly attributable to the acquisition or construction of qualifying assets (refer note 7)), if any, for which services are yet to be roll out and are presented separately in the balance sheet.
1.8 Impairment of non-financial assets
Property, plant and equipment and Intangible assets
PPE and intangible assets with definite lives, are reviewed for impairment, whenever events or changes in circumstances indicate that their carrying values may not be recoverable. For the purpose of impairment testing, the recoverable amount (that is, higher of the fair value less costs to sell and the value-in-use) is determined on an individual asset basis, unless the asset does not generate cash flows that are largely independent of those from other assets, in which case the recoverable amount is determined at the cash-generating-unit (âCGUâ) level to which the said asset belongs. If such individual assets or CGU are considered to be impaired, the impairment to be recognised in the statement of profit and loss is measured by the amount by which the carrying value of the asset / CGU exceeds their estimated recoverable amount and allocated on pro rata basis.
Impairment losses, if any, are recognised in statement of profit and loss.
Reversal of impairment losses
Impairment losses are reversed and the carrying value is increased to its revised recoverable amount provided that this amount does not exceed the carrying value that would have been determined had no impairment loss been recognised for the said asset in previous years.
1.9 Financial instruments
a. Recognition, classification and presentation
The financial instruments are recognised in the balance sheet when the Company becomes a party to the contractual provisions of the financial instrument.
The Company determines the classification of its financial instruments at initial recognition.
The Company recognises its investment in subsidiaries, joint ventures and associates at cost less any impairment losses (basis the recoverable amount being higher of the fair value less costs to sell and the value-in-use). The Company classifies its financial assets in the following categories: a) those to be measured subsequently at fair value through profit or loss, and b) those to be measured at amortised cost. The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
The Company has classified all the non-derivative financial liabilities measured at amortised cost.
The entire hybrid contract, financial assets with embedded derivatives, are considered in their entirety for determining the contractual terms of the cash flow and accordingly the embedded derivatives are not separated. However, derivatives embedded in non-financial instrument / other financial liabilities host contracts are classified as separate derivatives if their economic characteristics and risks are not closely related to those of the host contracts.
Financial assets and liabilities arising from different transactions are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, the Company currently has a legally enforceable right to set-off the related recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
b. Measurement - Non-derivative financial instruments
I. Initial measurement
At initial recognition, the Company measures the non-derivative financial instruments (except financial guarantee) at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Otherwise transaction costs are expensed in the statement of profit and loss. Financial guarantees, issued in relation to obligations of subsidiaries, are initially recognized at fair value (as part of the cost of the investment in the subsidiary).
II. Subsequent measurement - financial assets The subsequent measurement of the non-derivative financial assets depends on their classification as follows:
i. Financial assets measured at amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost using the effective-interest rate (âEIRâ) method (if the impact of discounting / any transaction costs is significant). Interest income from these financial assets is included in finance income.
ii. Financial assets at fair value through profit or loss (FVTPL)
All financial assets that do not meet the criteria for amortised cost are measured at fair value through profit or loss. Interest (basis EIR method) income from financial assets at fair value through profit or loss is recognised in the statement of profit and loss within finance income/ finance costs separately from the other gains/ losses arising from changes in the fair value.
Impairment
The company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition. If credit risk has not increased significantly, twelve month ECL is used to provide for impairment loss, otherwise lifetime ECL is used.
However, only in case of trade receivables, the Company applies the simplified approach which requires expected lifetime losses to be recognised from initial recognition of the receivables.
iii. Subsequent measurement - financial liabilities
The financial guarantees are amortised over the life of the guarantee and are measured at each reporting date at the higher of (i) the remaining unamortised balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the obligation at the end of the reporting period. Other financial liabilities are subsequently measured at amortised cost using the EIR method (if the impact of discounting / any transaction costs is significant).
c. Measurement - derivative financial instruments
Derivative financial instruments, including separated embedded derivatives are classified as financial instruments at fair value through profit or loss - Held for trading. Such derivative financial instruments are initially recognised at fair value. They are subsequently re-measured at their fair value, with changes in fair value being recognised in the statement of profit and loss within finance income / finance costs.
d. Derecognition
The financial liabilities are de-recognised from the balance sheet when the under-lying obligations are extinguished, discharged, lapsed, cancelled, expires or legally released. The financial assets are derecognised from the balance sheet when the rights to receive cash flows from the financial assets have expired, or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The difference in the carrying amount is recognised in the statement of profit and loss.
1.10 Leases
The determination of whether an arrangement is a lease is based on whether fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases where the lessor transfers substantially all the risks and rewards of ownership of the leased asset are classified as finance lease and other leases are classified as operating lease.
Operating lease receipts / payments are recognised as an income / expense on a straight-line basis over the lease term unless the lease payments increase in line with expected general inflation.
a. Company as a lessee
Assets acquired under finance leases are capitalised at the lease inception at lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between finance charges (recognised in the statement of profit and loss) and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability for each period.
b. Company as a lessor
Assets leased to others under finance lease are recognised as receivables at an amount equal to the net investment in the leased assets. Finance lease income is recognised based on the periodic rate of return on the net investment outstanding in respect of the finance lease.
Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised in statement of profit and loss on a stratght-line basis over the lease term.
The Company enters into âIndefeasible right to useâ arrangement wherein the assets are given on lease over the substantial part of the asset life. However, the title to the assets and significant risk associated with the operation and maintenance of these assets remains with the Company. Hence, such arrangements are recognised as operating lease. The contracted price is recognised as revenue during the tenure of the agreement. Unearned IRU revenue received in advance is presented as deferred revenue within liabilities in the balance sheet.
1.11 Taxes
The income tax expense comprises of current and deferred income tax. Income tax is recognised in the statement of profit and loss, except to the extent that it relates to items recognised in the other comprehensive income or directly in equity, in which case the related income tax is also recognised accordingly
a. Current tax
The current tax is calculated on the basis of the tax rates, laws and regulations, which have been enacted or substantively enacted as at the reporting date. The payment made in excess / (shortfall) of the Companyâs income tax obligation for the period are recognised in the balance sheet as current income tax assets / liabilities.
Any interest, related to accrued liabilities for potential tax assessments are not included in Income tax charge or (credit), but are rather recognised within finance costs.
b. Deferred tax
Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, deferred tax are not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
The unrecognised deferred tax assets / carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Income tax assets and liabilities are off-set against each other and the resultant net amount is presented in the balance sheet, if and only when, (a) the Company currently has a legally enforceable right to set-off the current income tax assets and liabilities, and (b) when it relate to income tax levied by the same taxation authority and where there is an intention to settle the current income tax balances on net basis.
1.12 Inventories
Inventories are stated at the lower of cost (determined using the first-in-first-out method) and net realisable value. The costs comprise its purchase price and any directly attributable cost of bringing to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated variable costs necessary to make the sale.
1.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank balances and any deposits with original maturities of three months or less (that are readily convertible to known amounts of cash and cash equivalents and subject to an insignificant risk of changes in value). However, for the purpose of the statement of cash flows, in addition to above items, any bank overdrafts / cash credits that are integral part of the Companyâs cash management, are also included as a component of cash and cash equivalents.
1.14 Non-current assets held for sale
Non-current assets are classified as assets-held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. The sale is considered highly probable only when the asset is available for immediate sale in its present condition, it is unlikely that the sale will be withdrawn and sale is expected within one year from the date of the classification. Assets classified as held for sale are stated at the lower of carrying amount and fair value less costs to sell.
Assets classified as held for sale are presented separately in the balance sheet.
Loss is recognised for any initial or subsequent writedown of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative loss previously recognised.
1.15 Share capital / Share premium
Ordinary shares are classified as Equity when the Company has an un-conditional right to avoid delivery of cash or another financial asset, that is, when the dividend and repayment of capital are at the sole and absolute discretion of the Company and there is no contractual obligation whatsoever to that effect.
1.16 Employee benefits
The Companyâs employee benefits mainly include wages, salaries, bonuses, defined contribution to plans, defined benefit plans, compensated absences, deferred compensation and share-based payments. The employee benefits are recognised in the year in which the associated services are rendered by the Company employees.
a. Defined contribution plans
The contributions to defined contribution plans are recognised in profit or loss as and when the services are rendered by employees. The Company has no further obligations under these plans beyond its periodic contributions.
b. Defined benefit plans
In accordance with the local laws and regulations, all the employees in India are entitled for the Gratuity plan. The said plan requires a lump-sum payment to eligible employees (meeting the required vesting service condition) at retirement or termination of employment, based on a pre-defined formula.
The Company provides for the liability towards the said plans on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method.
The obligation towards the said benefits is recognised in the balance sheet, at the present value of the defined benefit obligations less the fair value of plan assets (being the funded portion). The present value of the said obligation is determined by discounting the estimated future cash outflows, using interest rates of government bonds.
The interest income / (expense) are calculated by applying the above mentioned discount rate to the plan assets and defined benefit obligations liability. The net interest income / (expense) on the net defined benefit liability is recognised in the statement of profit and loss. However, the related re-measurements of the net defined benefit liability are recognised directly in the other comprehensive income in the period in which they arise. The said re-measurements comprise of actuarial gains and losses (arising from experience adjustments and changes in actuarial assumptions), the return on plan assets (excluding interest). Re-measurements are not re-classified to the statement of profit and loss in any of the subsequent periods.
c. Other long-term employee benefits
The employees of the Company are entitled to compensated absences as well as other long- term benefits. Compensated absences benefit comprises of encashment and availment of leave balances that were earned by the employees over the period of past employment.
The Company provides for the liability towards the said benefit on the basis of actuarial valuation carried out quarterly as at the reporting date, by an independent qualified actuary using the projected-unit-credit method. The related re-measurements are recognised in the statement of profit and loss in the period in which they arise.
d. Share-based payments
The Company operates equity-settled and cash-settled, employee share-based compensation plans, under which the Company receives services from employees as consideration for stock options either towards shares of the Company / cash settled units.
In case of equity-settled awards, the fair value is recognised as an expense in the statement of profit and loss within employee benefits as employee share-based payment expenses, with a corresponding increase in share-based payment reserve (a component of equity).
However, in case of cash-settled awards, the credit is recognised as a liability within other non-financial liabilities. Subsequently at each reporting period, until the liability is settled, and at the date of settlement, liability is re-measured at fair value through statement of profit and loss.
The total amount so expensed is determined by reference to the grant date fair value of the stock options granted, which includes the impact of any market performance conditions and non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. However, the non-market performance vesting and service conditions are considered in the assumption as to the number of options that are expected to vest. The forfeitures are estimated at the time of grant and reduce the said expense rateably over the vesting period.
The expense so determined is recognised over the requisite vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. As at each reporting date, the Company revises its estimates of the number of options that are expected to vest, if required.
It recognises the impact of any revision to original estimates in the period of change. Accordingly no expense is recognised for awards that do not ultimately vest, except for which vesting is conditional upon a market performance / non-vesting condition. These are treated as vesting irrespective of whether or not the market / non-vesting condition is satisfied, provided that service conditions and all other nonmarket performance are satisfied.
Where the terms of an award are modified, in addition to the expense pertaining to the original award, an incremental expense is recognised for any modification that results in additional fair value, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled (including due to non-vesting conditions not being met), it is treated as if it is vested thereon, and any un-recognised expense for the award is recognised immediately. This includes any award where non vesting conditions within the control of either the entity or the employee are not met. However, if a new replacement award is substituted for the cancelled award, the arrangement is treated as a modification and accounted accordingly.
1.17 Provisions
a. General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources will be required to settle the said obligation, and the amounts of the said obligation can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the relevant obligation, using a pre-tax rate that reflects current market assessments of the time value of money (if the impact of discounting is significant) and the risks specific to the obligation. The increase in the provision due to un-winding of discount over passage of time is recognised within finance costs.
b. Asset Retirement Obligation (âAROâ)
ARO are recognised for those operating lease arrangements where the Company has an obligation at the end of the lease period to restore the leased premises in a condition similar to inception of lease. ARO are provided at the present value of expected costs to settle the obligation and are recognised as part of the cost of that particular asset. The estimated future costs of decommissioning are reviewed annually and any changes in the estimated future costs or in the discount rate applied are adjusted from the cost of the asset.
1.18 Contingencies
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
1.19 Revenue recognition
Revenue is recognised when it is probable that the entity will receive the economic benefits associated with the transaction and the related revenue can be measured reliably. Revenue is recognised at the fair value of the consideration received or receivable, which is generally the transaction price, net of any taxes / duties, discounts and process waivers.
In order to determine if it is acting as a principal or as an agent, the Company assesses whether it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services.
a. Service revenues
Service revenues mainly pertain to usage subscription and activation charges for voice, data, messaging and value added services. It also includes revenue towards interconnection charges for usage of the Companyâs network by other operators for voice, data, messaging and signalling services.
Usage charges are recognised based on actual usage. Subscription charges are recognised over the estimated customer relationship period or subscription pack validity period, whichever is lower. Activation revenue and related activation costs are amortised over the estimated customer relationship period. However, any excess of activation costs over activation revenue are expensed as incurred.
The billing/ collection in excess of revenue recognised is presented as deferred revenue in the balance sheet whereas unbilled revenue is recognised within other current financial assets.
Revenues from long distance operations comprise of voice services and bandwidth services (including installation), which are recognised on provision of services and over the period of arrangement respectively.
b. Multiple element arrangements
The Company has entered into certain multiple-element revenue arrangements which involve the delivery or performance of multiple products, services or rights to use assets. At the inception of the arrangement, all the deliverables therein are evaluated to determine whether they represent separately identifiable component basis it is perceived from the customer perspective to have value on standalone basis.
Total consideration related to the multiple element arrangements is allocated among the different components based on their relative fair values (i.e., ratio of the fair value of each element to the aggregated fair value of the bundled deliverables).
c. Equipment sales
Equipment sales mainly pertain to sale of telecommunication equipment and related accessories. Such transactions are recognised when the significant risks and rewards of ownership are transferred to the customer. However, in case of equipment sale forming part of multiple-element revenue arrangements which is not separately identifiable component, revenue is recognised over the customer relationship period.
d. Capacity Swaps
The exchange of network capacity is recognised at fair value unless the transaction lacks commercial substance or the fair value of neither the capacity received nor the capacity given is reliably measurable.
e. Interest income
The interest income is recognised using the EIR method. For further details, refer Note 2.9.
f. Dividend income
Dividend income is recognised when the Companyâs right to receive the payment is established.
1.20 Borrowing costs
Borrowing costs consist of interest and other ancillary costs that the Company incurs in connection with the borrowing of funds. The borrowing costs directly attributable to the acquisition or construction of any asset that takes a substantial period of time to get ready for its intended use or sale are capitalised. All the other borrowing costs are recognised in the statement of profit and loss within finance costs of the period in which they are incurred.
1.21 Exceptional items
Exceptional items refer to items of income or expense within the statement of profit and loss from ordinary activities which are non-recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.
1.22 Dividends Paid
Dividend to shareholders is recognised as a liability and deducted from equity, in the year in which the dividends are approved by the shareholders. However, interim dividends declared by the Board of directors, which does not need shareholderâs approval, are recognised as a liability and deducted from retained earnings, in the year in which the dividends are so declared.
1.23 Earnings per share (âEPSâ)
The Company presents the Basic and Diluted EPS data.
Basic EPS is computed by dividing the profit for the period attributable to the shareholders of the Company by the weighted average number of shares outstanding during the period.
Diluted EPS is computed by adjusting, the profit for the year attributable to the shareholders and the weighted average number of shares considered for deriving Basic EPS, for the effects of all the shares that could have been issued upon conversion of all dilutive potential shares. The dilutive potential shares are adjusted for the proceeds receivable had the shares been actually issued at fair value. Further, the dilutive potential shares are deemed converted as at beginning of the period, unless issued at a later date during the period.
Mar 31, 2015
1.1. Use of Estimates
The preparation of the financial statements in conformity with Indian
GAAP requires management to make judgement, estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the results of operations during the reporting year.
Although these estimates are based upon management's best knowledge of
current events and actions, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets and liabilities in future periods.
1.2. Tangible Assets
Tangible Assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. Such cost includes the cost of
replacing part of the plant and equipment and borrowing costs for long
term construction projects, if the recognition criteria are met. When
significant parts of tangible assets are required to be replaced in
intervals, the Company recognises such parts as separate component of
assets with specific useful lives and provides depreciation over their
useful life. Subsequent costs are included in the asset's carrying
amount or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognised. All other
repair and maintenance costs are recognised in the statement of profit
and loss as incurred. Capital work in progress is valued at cost.
Where assets are installed on the premises of customers (commonly
called Customer premise equipment Â"CPE"), such assets continue to be
treated as tangible assets as the associated risks and rewards remain
with the Company and management is confident of exercising control over
them.
Gains and losses arising from retirement or disposal of the tangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
statement of profit and loss on the date of retirement or disposal.
Depreciation on tangible assets is provided on the straight line method
based on useful lives of respective assets as estimated by the
management. The assets' residual values and useful lives are reviewed
at each financial year end or whenever there are indicators for review,
and adjusted prospectively. Freehold Land is not depreciated.
The management basis its past experience and technical assessment has
estimated the useful life, which is at variance with the life
prescribed in Part C of Schedule II of the Companies Act, 2013 and has
accordingly, depreciated the assets over such useful life.
1.3. Intangible Assets
Identifiable intangible assets are recognised when the Company controls
the asset, it is probable that future economic benefits attributed to
the asset will flow to the Company and the cost of the asset can be
reliably measured. Intangible assets under development is valued at
cost.
At initial recognition, the separately acquired intangible assets are
recognised at cost. Following initial recognition, the intangible
assets are carried at cost less any accumulated amortisation and
accumulated impairment losses, if any.
Amortisation is recognised in the statement of profit and loss on a
straight-line basis over the estimated useful lives of intangible
assets from the date they are available for use. The amortisation
period and the amortisation method for an intangible asset are reviewed
at least at each financial year end. Changes in the expected useful
life is accounted for as changes in accounting estimates and accounted
prospectively over the remaining useful life. Changes in the expected
pattern of consumption of future economic benefits embodied in the
asset is accounted for as change in the amortisation method and
accounted retrospectively, thus, depreciation is recalculated in
accordance with the new method from the date of the asset coming into
use and any excess or deficit on such re-computation is accounted in
the statement of profit and loss when such change is effected.
Gains and losses arising from retirement or disposal of the intangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
statement of profit and loss on the date of retirement or disposal.
(i) Software
Software is capitalized at the amounts paid to acquire the respective
license for use and is amortised over the period of license, generally
not exceeding three years. Software up to Rupees five hundred
thousand, which has an independent use, is amortised over a period of
one year from the date of place in service.
(ii) Licenses and spectrum
Acquired licenses and spectrum are initially recognised at cost.
Subsequently, they are measured at cost less accumulated amortisation
and accumulated impairment loss, if any. Amortisation is recognised in
the statement of profit and loss on a straight-line basis over the
unexpired period of the license/spectrum commencing from the date when
the related network is available for intended use in the respective
jurisdiction.
(iii) Bandwidth
Payment for bandwidth capacities are classified as pre-payments in
service arrangements or under certain conditions as an acquisition of a
right. In the latter case it is accounted for as intangible assets and
the cost is amortised over the period of the agreements, which may
exceed a period of ten years depending on the tenor of the agreement.
(iv) Other acquired intangible assets
Payment for the rights acquired for unlimited license access to various
applications are recognised as other acquired intangibles. They are
capitalised at the amounts paid and amortised on a straight-line basis
over the period of the agreements.
1.4. Leases
(i) Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and rewards incidental to ownership of the leased item, are classified
as operating leases. Lease rentals with respect to assets taken on
'Operating Lease' are charged to the statement of profit and loss on a
straight-line basis over the lease term.
Leases which effectively transfer to the Company substantially all the
risks and rewards incidental to ownership of the leased item are
classified as finance lease. These are capitalised at the commencement
of the lease at the fair value of the leased asset or, if lower, at the
present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are recognised in the
statement of profit or loss. Lease management fees, legal charges and
other initial direct costs of lease are capitalized.
Leased assets are depreciated on straight-line basis over the useful
life of the asset. However,if there is no reasonable certainty that the
company will obtain ownership by the end of the lease term, the asset
is depreciated on straight line basis over the shorter of the estimated
useful life of the asset or the lease term.
(ii) Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and rewards incidental to ownership of the asset are classified
as operating leases. Lease income in respect of 'Operating Lease' is
recognised in the statement of profit and loss on a straight-line basis
over the lease term. Assets subject to operating leases are included in
fixed assets. Initial direct costs incurred in negotiating an operating
lease are added to the carrying amount of the leased asset and
recognised over the lease term on the same basis as rental income.
Leases in which the Company transfer substantially all the risks and
rewards incidental to ownership of the asset are classified as finance
leases.
Assets leased to others under finance lease are recognised as
receivables at an amount equal to the net investment in the leased
assets. Finance Income is recognised based on a pattern reflecting a
constant periodic rate of return on the net investment of the lessor
outstanding in respect of the finance lease.
Initial direct costs are expensed in the statement of profit and loss
at the inception of the lease.
(iii) Indefasible right to use ('IRU')
As a part of operations, the Company enters into agreement for leasing
assets under "Indefasible right to use" with third parties. Under the
arrangement the assets are given on lease over the substantial part of
the asset life. However, the title to the assets and significant risk
associated with the operation and maintenance of these assets remain
with the lessor. Hence, such arrangements are recognised as operating
lease.
The contracted price is received in advance and is recognised as
revenue during the tenure of the agreement. Unearned IRU revenue net of
the amount recognisable within one year is disclosed as deferred
revenue in other long term liabilities and the amount recognisable
within one year is disclosed as deferred revenue in other current
liabilities.
1.5. Borrowing Cost
Borrowing costs consist of interest and other costs that the Company
incurs in connection with the borrowing of funds. Borrowing costs
directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale are capitalised as part of the cost
of the respective assets. All other borrowing costs are expensed in the
period in which they occur.
1.6. Impairment of Assets
The carrying amounts of assets are reviewed for impairment, whenever
events or changes in circumstances indicate that the carrying amount
may not be recoverable or when annual impairment testing for an asset
is required. An impairment loss is recognised whenever the carrying
amount of an asset or its cash-generating unit exceeds its recoverable
amount. The recoverable amount of an asset is the greater of its fair
value less costs to sell and value in use. To calculate value in use,
the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market rates and
the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined
for the cash-generating unit to which the asset belongs. Fair value
less costs to sell is the best estimate of the amount obtainable from
the sale of an asset in an arm's length transaction between
knowledgeable, willing parties, less the costs of disposal. Impairment
losses, if any, are recognised in the statement of profit and loss as a
component of depreciation and amortisation expense.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life. An impairment loss
is only reversed to the extent that the asset's carrying amount does
not exceed the carrying amount that would have been determined if no
impairment loss had previously been recognised.
1.7. Asset Retirement Obligations (ARO)
Asset retirement obligations (ARO) are provided for those operating
lease arrangements where the Company has a binding obligation at the
end of the lease period to restore the leased premises in a condition
similar to inception of lease. The estimated future costs of
decommissioning are reviewed annually and adjusted as appropriate.
Changes in the estimated future costs are added to or deducted from the
cost of the asset and depreciated prospectively over the remaining
useful life.
1.8. Investment
Investment, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as non-current investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current Investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Non-current investments are valued at cost. Provision is made for
diminution in value to recognise a decline, if any, other than that of
temporary nature.
On disposal of investment, the difference between its carrying amount
and net disposal proceeds is charged or credited to the statement of
profit and loss.
1.9. Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank, cash on hand and cheques on hand, call deposits,
and other short term highly liquid investments with an original
maturity of three months or less that are readily convertible to a
known amount of cash and are subject to an insignificant risk of
changes in value.
1.10. Inventory
Inventory is valued at the lower of cost and net realisable value. Cost
is determined on First in First out basis. Net realisable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make
the sale.
The Company provides for obsolete and slow-moving inventory based on
management estimates of the usability of inventory.
1.11. Revenue Recognition and Receivables
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. Revenue is measured at the consideration
received/receivable net off discounts, process waivers, and value added
tax ('VAT'), service tax or duty. The Company assesses its revenue
arrangements against specific criteria, i.e., whether it has exposure
to the significant risks and rewards associated with the sale of goods
or the rendering of services, in order to determine if it is acting as
a principal or as an agent.
(i) Service Revenues
Service revenues include amounts invoiced for usage charges, fixed
monthly subscription charges and very small aperture terminal ('VSAT')
service usage charges, bandwidth services, roaming charges, activation
fees, processing fees and fees for value added services ('VAS').
Service revenues also include revenues associated with access and
interconnection for usage of the telephone network of other operators
for local, domestic long distance and international calls and data
messaging services.
Service revenues are recognised as the services are rendered and are
stated net of discounts, process waivers and taxes. Revenues from
pre-paid customers are recognised based on actual usage. Processing
fees on recharge coupons is recognised over the estimated customer
relationship period or coupon validity period, whichever is lower.
Activation revenue and related activation costs, not exceeding the
activation revenue, are deferred and amortised over the estimated
customer relationship period. The excess of activation costs over
activation revenue, if any, are expensed as incurred. Billings in
excess of revenue recognised is treated as unearned and reported as
deferred revenue in the balance sheet.
Service revenues from the internet and VSAT business comprise revenues
from registration, installation and provision of internet and VSAT
services. Registration fee and installation charges are deferred and
amortised over the period of agreement with customer. Service revenue
is recognised from the date of satisfactory installation of equipment
and software at the customer site and provisioning of internet and VSAT
services.
Revenues from national and international long distance operations
comprise revenue from provision of voice services which are recognised
on provision of services while revenue from provision of bandwidth
services (including installation) is recognised over the period of
arrangement.
(ii) Equipment Sales
Equipment sales consist primarily of revenues from sale of
telecommunication equipment and related accessories. Revenue from
equipment sales transactions are recognised when the significant risks
and rewards of ownership are transferred to the buyer and when no
significant uncertainty exists regarding realisation of consideration.
Installation charges are recognised as revenue on satisfactory
completion of installation.
(iii) Investing and Other Activities
Income on account of interest and other activities are recognised on an
accrual basis.
(iv) Dividend Income
Dividend income is recognised when the Company's right to receive the
payment is established.
(v) Provision for Doubtful Debts
The Company provides for amounts outstanding for more than 90 days from
the date of billing, in case of active subscribers, roaming
receivables, receivables for data services and for entire outstanding
from deactivated customers net off security deposits or in specific
cases where the management is of the view that the amounts from certain
customers are not recoverable.
For receivables due from the other operators on account of their
National Long Distance (NLD) and International Long Distance (ILD)
traffic for voice and Interconnect Usage charges (IUC), the Company
provides for amounts outstanding for more than 120 days from the date
of billing, net of any amounts payable to the operators or in specific
cases where the management is of the view that the amounts from these
operators are not recoverable.
(vi) Unbilled Revenue
Unbilled revenue represent revenue recognised from last bill cycle date
to the end of the reporting period. These are billed in subsequent
periods based on the terms of the billing plans / contractual
arrangements.
1.12. License Fees  Revenue Share
The revenue-share fee on license and spectrum is computed as per the
licensing agreement at the prescribed rate and is expensed as incurred.
1.13. Foreign Currency translation, accounting for forward contracts
and derivatives
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are translated using exchange rates
prevailing at the reporting date. Non- monetary items which are carried
in terms of historical cost denominated in a foreign currency are
translated using the exchange rate at the date of the transaction; and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are translated using the
exchange rates at the date when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company's monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognised as income or
as expenses in the year in which they arise.
Forward Exchange Contracts covered under AS 11, 'The Effects of Changes
in Foreign Exchange Rates'
Exchange differences on forward exchange contracts and plain vanilla
currency options for establishing the amount of reporting currency and
not intended for trading & speculation purposes, are recognised in the
statement of profit and loss in the year in the which the exchange rate
changes. The premium or discount arising at the inception of forward
exchange contracts is amortised as expense or income over the life of
the contract. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is recognised as income or expense for
the year.
Exchange difference on forward contracts which are taken to establish
the amount other than the reporting currency, arising due to the
difference between forward rate available at the reporting date for the
remaining maturity period and the contracted forward rate (or the
forward rate last used to measure a gain or loss on the contract for an
earlier period) are recognised in the statement of profit and loss for
the year.
Other Derivative Instruments, not in the nature of AS 11, 'The Effects
of Changes in Foreign Exchange Rates'
The Company enters into various foreign currency option contracts and
interest rate swap contracts that are not in the nature of forward
contracts designated under AS 11 as such and contracts that are not
entered to establish the amount of the reporting currency required or
available at the settlement date of a transaction; to hedge its risks
with respect to foreign currency fluctuations and interest rate
exposure arising out of foreign currency loan. In accordance with the
ICAI announcement, at every year end, all outstanding derivative
contracts are fair valued on a mark-to- market basis and any loss on
valuation is recognised in the statement of profit and loss, on each
contract basis. Any gain on mark-to-market valuation on respective
contracts is not recognised by the Company, keeping in view the
principle of prudence as enunciated in AS 1, 'Disclosure of Accounting
Policies'. Any reduction in fair values and any reversals of such
reductions are included in statement of profit and loss of the year.
Embedded Derivative Instruments
The Company occasionally enters into contracts, that do not in their
entirety meet the definition of a derivative instrument, that may
contain "embedded" derivative instruments  implicit or explicit terms
that affect some or all of the cash flow or the value of other
exchanges required by the contract in a manner similar to a derivative
instrument. The Company assesses whether the economic characteristics
and risks of the embedded derivative are clearly and closely related to
the economic characteristics and risks of the remaining component of
the host contract and whether a separate, non-embedded instrument with
the same terms as the embedded instrument would meet the definition of
a derivative instrument. When it is determined that (1) the embedded
derivative possesses economic characteristics and risks that are not
clearly and closely related to the economic characteristics and risks
of the host contract and (2) a separate, stand- alone instrument with
the same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract, carried at fair value
as a trading or non-hedging derivative instrument. At every year end,
all outstanding embedded derivative instruments are fair valued on
mark-to-market basis and any loss on valuation is recognised in the
statement of profit and loss for the year. Any reduction in mark to
market valuations and reversals of such reductions are included in
statement of profit and loss of the year.
Translation of Integral and Non-Integral Foreign Operation
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
In translating the financial statements of a non- integral foreign
operation for incorporation in financial statements, the assets and
liabilities, both monetary and non-monetary are translated at the
closing rate; income and expense items are translated at average
exchange rates prevailing during the year; and all resulting exchange
differences are accumulated in a foreign currency translation reserve
until the disposal of the net investment.
1.14. Employee Benefits
The Company's post employment benefits include defined benefit plan and
defined contribution plans. The Company also provides other benefits
in the form of deferred compensation and compensated absences.
Under the defined benefit retirement plan, the Company provides
retirement obligation in the form of Gratuity. Under the plan, a lump
sum payment is made to eligible employees at retirement or termination
of employment based on respective employee salary and years of
experience with the Company.
For defined benefit retirement plans, the difference between the fair
value of the plan assets and the present value of the plan liabilities
is recognised as an asset or liability in the balance sheet. Scheme
liabilities are calculated using the projected unit credit method and
applying the principal actuarial assumptions as at the date of balance
sheet. Plan assets are assets that are held by a long-term employee
benefit fund or qualifying insurance policies.
All expenses in respect of defined benefit plans, including actuarial
gains and losses, are recognised in the statement of profit and loss as
incurred.
The Company's contributions to defined contribution plans are
recognised in statement of profit and loss when the employee renders
the related services. The Company has no further obligations under
these plans beyond its periodic contributions.
The distinction between short-term and long-term employee benefits is
based on expected timing of settlement rather than the employee's
entitlement benefits.
The employees of the Company are entitled to compensated absences based
on the unavailed leave balance as well as other long term benefits. The
Company records liability based on actuarial valuation computed under
projected unit credit method. The Company presents the liability for
compensated absences as a current liability in the balance sheet as it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.
1.15. Share Based Compensation
The Company issues equity-settled and cash-settled share-based options
to certain employees. These are measured at fair value on the date of
grant.
The fair value determined on the grant date of the equity settled share
based options is expensed over the vesting period, based on the
Company's estimate of the shares that will eventually vest.
The fair value determined on the grant date of the cash settled share
based options is expensed over the vesting period, based on the
Company's estimates of the shares that will eventually vest. At the end
of the each reporting period, until the liability is settled, and at
the date of settlement, liability is re-measured at fair value, with
any changes in fair value pertaining to the vesting period till the
reporting date is recognised immediately in profit or loss.
Fair value is measured using Lattice-based option valuation model,
Black-Scholes and Monte Carlo Simulation framework and is recognised as
an expense, together with a corresponding increase in equity/
liability, as appropriate, over the period in which the options vest
using the graded vesting method. The expected life used in the model is
adjusted, based on management's best estimate, for the effects of non-
transferability, exercise restrictions and behavioral considerations.
The expected volatility and forfeiture assumptions are based on
historical information.
Where the terms of a share-based compensation are modified, the minimum
expense recognised is the expense as if the terms had not been
modified, if the original terms of the award are met. An additional
expense is recognised for any modification that increases the total
fair value of the share-based payment transaction, or is otherwise
beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it is
vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. This includes any award where
non- vesting conditions within the control of either the entity or the
employee are not met. However, if a new award is substituted for the
cancelled award, and designated as a replacement award on the date that
it is granted, the cancelled and new awards are treated as if they were
a modification of the original award, as described in the previous
paragraph. All cancellations of equity-settled transaction awards are
treated equally.
1.16. Taxes
(i) Current Income tax
Current Income tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian Income Tax Act, 1961. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, by the reporting date.
(ii) Deferred Tax
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realised. In situations, where the
Company has unabsorbed depreciation or carry forward tax losses, all
deferred tax assets are recognised only if there is virtual certainty
supported by convincing evidence that they can be realised against
future taxable profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961, no deferred tax (asset or liability) is
recognised in respect of timing differences which reverse during the
tax holiday period. Deferred tax in respect of timing differences which
reverse after the tax holiday period is recognised in the year in which
the timing differences originate. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
The carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer reasonably
certain or virtual certain, as the case may be, that sufficient taxable
profit will be available to allow all or part of the deferred tax asset
to be realised.
At each balance sheet date, unrecognised deferred tax assets of earlier
years are re-assessed and recognised to the extent that it has become
reasonably or virtually certain, as the case may be, that future
taxable income will be available against which such deferred tax assets
can be realised.
(iii) MAT Credit
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period, i.e., the
period for which MAT credit is allowed to be carried forward. In the
year in which the MAT credit becomes eligible to be recognised as an
asset in accordance with the recommendations contained in Guidance Note
on Accounting for credit available in respect of
Minimum Alternative Tax under the Income Tax Act, 1961, the said asset
is created by way of a credit to the statement of profit and loss
account and shown as MAT Credit Entitlement. The Company reviews the
same at each balance sheet date and writes down the carrying amount of
MAT Credit Entitlement to the extent there is no longer convincing
evidence to the effect that Company will pay normal income tax during
the specified period.
1.17. Segment Reporting (i) Primary Segment
The Company operates in three primary business segments viz. Mobile
Services, Telemedia Services and Airtel Business.
(ii) Secondary Segment
The Company has operations serving customers within India as well as in
other countries located outside India. The operations in India
constitute the major part, which is the only reportable segment, the
remaining portion being attributable to others.
1.18. Earnings Per Share
The earnings considered in ascertaining the Company's Earnings per
Share ('EPS') comprise the net profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the year. The
weighted average number of equity shares outstanding during the year
are adjusted for events of bonus issue, bonus element in a rights issue
to existing shareholders, share split, and reverse share split
(consolidation of shares).The diluted EPS is calculated on the same
basis as basic EPS, after adjusting for the effects of potential
dilutive equity shares.
1.19. Provisions and Contingencies
Provisions are recognised when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance
sheet date. These estimates are reviewed at each balance sheet date and
adjusted to reflect the current best estimates.
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company or a present obligation that is not
recognised because it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
or the amount of the obligation cannot be measured with sufficient
reliability. Information on contingent liabilities is disclosed in the
notes to the financial statements, unless the possibility of an outflow
of resources embodying economic benefits is remote.
1.20. Multiple Element Contracts with Vendors
The Company enters into multiple element contracts with vendors for
supply of goods and rendering of services. The consideration paid
is/may be determined independent of the value of supplies received and
services availed. Accordingly, the supplies and services are accounted
for based on their relative fair values to the overall consideration.
The supplies with finite life under such contracts are accounted as
Tangible assets or as Intangible assets in view of the substance of
these contracts and existence of economic ownership in these assets.
1.21. Expenditure incurred on Corporate Social Responsibility ("CSR")
In accordance with the guidance issued by ICAI, 'FAQ on the provisions
of CSR under Section 135 of the Companies Act 2013 and Rules thereon',
the amount of expenditure incurred on CSR is accounted as appropriation
to the statement of profit and loss unless otherwise it is incurred by
the Company as part of the normal business activity which also
qualifies for CSR activity, in which case, it will continue to be
charged to statement of profit and loss in the normal course.
Mar 31, 2014
1. Corporate Information
Bharti Airtel Limited (''the Company'') incorporated in India on July 7,
1995, is a company promoted by Bharti Telecom Limited (''BTL''), a
company incorporated under the laws of India. The Company''s shares are
publicly traded on the National Stock Exchange (''NSE'') and the Bombay
Stock Exchange (''BSE''), India. The Registered office of the Company is
situated at Bharti Crescent, 1, Nelson Mandela Road, Vasant Kunj, Phase
 II, New Delhi  110070.
The Company is a leading telecommunication service provider in India
providing telecommunication systems and services.
2. Basis of Preparation
The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP). The financial statements have been prepared to comply in
all material respects with the accounting standards notified under the
Companies (Accounting Standards) Rules, 2006, (''as amended'') and the
relevant provisions of the Companies Act, 1956 read with General
Circular 8/2014 dated April 4, 2014 issued by the Ministry of Corporate
Affairs. The financial statements have been prepared under the
historical cost convention and on an accrual basis except in case of
assets for which revaluation is carried out and certain derivative
financial instruments (refer note 3.13). The accounting policies have
been consistently applied by the Company and are consistent with those
used in the previous year.
These financial statements are presented in Indian Rs. and all amount are
rounded to the nearest million (''Mn''), except as stated otherwise.
3. Summary of Significant Accounting Policies
3.1. Use of Estimates
The preparation of the financial statements in conformity with Indian
GAAP requires management to make judgement, estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the results of operations during the reporting year.
Although these estimates are based upon management''s best knowledge of
current events and actions, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets and liabilities in future periods.
3.2. Tangible Assets
Tangible Assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. Such cost includes the cost of
replacing part of the plant and equipment and borrowing costs for long
term construction projects, if the recognition criteria are met. When
significant parts of tangible assets are required to be replaced in
intervals, the Company recognises such parts as separate component of
assets with specific useful lives and provides depreciation over their
useful life. Subsequent costs are included in the asset''s carrying
amount or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognised. All other
repair and maintenance costs are recognised in the statement of profit
and loss as incurred. Capital work in progress is valued at cost.
Where assets are installed on the premises of customers (commonly
called Customer premise equipment Â"CPE"), such assets continue to be
treated as tangible assets as the associated risks and rewards remain
with the Company and management is confident of exercising control over
them.
Gains and losses arising from retirement or disposal of the tangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
statement of profit and loss on the date of retirement or disposal.
Depreciation on tangible assets is provided on the straight line method
based on useful lives of respective assets as estimated by the
management or at the rates prescribed under Schedule XIV of the
Companies Act, 1956, whichever is higher. The assets'' residual values
and useful lives are reviewed at each financial year end or whenever
there are indicators for review, and adjusted prospectively.Freehold
Land is not depreciated.
Assets individually costing Rupees five thousand or less are fully
depreciated over a period of 12 months from the date placed in service.
3.3. Intangible Assets
Identifiable intangible assets are recognised when the Company controls
the asset, it is probable that future economic benefits attributed to
the asset will flow to the Company and the cost of the asset can be
reliably measured.
At initial recognition, the separately acquired intangible assets are
recognised at cost. Following initial recognition, the intangible
assets are carried at cost less any accumulated amortisation and
accumulated impairment losses, if any.
Amortisation is recognised in the statement of profit and loss on a
straight-line basis over the estimated useful lives of intangible
assets from the date they are available for use. The amortisation
period and the amortisation method for an intangible asset are reviewed
at least at each financial year end. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortisation
period or method, as appropriate, and are treated as changes in
accounting estimates.
Gains and losses arising from retirement or disposal of the intangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
statement of profit and loss on the date of retirement or disposal.
(i) Software
Software is capitalised at the amounts paid to acquire the respective
license for use and is amortised over the period of license, generally
not exceeding three years. Software up to Rs. 500 thousand,which has an
independent use, is amortised over a period of one year from the date
of place in service.
(ii) Licenses
Acquired licenses (including spectrum) are initially recognised at
cost. Subsequently, licenses are measured at cost less accumulated
amortisation and accumulated impairment loss, if any. Amortisation is
recognised in the statement of profit and loss on a straight-line basis
over the unexpired period of the license commencing from the date when
the related network is available for intended use in the respective
jurisdiction.
Intangible assets under development are valued at cost.
(iii) Bandwidth
Payment for bandwidth capacitites are classified as pre-payments in
service arrangements or under certain conditions as an acquisition of a
right. In the latter case it is accounted for as intangible assets and
the cost is amortised over the period of the agreements,which may
exceed a period of ten years depending on the tenor of the agreement.
3.4. Leases
(i) Where the Company is the Lessee
Leases where the lessor effectively retains substantially all the risks
and rewards incidental to ownership of the leased item, are classified
as operating leases. Lease rentals with respect to assets taken on
''Operating Lease'' are charged to the statement of profit and loss on a
straight-line basis over the lease term.
Leases which effectively transfer to the Company substantially all the
risks and rewards incidental to ownership of the leased item are
classified as finance lease. These are capitalised at the commencement
of the lease at the fair value of the leased asset or,if lower, at the
present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are recognised in the profit
or loss.
Leased assets are depreciated over the useful life of the asset.
However,if there is no reasonable certainty that the Company will
obtain ownership by the end of the lease term, the asset is depreciated
over the shorter of the estimated useful life of the asset and the
lease term.
(ii) Where the Company is the Lessor
Leases in which the Company does not transfer substantially all the
risks and rewards incidental to ownership of the asset are classified
as operating leases. Lease income in respect of ''Operating Lease'' is
recognised in the statement of profit and loss on a straight-line basis
over the lease term. Assets subject to operating leases are included in
fixed assets. Initial direct costs incurred in negotiating an operating
lease are added to the carrying amount of the leased asset and
recognised over the lease term on the same basis as rental income.
Leases in which the Company transfer substantially all the risks and
rewards incidental to ownership of the asset are classified as finance
leases.
Assets leased to others under finance lease are recognised as
receivables at an amount equal to the net investment in the leased
assets. Finance Income is recognised based on a pattern reflecting a
constant periodic rate of return on the net investment of the lessor
outstanding in respect of the finance lease.
Initial direct costs are expensed in the statement of profit and loss
at the inception of the lease.
(iii) Indefeasible right to use (''IRU'')
As a part of operations, the Company enters into agreement for leasing
assets under "Indefeasible right to use" with third parties. Under the
arrangement the assets are given on lease over the substantial part of
the asset life. However, the title to the assets and significant risk
associated with the operation and maintenance of these assets remain
with the lessor. Hence, such arrangements are recognised as operating
lease.
The contracted price is received in advance and is recognised as
revenue during the tenure of the agreement. Unearned IRU revenue net of
the amount recognisable within one year is disclosed as deferred
revenue in other long term liabilities and the amount recognisable
within one year is disclosed as deferred revenue in other current
liabilities.
3.5. Borrowing Cost
Borrowing costs consist of interest and other costs that the Group
Company incurs in connection with the borrowing of funds. Borrowing
costs directly attributable to the acquisition, construction or
production of an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale are capitalised as part
of the cost of the respective assets. All other borrowing costs are
expensed in the period in which they occur.
3.6. Impairment of Assets
The carrying amounts of assets are reviewed for impairment, whenever
events or changes in circumstances indicate that the carrying amount
may not be recoverable or when annual impairment testing for an asset
is required. An impairment loss is recognised whenever the carrying
amount of an asset or its cash-generating unit exceeds its recoverable
amount. The recoverable amount of an asset is the greater of its fair
value less costs to sell and value in use. To calculate value in use,
the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market rates and
the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined
for the cash- generating unit to which the asset belongs. Fair value
less costs to sell is the best estimate of the amount obtainable from
the sale of an asset in an arm''s length transaction between
knowledgeable, willing parties, less the costs of disposal. Impairment
losses, if any, are recognised in profit or loss as a component of
depreciation and amortisation expense.
An impairment loss is only reversed to the extent that the asset''s
carrying amount does not exceed the carrying amount that would have
been determined if no impairment loss had previously been recognised.
3.7. Asset Retirement Obligations (ARO)
Asset retirement obligations (ARO) are provided for those operating
lease arrangements where the Company has a binding obligation at the
end of the lease period to restore the leased premises in a condition
similar to inception of lease. The estimated future costs of
decommissioning are reviewed annually and adjusted as appropriate.
Changes in the estimated future costs are added to or deducted from the
cost of the asset and depreciated prospectively over the remaining
useful life.
3.8. Investment
Investment, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as non-current investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current Investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Non-current investments are valued at cost. Provision is made for
diminution in value to recognise a decline, if any, other than that of
temporary nature.
On disposal of investment, the difference between its carrying amount
and net disposal proceeds is charged or credited to the statement of
profit and loss.
3.9. Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank, cash on hand and cheques on hand, call deposits,
and other short term highly liquid investments with an original
maturity of three months or less that are readily convertible to a
known amount of cash and are subject to an insignificant risk of
changes in value.
3.10. Inventory
Inventory is valued at the lower of cost and net realisable value. Cost
is determined on First in First out basis. Net realisable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make
the sale.
The Company provides for obsolete and slow-moving inventory based on
management estimates of the usability of inventory.
3.11. Revenue Recognition and Receivables
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. Revenue is measured at the consideration
received/receivable, excluding discounts, rebates, and value added tax
(''VAT''), service tax or duty. The Company assesses its revenue
arrangements against specific criteria, i.e., whether it has exposure
to the significant risks and rewards associated with the sale of goods
or the rendering of services, in order to determine if it is acting as
a principal or as an agent.
(i) Service Revenues
Service revenues include amounts invoiced for usage charges, fixed
monthly subscription charges and very small aperture terminal (''VSAT'')/
internet usage charges, bandwidth services, roaming charges, activation
fees, processing fees and fees for value added services (''VAS'').
Service revenues also include revenues associated with access and
interconnection for usage of the telephone network of other operators
for local, domestic long distance and international calls and data
messaging services.
Service revenues are recognised as the services are rendered and are
stated net of discounts, waivers and taxes. Revenues from pre-paid
cards are recognised based on actual usage. Processing fees on recharge
coupons is being recognised over the estimated customer relationship
period or coupon validity period, whichever is lower. Activation
revenue and related activation costs, not exceeding the activation
revenue, are deferred and amortised over the estimated customer
relationship period. The excess of activation costs over activation
revenue, if any, are expensed as incurred.
Service revenues from the internet and VSAT business comprise revenues
from registration, installation and provision of internet and VSAT
services. Registration fee and installation charges are deferred and
amortised over the period of agreement with customer. Service revenue
is recognised from the date of satisfactory installation of equipment
and software at the customer site and provisioning of internet and VSAT
services.
Revenues from national and international long distance operations
comprise revenue from voice services which are recognised on provision
of services while revenue from bandwidth services (including
installation) is recognised over the period of arrangement.
Deferred revenue includes amount received in advance from customers
which would be recognised over the periods when the related services
are expected to be rendered.
(ii) Equipment Sales
Equipment sales consist primarily of revenues from sale of
telecommunication equipment and related accessories. Revenue from
equipment sales transactions are recognised when the significant risks
and rewards of ownership are transferred to the buyer and when no
significant uncertainty exists regarding realisation of consideration.
(iii) Investing and other Activities
Income on account of interest and other activities are recognised on an
accrual basis.
(iv) Dividend Income
Dividend income is recognised when the Company''s right to receive the
payment is established.
(v) Provision for Doubtful Debts
The Company provides for amounts outstanding for more than 90 days from
the date of billing, in case of active subscribers , roaming
receivables, receivables for data services and for entire outstanding
from deactivated customers net off security deposits or in specific
cases where the management is of the view that the amounts from certain
customers are not recoverable.
For receivables due from the other operators on account of their
National Long Distance (NLD) and International Long Distance (ILD)
traffic for voice and Interconnect Usage charges (IUC), the Company
provides for amounts outstanding for more than 120 days from the date
of billing, net of any amounts payable to the operators or in specific
cases where the management is of the view that the amounts from these
operators are not recoverable.
(vi) Unbilled Revenue
Unbilled revenue represent revenue recognised in respect of services
provided from the last bill cycle date to the end of the reporting
period. These are billed in subsequent periods as per the terms of the
billing plans / contractual arrangements.
3.12. License Fees  Revenue Share
The revenue-share fee on license and spectrum is computed as per the
licensing agreement at the prescribed rate and is expensed as incurred.
3.13. Foreign Currency translation, accounting for forward contracts
and derivatives
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are translated using exchange rates
prevailing at the reporting date. Non- monetary items which are carried
in terms of historical cost denominated in a foreign currency are
translated using the exchange rate at the date of the transaction; and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are translated using the
exchange rates at the date when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company''s monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognised as income or
as expenses in the year in which they arise as mentioned below.
Forward Exchange Contracts covered under AS 11, ''The Effects of Changes
in Foreign Exchange Rates''
Exchange differences on forward exchange contracts and plain vanilla
currency options for establishing the amount of reporting currency and
not intended for trading & speculation purposes, are recognised in the
statement of profit and loss in the year in the which the exchange rate
changes. The premium or discount arising at the inception of forward
exchange contracts is amortised as expense or income over the life of
the contract. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is recognised as income or expense for
the year.
Exchange difference on forward contracts which are taken to establish
the amount other than the reporting currency, arising due to the
difference between forward rate available at the reporting date for the
remaining maturity period and the contracted forward rate (or the
forward rate last used to measure a gain or loss on the contract for an
earlier period) are recognised in the statement of profit and loss for
the year.
Other Derivative Instruments, not in the nature of AS 11, ''The Effects
of Changes in Foreign Exchange Rates''
The Company enters into various foreign currency option contracts and
interest rate swap contracts that are not in the nature of forward
contracts designated under AS 11 as such and contracts that are not
entered to establish the amount of the reporting currency required or
available at the settlement date of a transaction; to hedge its risks
with respect to foreign currency fluctuations and interest rate
exposure arising out of foreign currency loan. In accordance with the
ICAI announcement, at every year end, all outstanding derivative
contracts are fair valued on a mark-to- market basis and any loss on
valuation is recognised in the statement of profit and loss, on each
contract basis. Any gain on mark-to-market valuation on respective
contracts is not recognised by the Company, keeping in view the
principle of prudence as enunciated in AS 1, ''Disclosure of Accounting
Policies''. Any reduction to fair values and any reversals of such
reductions are included in statement of profit and loss of the year.
Embedded Derivative Instruments
The Company occasionally enters into contracts, that do not in their
entirety meet the definition of a derivative instrument, that may
contain "embedded" derivative instruments  implicit or explicit terms
that affect some or all of the cash flow or the value of other
exchanges required by the contract in a manner similar to a derivative
instrument. The Company assesses whether the economic characteristics
and risks of the embedded derivative are clearly and closely related to
the economic characteristics and risks of the remaining component of
the host contract and whether a separate, non-embedded instrument with
the same terms as the embedded instrument would meet the definition of
a derivative instrument. When it is determined that (1) the embedded
derivative possesses economic characteristics and risks that are not
clearly and closely related to the economic characteristics and risks
of the host contract and (2) a separate, stand- alone instrument with
the same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract, carried at fair value
as a trading or non-hedging derivative instrument. At every year end,
all outstanding embedded derivative instruments are fair valued on
mark-to-market basis and any loss on valuation is recognised in the
statement of profit and loss for the year. Any reduction in mark to
market valuations and reversals of such reductions are included in
statement of profit and loss of the year.
Translation of Integral and Non-Integral Foreign Operation
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
In translating the financial statements of a non- integral foreign
operation for incorporation in financial statements, the assets and
liabilities, both monetary and non-monetary are translated at the
closing rate; income and expense items are translated at average
exchange rates prevailing during the year; and all resulting exchange
differences are accumulated in a foreign currency translation reserve
until the disposal of the net investment.
3.14. Employee Benefits
The Company''s post employment benefits include defined benefit plan and
defined contribution plans. The Company also provides other benefits in
the form of deferred compensation and compensated absences.
Under the defined benefit retirement plan, the Company provides
retirement obligation in the form of Gratuity. Under the plan, a lump
sum payment is made to eligible employees at retirement or termination
of employment based on respective employee salary and years of
experience with the Company.
For defined benefit retirement plans, the difference between the fair
value of the plan assets and the present value of the plan liabilities
is recognised as an asset or liability in the balance sheet. Scheme
liabilities are calculated using the projected unit credit method and
applying the principal actuarial assumptions as at the date of balance
sheet. Plan assets are assets that are held by a long-term employee
benefit fund or qualifying insurance policies.
All expenses in respect of defined benefit plans, including actuarial
gains and losses, are recognised in the statement of profit and loss as
incurred.
The Company''s contributions to defined contribution plans are
recognised in statement of profit and loss as they fall due. The
Company has no further obligations under these plans beyond its
periodic contributions.
The employees of the Company are entitled to compensated absences based
on the unavailed leave balance as well as other long term benefits. The
Company records liability based on actuarial valuation computed under
projected unit credit method.
The distinction between short-term and long-term employee benefits is
based on expected timing of settlement rather than the employee''s
entitlement benefits.
3.15. Share Based Compensation
The Company issues equity-settled and cash-settled share-based options
to certain employees. Equity- settled share-based options are measured
at fair value on the date of grant.
The fair value determined on the grant date of the equity settled share
based options is expensed over the vesting period, based on the
Company''s estimate of the shares that will eventually vest.
The fair value determined on the grant date of the cash settled shares
based options is expensed over the vesting period, based on the
Company''s estimates of the shares that will eventually vest. At the end
of the each reporting period, until the liability is settled, and at
the date of settlement, the fair value of the liability is recognised,
with any changes in fair value pertaining to the vested period
recognised immediately in profit or loss.
Fair value is measured using Lattice-based option valuation model,
Black-Scholes and Monte Carlo Simulation framework and is recognised as
an expense, together with a corresponding increase in equity/
liability, as appropriate, over the period in which the options vest
using the graded vesting method. The expected life used in the model is
adjusted, based on management''s best estimate, for the effects of non-
transferability, exercise restrictions and behavioral considerations.
The expected volatility and forfeiture assumptions are based on
historical information.
Where the terms of a share-based compensation are modified, the minimum
expense recognised is the expense as if the terms had not been
modified, if the original terms of the award are met. An additional
expense is recognised for any modification that increases the total
fair value of the share-based payment transaction, or is otherwise
beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it is
vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. This includes any award where
non- vesting conditions within the control of either the entity or the
employee are not met. However, if a new award is substituted for the
cancelled award, and designated as a replacement award on the date that
it is granted, the cancelled and new awards are treated as if they were
a modification of the original award, as described in the previous
paragraph. All cancellations of equity-settled transaction awards are
treated equally.
3.16. Taxes
(i) Current Income Tax
Current Income tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian Income Tax Act, 1961. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, by the reporting date.
(ii) Deferred Tax
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised and reviewed at each balance sheet date, only to the
extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. In situations, where the Company has unabsorbed
depreciation or carry forward tax losses, all deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that they can be realised against future taxable profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961, no deferred tax (asset or liability) is
recognised in respect of timing differences which reverse during the
tax holiday period. Deferred tax in respect of timing differences which
reverse after the tax holiday period is recognised in the year in which
the timing differences originate.
At each balance sheet date, unrecognised deferred tax assets of earlier
years are re-assessed and recognised to the extent that it has become
reasonably or virtually certain, as the case may be, that future
taxable income will be available against which such deferred tax assets
can be realised.
(iii) MAT Credit
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period, i.e., the
period for which MAT credit is allowed to be carried forward. In the
year in which the MAT credit becomes eligible to be recognised as an
asset in accordance with the recommendations contained in Guidance Note
issued by the ICAI, the said asset is created by way of a credit to the
statement of profit and loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each balance sheet date
and writes down the carrying amount of MAT Credit Entitlement to the
extent there is no longer convincing evidence to the effect that
Company will pay normal income tax during the specified period.
3.17. Segment Reporting (i) Primary Segment
The Company operates in three primary business segments viz. Mobile
Services, Telemedia Services and Airtel Business.
(ii) Secondary Segment
The Company has operations serving customers within India as well as in
other countries located outside India. The operations in India
constitute the major part, which is the only reportable segment, the
remaining portion being attributable to others.
3.18. Earnings Per Share
The earnings considered in ascertaining the Company''s Earnings per
Share (''EPS'') comprise the net profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the year. The
weighted average number of equity shares outstanding during the year
are adjusted for events of bonus issue, bonus element in a rights issue
to existing shareholders, share split, and reverse share split
(consolidation of shares). The diluted EPS is calculated on the same
basis as basic EPS, after adjusting for the effects of potential
dilutive equity shares.
3.19. Provisions and Contingencies
Provisions are recognised when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance
sheet date. These estimates are reviewed at each balance sheet date and
adjusted to reflect the current best estimates.
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company or a present obligation that is not
recognised because it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
or the amount of the obligation cannot be measured with sufficient
reliability. Information on contingent liabilities is disclosed in the
notes to the financial statements, unless the possibility of an outflow
of resources embodying economic benefits is remote.
3.20. Multiple Element Contracts with Vendors
The Company enters into multiple element contracts with vendors for
supply of goods and rendering of services. The consideration paid
is/may be determined independent of the value of supplies received and
services availed. Accordingly, the supplies and services are accounted
for based on their relative fair values to the overall consideration.
The supplies with finite life under such contracts are accounted as
Tangible assets or as Intangible assets in view of the substance of
these contracts and existence of economic ownership in these assets.
4. Information about Business Segments-Primary
Segment Definitions:
The Company''s operating businesses are organised and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets.
Effective April 1, 2013, to better reflect business synergies, intra
city fibre networks earlier included in ''Telemedia Services'', has now
been included in ''Mobile Services''. Further, in order to improve the
comparability of results with the single segment telecom players, the
Company has also allocated certain central common expenses, earlier
included in ''Unallocated'' to ''Mobile Services'', ''Telemedia Services''
and ''Airtel Business''. Accordingly, previous period year segment
figures have been restated.
Mobile Services  These services cover voice and data telecom services
provided through wireless technology in India (2G/3G/4G). This includes
the captive national long distance networks which primarily provide
connectivity to the mobile services business in India. This also
includes intra city fibre networks.
Telemedia Services  These services cover voice and data communications
based on fixed network and broadband technology.
Airtel Business  These services cover end-to-end telecom solutions
being provided to large Indian and global corporations by serving as a
single point of contact for all telecommunication needs across data and
voice (domestic as well as international long distance), network
integration and managed services.
26. Contingent Liabilities
(i) Total Guarantees outstanding as of March 31, 2014 amounting to Rs.
57,582 Mn (March 31, 2013 Â Rs. 29,714 Mn) have been issued by banks and
financial institutions on behalf of the Company. These guarantees
include certain financial bank guarantees which have been given for
subjudice matters and in compliance with licensing conditions, the
amount with respect to these have been disclosed under capital
commitments, contingencies and liabilities, as applicable, in
compliance with the applicable accounting standards.
Corporate Guarantees outstanding as of March 31, 2014 amounting to Rs.
770,121 Mn (March 31, 2013 - Rs. 537,606 Mn) have been given to banks,
financial institutions and third parties on behalf of Group Companies
at no cost to the latter.
(ii) Claims against the Company not acknowledged as debt: (excluding
cases where the possibility of any outflow in settlement is remote):
b) Sales Tax and Service Tax
Sales Tax
The claims for sales tax as of March 31, 2014 comprised the cases
relating to:
i. the appropriateness of the declarations made by the Company under
the relevant sales tax legislations which was primarily procedural in
nature;
ii. the applicable sales tax on disposals of certain property and
equipment items;
iii. lease circuit / broadband connectivity services;
iv. the applicability of sales tax on sale of SIM cards, SIM
replacements, VAS, Handsets and Modem rentals;
v. In the State of J&K, the Company has disputed the levy of General
Sales Tax on its telecom services and towards which the Company has
received a stay from the Hon''ble J&K High Court. The demands received
to date have been disclosed under contingent liabilities.
Service Tax
The service tax demands as of March 31, 2014 relate to:
i. cenvat claimed on tower and related material, ii. levy of service
tax on SIM cards,
iii. cenvat credit disallowed for procedural lapses and
inadmissibility of credit,
iv. disallowance of cenvat credit used in excess of 20% limit, and
v. employee talk time
c) Income Tax
Income tax demands under appeal mainly included the appeals filed by
the Company before various appellate authorities against the
disallowance by the income tax authorities of certain expenses being
claimed, non- deduction of tax at source with respect to dealers/
distributor''s margin and non-deduction of tax on payments to
international operators for access charges, etc.
d) Custom Duty
The custom authorities, in some states, demanded Rs. 4,463 Mn as of March
31, 2014 (March 31, 2013 - Rs. 4,463 Mn) for the imports of special
software on the ground that this would form part of the hardware on
which it was pre-loaded at the time of import. The view of the Company
is that such imports should not be subject to any custom duty as it
would be an operating software exempt from any custom duty. In response
to the application filed by the Company, the Hon''ble CESTAT has passed
an order in favour of the custom authorities.
The Company has filed an appeal with Hon''ble Supreme Court against the
CESTAT order.
e) Entry Tax
In certain states an entry tax is levied on receipt of material from
outside the state. This position has been challenged by the Company in
the respective states, on the grounds that the specific entry tax is
ultra vires the Constitution. Classification issues have also been
raised whereby, in view of the Company, the material proposed to be
taxed is not covered under the specific category. The amount under
dispute as of March 31, 2014 was Rs. 3,676 Mn (March 31, 2013 - Rs. 3,408
Mn).
f) Access Charges (Interconnect Usage Charges)/Port Charges
(i) Interconnect charges are based on the Interconnect Usage Charges
(IUC) agreements between the operators although the IUC rates are
governed by the IUC guidelines issued by Telecom Regulatory Authority
of India (TRAI). BSNL has raised a demand requiring the Company to pay
the interconnect charges at the rates contrary to the regulations
issued by TRAI. The Company filed a petition against that demand with
the Telecom Disputes Settlement and Appellate Tribunal (''TDSAT'') which
passed a status quo order, stating that only the admitted amounts based
on the regulations would need to be paid by the Company. The final
order was also passed in Company''s favour. BSNL has challenged the same
in Hon''ble Supreme Court. However, no stay has been granted.
(ii) In another proceeding with respect to distance based carriage
charges, TDSAT in its order dated May 21, 2010, allowed BSNL appeal
praying to recover distance based carriage charges. On filing of appeal
by the telecom operators, Hon''ble Supreme Court asked the telecom
operators to furnish details of distance-based carriage charges owed by
them to BSNL. Further, in a subsequent hearing held on August 30, 2010
Hon''ble Supreme Court sought the quantum of amount in dispute from all
the operators as well as BSNL and directed both BSNL and private
telecom operators to furnish Call Data Records (CDRs) to TRAI. The CDRs
have been furnished to TRAI.
(iii) In another issue with respect to Port Charges, in 2001, TRAI had
prescribed slab based rate of port charges payable by private operators
which were subsequently reduced in the year 2007 by TRAI. On BSNL''s
appeal, TDSAT passed it''s judgment in favour of BSNL, and held that the
pre-2007 rates shall be applicable prospectively from May 29, 2010. The
rates were further revised downwards by TRAI in 2012. On BSNL''s appeal,
TDSAT declined to stay the revised regulation.
Further, the Hon''ble Supreme Court vide its judgement dated December 6,
2013, passed in another matter, held that TRAI is empowered to issue
regulations on any matter under Section 11(1)(b) of TRAI Act and the
same cannot be challenged before TDSAT. Accordingly, all matters raised
before TDSAT, wherein TDSAT had interfered in Appeal and passed
judgements, all such orders do not have any significance. However,
parties can file Writ Petitions before High Court challenging such
regulations.
The Company believes that the above said judgement has further
strengthened the position of the Company on many issues with respect to
Regulations which had been in its favour and impugned before TDSAT.
g) Department of Telecommunications (''DoT'') Demands
i) The Company has not been able to meet its roll out obligations fully
due to certain non-controllable factors like Telecommunication
Engineering Center testing, Standing Advisory Committee of Radio
Frequency Allocations clearance, non availability of spectrum, etc.
The Company has received show cause notices from DoT for 14 of its
circles for non-fulfillment of its roll out obligations and these have
been replied to. DoT has reviewed and revised the criteria and there
has been no further development on this matter since then.
ii) DoT demands include demands raised for contentious matters relating
to computation of license fees and spectrum charges.
iii) DoT demands include alleged short payment of license fee for
financial year 06-07 and financial year 07-08 due to difference of
interpretation of Adjusted Gross Revenue (AGR) between the Company and
DoT and interest thereon, against which the Company has obtained stay
from appropriate Hon''ble High Courts & TDSAT.
iv) DoT demands also include the contentious matters in respect of
subscriber verification norms and regulations including validity of
certain documents allowed as Proof of Address / Identity in certain
mobility circles.
v) DoT demand also include penalty for alleged failure to meet the
procedural requirement for submission of EMF radiation self
certification.
The above stated matters are being contested by the Company and the
Company, based on legal advice, believes that it has complied with all
license related regulations as and when prescribed and does not expect
any loss relating to these matters.
In addition to the amount disclosed in the table above, the contingent
liability on DoT matters includes the following:
vi) Post the Hon''ble Supreme Court Judgment on October 11, 2011 on
components of AGR for computation of license fee, based on the legal
advice, the Company believes that the realised and unrealised foreign
exchange gain should not be included in AGR for computation of license
fee thereon. Accordingly, the license fee on such foreign exchange gain
has not been provided in these financial statements. Also, due to
ambiguity of interpretation of ''foreign exchange differences'', the
license fee impact on such exchange differences is not quantifiable and
has not been included in the table above. Further, as per the Order
dated June 18, 2012 of the Kerala High Court, stay has been obtained,
wherein the licensee can continue making the payment as was being done
throughout the period of license on telecom activities.
vii) On January 8, 2013, DoT issued a demand on the Company and one of
its subsidiaries for Rs. 52,013 Mn towards levy of one time spectrum
charge. The demand includes a retrospective charge of Rs. 9,090 Mn for
holding GSM Spectrum beyond 6.2 MHz for the period from July 1, 2008 to
December 31, 2012 and also a prospective charge of Rs. 42,923 Mn for GSM
spectrum held beyond 4.4 MHz for the period from January 1, 2013, till
the expiry of the initial terms of the respective licenses.
In the opinion of the Company, inter-alia, the above demand amounts to
alteration of financial terms of the licenses issued in the past. Based
on a petition filed by the Company, the Hon''ble High Court of Bombay,
vide its order dated January 28, 2013, has directed the DoT to respond
and not to take any coercive action until the next date of hearing. The
DoT has filed its reply and the next date of hearing is June 30, 2014.
viii) Based on the scope of Service under UAS License the Company has
been providing 3G service under a commercial arrangement, i.e., "3G
Intra Circle Roaming (''3G ICR'') Agreements with other operators", where
the Company has not been allocated 3G spectrum.
The Department of Telecommunications(''DoT'') issued notice to the
Company dated December 23, 2011 along with other Telecom Operators to
stop provision of services under 3G Intra Circle Roaming Agreements
where it has not won 3G Spectrum, which was challenged by the Company
in TDSAT wherein stay was granted against the said order by TDSAT.
TDSAT on July 3, 2012 gave a split verdict on the legality of telecom
operators providing 3G services under 3G ICR arrangements.
DOT vide its order dated March 15, 2013 directed the Company to stop
providing 3G services in these 7 circles (under 3G ICR arrangements)
and also levied a financial penalty of Rs. 3,500 Mn. The same was
challenged by the Company before Hon''ble Delhi High Court which granted
a stay vide its order dated March 18, 2013. Subsequently, one of the
operators (not being a party to the litigation) approached the Division
Bench of Delhi High Court and, allowing its appeal, the Division Bench
vacated the stay. The Company filed a Special Leave Petition (SLP)
before the Hon''ble Supreme Court, challenging the order of the Division
Bench. The Hon''ble Supreme Court, vide its interim order dated April
11, 2013, restrained DoT from taking any coercive action and also
directed the Company not to extend the facilities to any new customer
on the basis of the 3G ICR arrangements in the meantime.
Both the writ petition as well as the appeal against interim order
before the Supreme Court were disposed with liberty to the Company to
approach TDSAT.
On October 3, 2013, the Company filed the petition before TDSAT which
was heard by TDSAT and vide judgment dated April 29, 2014, TDSAT held
3G ICR to be a competent service and quashed the penalty of Rs. 3,500 Mn
levied by DoT on the Company.
h) Others
Others mainly include disputed demands for consumption tax, disputes
before consumer forum and with respect to labour cases and a potential
claim for liquidated damages.
i) Bharti Mobinet Limited (''BMNL'') Litigation
The Company is in litigation in various proceedings at various stages
and in various forums with DSS Enterprises Private Limited (DSS) (which
had 0.34 per cent equity interest in erstwhile Bharti Cellular Limited
(BCL)) on claims of specific performance in respect of alleged
agreements to sell the equity interest of DSS in erstwhile BMNL to the
Company. In respect of one of the transactions with respect to purchase
of 10.5% share of DSS in Skycell by the Company, Crystal Technologies
Private Limited (''Crystal''), an intermediary, initiated arbitration
proceedings against the Company demanding Rs. 195 Mn regarding
termination of its appointment as a consultant to negotiate with DSS
for the sale of DSS stake in erstwhile BMNL to the Company. The Ld.
Arbitrator partly allowed the award for a sum of Rs. 31 Mn, 9% interest
from period October 3, 2001 till date of award (i.e May 28, 2009) and a
further 18% interest from date of award to date of payment. The Company
appealed in Hon''ble High Court against the award.
The Single Judge while dismissing the appeal reduced the rate of
interest from 18% to 12%. The matter was appealed thereafter to
Division Bench and finally to Hon''ble Supreme Court wherein the matter
has been admitted on the condition that the amount as per Single Judge
Order shall be secured in Hon''ble Supreme Court, which has been done.
The matter will now come up in due course.
DSS has also filed a suit against a previous shareholder of BMNL and
the Company challenging the transfer of shares by that shareholder to
the Company. The matter is to be reheard.
DSS has also initiated arbitration proceedings seeking direction for
restoration of the cellular license and the entire business associated
with it including all assets of BCL/BMNL to DSS or alternatively, an
award for damages. An interim stay was granted by the Hon''ble Delhi
High Court with respect to the commencement of arbitration proceedings.
The stay was made absolute.
The liability, if any, of the Company arising out of above litigation
cannot be currently estimated. Since the amalgamation of BCL and
erstwhile Bharti Infotel Limited (BIL) with the Company, DSS, a
minority shareholder in BCL, had been issued 2,722,125 equity shares of
Rs. 10 each (5,444,250 equity shares of Rs. 5 each post split) bringing the
share of DSS in the Company down to 0.136% as of March 31, 2014.
Mar 31, 2013
1.1. Use of Estimates
The preparation of the financial statements in conformity with Indian
GAAP requires management to make judgement, estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the results of operations during the reporting year.
Although these estimates are based upon management''s best knowledge of
current events and actions, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets and liabilities in future periods.
1.2. Tangible Assets
Tangible Assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. Such cost includes the cost of
replacing part of the plant and equipment and borrowing costs for long
term construction projects if the recognition criteria are met. When
significant parts of tangible assets are required to be replaced in
intervals, the Company recognises such parts as separate component of
assets with specific useful lives and provides depreciation over their
useful life. Subsequent costs are included in the asset''s carrying
amount or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognised. All other
repair and maintenance costs are recognised in the statement of profit
and Loss as incurred. Capital work in progress is valued at cost.
Where assets are instated on the premises of customers (commonly called
Customer premise equipment -"CPE"), such assets continue to be treated
as tangible assets as the associated risks and rewards remain with the
Company and management is confident of exercising control over them.
Gains and losses arising from retirement or disposal of the tangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
statement of profit and Loss on the date of retirement and disposal.
Depreciation on tangible assets is provided on the straight line method
based on useful lives of respective assets as estimated by the
management or at the rates prescribed under Schedule XIV of the
Companies Act, 1956, whichever is higher. The assets'' residual values
and useful lives are reviewed at each financial year end or whenever
there are indicators for review, and adjusted prospectively. Freehold
Land is not depreciated.
Assets individually costing Rupees five thousand or less are fully
depreciated over a period of 12 months from the date placed in service.
1.3. Intangible Assets
Identifiable intangible assets are recognised when the Company controls
the asset, it is probable that future economic benefits attributed to
the asset will flow to the Company and the cost of the asset can be
reliably measured.
At initial recognition, the separately acquired intangible assets are
recognised at cost. Following initial recognition, the intangible
assets are carried at cost less any accumulated amortisation and
accumulated impairment losses, if any.
Amortisation is recognised in the statement of profit and loss on a
straight-line basis over the estimated useful lives of intangible
assets from the date they are available for use. The amortisation
period and the amortisation method for an intangible asset are reviewed
at least at each financial year end. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortisation
period or method, as appropriate, and are treated as changes in
accounting estimates.
(i) Software
Software is capitalised at the amounts paid to acquire the respective
license for use and is amortised over the period of license, generally
not exceeding three years. Software up to Rs. 500 thousand is amortised
over a period of one year from the date of place in service.
(ii) Licenses
Acquired licenses (including spectrum) are initially recognised at
cost. Subsequently, licenses are measured at cost less accumulated
amortisation and accumulated impairment loss, if any. Amortisation is
recognised in the statement of profit and loss on a straight-line basis
over the unexpired period of the license commencing from the date when
the related network is available for intended use in the respective
jurisdiction.
Intangible assets under development are valued at cost.
(iii) Bandwidth
Payment for bandwidth capacitites are classified as pre-payments in
service arrangements or under certain conditions as an acquisition of a
right. In the latter case it is accounted for as intangible assets and
the cost is amortised over the period of the agreements,which may
exceed a period of ten years depending on the tenor of the agreement.
1.4. Leases
(i) Where the Company is the Lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Lease rentals with respect to assets taken on
''Operating Lease'' are charged to the statement of profit and loss on a
straight-line basis over the lease term.
Leases which effectively transfer to the Company substantially all the
risks and benefits incidental to ownership of the leased item are
classified as finance lease. Assets acquired on ''Finance Lease'',which
transfer risk and rewards of ownership to the Company, are capitalised
as assets by the Company at the lower of fair value of the leased
property or the present value of the minimum lease payments.
Amortisation of capitalised leased assets is computed on the straight
line method over the useful life of the assets. Lease rental payable is
apportioned between principal and finance charge using the internal
rate of return method. The finance charge is allocated over the lease
term so as to produce a constant periodic rate of interest on the
remaining balance of liability.
(ii) Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Lease income in respect of ''Operating Lease'' is
recognised in the statement of profit and loss on a straight-line basis
over the lease term. Assets subject to operating leases are included in
fixed assets. Initial direct costs incurred in negotiating an operating
lease are added to the carrying amount of the leased asset and
recognised over the lease term on the same basis as lease term.
Leases in which the Company transfer substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets leased to others under finance lease are recognised as
receivables at an amount equal to the net investment in the leased
assets. Finance Income is recognised based on a pattern reflecting a
constant periodic rate of return on the net investment of the lessor
outstanding in respect of the lease.
Initial direct costs are expensed in the statement of profit and loss
at the inception of the lease.
(iii) Indefeasible Right to Use (''IRU'')
As a part of operations, the Company enters into agreement for leasing
assets under "Indefeasible right to use" with third parties. Under the
arrangement the assets are given on lease over the substantial part of
the asset life. However, the title to the assets and significant risk
associated with the operation and maintenance of these assets remain
with the lessor. Hence, such arrangements are recognised as operating
lease.
The contracted price is received in advance and is recognised as
revenue during the tenure of the agreement. Unearned IRU revenue net of
the amount recognisable within one year is disclosed as deferred
revenue in other long term liabilities and the amount recognisable
within one year is disclosed as deferred revenue in current
liabilities.
1.5. Borrowing Cost
Borrowing costs consist of interest and other costs that the Company
incurs in connection with the borrowing of funds. Borrowing costs
directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale are capitalised as part of the cost
of the respective assets. The interest cost incurred for funding a
qualifying asset during the construction period is capitalised based on
actual investment in the asset at the interest rate for specific
borrowings. All other borrowing costs are expensed in the period they
occur.
1.6. Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. The recoverable
amount of an asset is the greater of its fair value less costs to sell
and value in use. To calculate value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market rates and the risks specific to the
asset. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash- generating
unit to which the asset belongs. Fair value less costs to sell is the
best estimate of the amount obtainable from the sale of an asset in an
arm''s length transaction between knowledgeable, willing parties, less
the costs of disposal. Impairment losses, if any, are recognised in
profit or loss as a component of depreciation and amortisation expense.
An impairment loss is only reversed to the extent that the asset''s
carrying amount does not exceed the carrying amount that would have
been determined if no impairment loss had previously been recognised.
1.7. Asset Retirement Obligations (ARO)
Asset retirement obligations (ARO) are provided for those operating
lease arrangements where the Company has a binding obligation at the
end of the lease period to restore the leased premises in a condition
similar to inception of lease. The estimated future costs of
decommissioning are reviewed annually and adjusted as appropriate.
Changes in the estimated future costs are added to or deducted from the
cost of the asset and depreciated prospectively over the remaining
useful life.
1.8. Investment
Investment, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as non-current investments.
On initiaL recognition, aLL investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current Investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Non-current investments are valued at cost. Provision is made for
diminution in value to recognise a decline, if any, other than that of
temporary nature.
On disposaL of investment, the difference between its carrying amount
and net disposal proceeds is charged or credited to the statement of
profit and Loss.
1.9. Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and on hand, call
deposits, and other short term highly liquid investments with an
original maturity of three months or Less that are readiLy convertible
to a known amount of cash and are subject to an insignificant risk of
changes in value.
1.10. Inventory
Inventory is vaLued at the Lower of cost and net realisable value. Cost
is determined on First in First out basis. Net realisable value is the
estimated selling price in the ordinary course of business, Less
estimated costs of completion and the estimated costs necessary to make
the sale.
The Company provides for obsoLete and sLow-moving inventory based on
management estimates of the usability of inventory.
1.11. Revenue Recognition and Receivables
Revenue is recognised to the extent that it is probabLe that the
economic benefits wiLL flow to the Company and the revenue can be
reliably measured. Revenue is measured at the consideration
received/receivabLe, excluding discounts, rebates, and value added tax
(''VAT''), service tax or duty. The Company assesses its revenue
arrangements against specific criteria, i.e., whether it has exposure
to the significant risks and rewards associated with the sale of goods
or the rendering of services, in order to determine if it is acting as
a principal or as an agent.
(i) Service Revenues
Service revenues incLude amounts invoiced for usage charges, fixed
monthly subscription charges and very small aperture terminal
(''VSAT'')/internet usage charges, bandwidth services,roaming charges,
activation fees, processing fees and fees for value added services
(''VAS''). Service revenues also include revenues associated with access
and interconnection for usage of the telephone network of other
operators for local, domestic long distance and international calls and
data messaging services.
Service revenues are recognised as the services are rendered and are
stated net of discounts, waivers and taxes. Revenues from pre-paid
cards are recognised based on actuaL usage. Processing fees on recharge
coupons is being recognised over the estimated customer relationship
period or coupon validity period, whichever is Lower. Activation
revenue and reLated activation costs, not exceeding the activation
revenue, are deferred and amortised over the estimated customer
relationship period. The excess of activation costs over activation
revenue, if any, are expensed as incurred.
Service revenues from the internet and VSAT business comprise revenues
from registration, instaLLation and provision of internet and VSAT
services. Registration fee and installation charges are deferred and
amortised over the period of agreement with customer. Service revenue
is recognised from the date of satisfactory instaLLation of equipment
and software at the customer site and provisioning of internet and VSAT
services.
Revenues from nationaL and international Long distance operations
comprise revenue from voice services which are recognised on provision
of services while revenue from bandwidth services (including
installation) is recognised over the period of arrangement.
Deferred revenue incLudes amount received in advance from customers
which would be recognised over the periods when the related services
are expected to be rendered.
(ii) Equipment Sales
Equipment sales consist primarily of revenues from sale of
telecommunication equipment and related accessories to customers.
Revenue from equipment sales transactions are recognised when the
significant risks and rewards of ownership are transferred to the buyer
and when no significant uncertainty exists regarding realisation of
consideration.
(iii)Investing and Other Activities
Income on account of interest and other activities are recognised on an
accrual basis.
(iv) Dividend Income
Dividends are accounted for when the right to receive the payment is
established.
(v) Provision for Doubtful Debts
The Company provides for amounts outstanding for more than 90 days in
case of active subscribers, roaming receivables, receivables for data
services and for entire outstanding from deactivated customers net off
security deposits or in specific cases where the management is of the
view that the amounts from certain customers are not recoverable.
For receivables due from the other operators on account of their
National Long Distance (NLD) and International Long Distance (ILD)
traffic for voice and Interconnect Usage charges (IUC), the Company
provides for amounts outstanding for more than 120 days from the date
of billing, net of any amounts payable to the operators or in specific
cases where the management is of the view that the amounts from these
operators are not recoverable.
(vi) Unbilled Revenue
Unbilled revenue represent revenue recognised in respect of services
provided from the last bill cycle date to the end of the reporting
period. These are billed in subsequent periods as per the terms of the
billing plans/contractual arrangements.
1.12. License Fees - Revenue Share
The revenue-share fee on license and spectrum is computed as per the
licensing agreement at the prescribed rate and is expensed as incurred.
1.13. Foreign Currency Translation, Accounting for Forward Contracts
and Derivatives
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using exchange rates
prevailing at the reporting date using the closing rate. Non-monetary
items which are carried in terms of historical cost denominated in a
foreign currency are reported using the exchange rate at the date of
the transaction; and non-monetary items which are carried at fair value
or other similar valuation denominated in a foreign currency are
reported using the exchange rates that existed when the values were
determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company''s monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognised as income or
as expenses in the year in which they arise as mentioned below.
Forward Exchange Contracts covered under AS 11, ''The Effects of Changes
in Foreign Exchange Rates''
Exchange differences on forward exchange contracts and plain vanilla
currency options for establishing the amount of reporting currency and
not intended for trading & speculation purposes, are recognised in the
statement of profit and loss in the year in the which the exchange rate
changes. The premium or discount arising at the inception of forward
exchange contracts is amortised as expense or income over the life of
the contract. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is recognised as income or expense for
the year.
Exchange difference on forward contracts which are taken to establish
the amount other than the reporting currency arising due to the
difference between forward rate available at the reporting date for the
remaining maturity period and the contracted forward rate (or the
forward rate last used to measure a gain or loss on the contract for an
earlier period) are recognised in the statement of profit and loss for
the year.
Other Derivative Instruments, not in the nature of AS 11, ''The Effects
of Changes in Foreign Exchange Rates''
The Company enters into various foreign currency option contracts and
interest rate swap contracts that are not in the nature of forward
contracts designated under AS 11 as such and contracts that are not
entered to establish the amount of the reporting currency required or
available at the settlement date of a transaction; to hedge its risks
with respect to foreign currency fluctuations and interest rate
exposure arising out of foreign currency loan. In accordance with the
ICAI announcement, at every year end, all outstanding derivative
contracts are fair valued on a mark-to- market basis and any loss on
valuation is recognised in the statement of profit and loss, on each
contract basis. Any gain on mark-to-market valuation on respective
contracts is not recognised by the Company, keeping in view the
principle of prudence as enunciated in AS 1, ''Disclosure of Accounting
Policies''. Any reduction to fair values and any reversals of such
reductions are included in statement of profit and loss of the year.
Embedded Derivative Instruments
The Company occasionally enters into contracts, that do not in their
entirety meet the definition of a derivative instrument, that may
contain "embedded" derivative instruments - implicit or explicit terms
that affect some or all of the cash flow or the value of other
exchanges required by the contract in a manner similar to a derivative
instrument. The Company assesses whether the economic characteristics
and risks of the embedded derivative are clearly and closely related to
the economic characteristics and risks of the remaining component of
the host contract and whether a separate, non-embedded instrument with
the same terms as the embedded instrument would meet the definition of
a derivative instrument. When it is determined that (1) the embedded
derivative possesses economic characteristics and risks that are not
clearly and closely related to the economic characteristics and risks
of the host contract and (2) a separate, stand- alone instrument with
the same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract, carried at fair value
as a trading or non-hedging derivative instrument. At every year end,
all outstanding embedded derivative instruments are fair valued on
mark-to-market basis and any loss on valuation is recognised in the
statement of profit and loss for the year. Any reduction in mark to
market valuations and reversals of such reductions are included in
statement of profit and loss of the year.
Translation of Integral and Non-Integral Foreign Operation
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
In translating the financial statements of a non- integral foreign
operation for incorporation in financial statements, the assets and
liabilities, both monetary and non-monetary are translated at the
closing rate; income and expense items are translated at average
exchange rates prevailing during the year; and all resulting exchange
differences are accumulated in a foreign currency translation reserve
until the disposal of the net investment.
1.14. Employee Benefits
The Company''s post employment benefits include defined benefit plan and
defined contribution plans. The Company also provides other benefits in
the form of deferred compensation and compensated absences.
Under the defined benefit retirement plan, the Company provides
retirement obligation in the form of Gratuity. Under the plan, a lump
sum payment is made to eligible employees at retirement or termination
of employment based on respective employee salary and years of
experience with the Company.
For defined benefit retirement plans, the difference between the fair
value of the plan assets and the present value of the plan liabilities
is recognised as an asset or liability in the balance sheet. Scheme
liabilities are calculated using the projected unit credit method and
applying the principal actuarial assumptions as at the date of balance
sheet. Plan assets are assets that are held by a long-term employee
benefit fund or qualifying insurance policies.
All expenses in respect of defined benefit plans, including actuarial
gains and losses, are recognised in the statement of profit and loss as
incurred.
The Company''s contributions to defined contribution plans are
recognised in statement of profit and loss as they fall due. The
Company has no further obligations under these plans beyond its
periodic contributions.
The employees of the Company are entitled to compensated absences based
on the unavailed leave balance as well as other long term benefits. The
Company records liability based on actuarial valuation computed under
projected unit credit method.
The distinction between short-term and long-term employee benefits is
based on expected timing of settlement rather than the employee''s
entitlement benefits.
1.15. Share Based Compensation
The Company issues equity-settLed share-based options to certain
employees. Equity-settLed share-based options are measured on fair
vaLue at the date of grant.
The fair vaLue determined on the grant date of the equity settled share
based options is expensed over the vesting period, based on the
Company''s estimate of the shares that wiLL eventuaLLy vest.
Fair vaLue is measured using Lattice-based option valuation model,
Black-Scholes and Monte Carlo Simulation framework and is recognised as
an expense, together with a corresponding increase in equity/
liability, as appropriate, over the period in which the options vest
using the graded vesting method. The expected life used in the model is
adjusted, based on management''s best estimate, for the effects of non-
transferability, exercise restrictions and behavioral considerations.
The expected voLatiLity and forfeiture assumptions are based on
historical information.
Where the terms of a share-based compensation are modified, the minimum
expense recognised is the expense as if the terms had not been
modified, if the original terms of the award are met. An additional
expense is recognised for any modification that increases the totaL
fair vaLue of the share-based payment transaction, or is otherwise
beneficiaL to the empLoyee as measured at the date of modification.
Where an equity-settLed award is canceLLed, it is treated as if it is
vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. This incLudes any award where
non- vesting conditions within the controL of either the entity or the
empLoyee are not met. However, if a new award is substituted for the
canceLLed award, and designated as a replacement award on the date that
it is granted, the canceLLed and new awards are treated as if they were
a modification of the original award, as described in the previous
paragraph. ALL canceLLations of equity-settLed transaction awards are
treated equaLLy.
The diLutive effect of outstanding options is reflected as additional
share diLution in the computation of diLuted earnings per share.
1.16. Taxes
(i) Current Income Tax
Current Income tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian Income Tax Act, 1961.
(ii) Deferred Tax
Deferred income taxes reflects the impact of current year timing
differences between taxabLe income and accounting income for the year
and reversaL of timing differences of earLieryears. Deferred tax is
measured based on the tax rates and the tax Laws enacted or
substantiveLy enacted at the baLance sheet date. Deferred tax assets
are recognised and reviewed at each baLance sheet date, onLy to the
extent that there is reasonable certainty that sufficient future
taxabLe income wiLL be avaiLabLe against which such deferred tax assets
can be reaLised. In situations, where the Company has unabsorbed
depreciation or carry forward tax Losses, aLL deferred tax assets are
recognised onLy if there is virtuaL certainty supported by convincing
evidence that they can be reaLised against future taxabLe profits. At
each baLance sheet date, unrecognised deferred tax assets of earLier
years are re-assessed and recognised to the extent that it has become
reasonably or virtuaLLy certain, as the case may be, that future
taxabLe income wiLL be avaiLabLe against which such deferred tax assets
can be reaLised.
(iii) MAT Credit
Minimum Alternative Tax (MAT) credit is recognised as an asset onLy
when and to the extent there is convincing evidence that the Company
wiLL pay normaL income tax during the specified period. In the year in
which the MAT credit becomes eLigibLe to be recognised as an asset in
accordance with the recommendations contained in Guidance Note issued
by the ICAI, the said asset is created by way of a credit to the
statement of profit and Loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each baLance sheet date
and writes down the carrying amount of MAT Credit Entitlement to the
extent there is no Longer convincing evidence to the effect that
Company wiLL pay normaL income tax during the specified period.
1.17. Segment Reporting
(i) Primary Segment
The Company operates in three primary business segments viz. MobiLe
Services, TeLemedia Services and AirteL Business.
(ii) Secondary Segment
The Company has operations serving customers within India as weLL as in
other countries Located outside India. The operations in India
constitute the major part, which is the only reportable segment, the
remaining portion being attributable to others.
1.18. Earnings Per Share
The earnings considered in ascertaining the Company''s Earnings per
Share (''EPS'') comprise the net profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the year. The
weighted average number of equity shares outstanding during the year
are adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).The diluted EPS is calculated on the same
basis as basic EPS, after adjusting for the effects of potential
dilutive equity shares unless impact is anti dilutive.
1.19. Provisions and Contingencies
Provisions are recognised when the Company has a present obligation as
a result of past event; it is more likely than not that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These estimates are
reviewed at each balance sheet date and adjusted to reflect the current
best estimates.
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company or a present obligation that is not
recognised because it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
or the amount of the obligation cannot be measured with sufficient
reliability. Information on contingent liabilities is disclosed in the
notes to the financial statements, unless the possibility of an outflow
of resources embodying economic benefits is remote.
1.20.Multiple Element Contracts with Vendors
The Company enters into multiple element contracts with vendors for
supply of goods and rendering of services. The consideration paid
is/may be determined independent of the value of supplies received and
services availed. Accordingly, the supplies and services are accounted
for based on their relative fair values to the overall consideration.
The supplies with finite life under such contracts are accounted as
Tangible assets or as Intangible assets in view of the substance of
these contracts and existence of economic ownership in these assets.
Mar 31, 2012
A. Change in accounting policy - presentation and disclosure of
financial statements
The financial statements of the Company have been prepared and
presented for the year ended March 31, 2012, as per the format
prescribed under the revised Schedule VI notified under the Companies
Act, 1956. The adoption of revised Schedule VI does not impact
recognition and measurement principles followed for the preparation of
the financial statements. However, it has significant impact on
presentation and disclosures made in the financial statements. The
Company has also reclassified the previous year figures in accordance
with the requirements applicable in the current year.
b. Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities at the date of
the financial statements and the results of operations during the
reporting year end. Although these estimates are based upon
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets and
liabilities in future periods.
c. Tangible assets
Tangible assets are stated at cost of acquisition and subsequent
improvements thereto, including taxes & duties (net of cenvat credit),
freight and other incidental expenses related to acquisition and
installation. Capital work-in-progress is stated at cost.
Site restoration cost obligations are capitalized when it is probable
that an outflow of resources will be required to settle the obligation
and a reliable estimate of the amount can be made.
Subsequent costs are included in the asset's carrying amount or
recognized as a separate asset, as appropriate, only when it is
porbable that future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured realiably.
All other repair and maintenance costs are recognized in the statement
of profit and loss as incurred.
Gains and losses arising from retirement or disposal of the tangible
assets are determined as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in
statement of profit and loss on the date of retirement and disposal.
d. Depreciation on tangible assets
Depreciation on tangible assets is provided on the straight line method
based on useful lives of respective assets as estimated by the
management or at the rates prescribed under Schedule XIV of the
Companies Act, 1956, whichever is higher.
The site restoration cost obligation capitalized is depreciated over
the period of the useful life of the related asset.
Assets costing up to Rs. 5 thousand (other than identified Customer
Premise Equipment) are being fully depreciated within one year from the
date of place in service.
e. Intangible assets
Licenses
The entry fee paid by the Company for cellular and basic circles, upon
migration to the National Telecom Policy (NTP 1999) and the one time
license fees paid for acquiring new licences (post NTP 1999) (basic,
cellular, national long distance and international long distance
services) has been capitalised as an intangible asset.
The entry fee capitalised is amortised over the period of the license
and the one time licence fee is amortised over the balance period of
licence from the date of commencement of commercial operations.
3G spectrum fees are being amortised over the period of license from
the effective date of launch of 3G services in a circle. Intangible
assets under development are valued at cost.
Bandwidth
Bandwidth capacity is amortised on straight line basis over the period
of the agreement subject to a maximum period of 18 years i.e. estimated
useful life of bandwidth.
Software
Software is capitalized at the amounts paid to acquire the respective
license for use and is amortized over the period of license, generally
not exceeding three years. Software up to Rs. 500 thousand is amortized
over a period of one year from the date of place in service.
f. Leases
a) Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Lease rentals with respect to assets taken on
'Operating Lease' are charged to the statement of profit and loss on a
straight-line basis over the lease term.
Leases which effectively transfer to the Company substantially all the
risks and benefits incidental to ownership of the leased item are
classified as finance lease. Assets acquired on 'Finance Lease' which
transfer risk and rewards of ownership to the Company are capitalized
as assets by the Company at the lower of fair value of the leased
property or the present value of the minimum lease payments.
Amortization of capitalised leased assets is computed on the straight
line method over the useful life of the assets. Lease rental payable is
apportioned between principal and finance charge using the internal
rate of return method. The finance charge is allocated over the lease
term so as to produce a constant periodic rate of interest on the
remaining balance of liability.
b) Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Lease income in respect of 'Operating Lease' is
recognised in the statement of profit and loss on a straight-line basis
over the lease term. Assets subject to operating leases are included in
fixed assets.
Leases in which the Company transfer substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets leased to others under finance lease are recognized as
receivables at an amount equal to the net investment in the leased
assets. Finance Income is recognized based on a pattern reflecting a
constant periodic rate of return on the net investment of the lessor
outstanding in respect of the lease.
c) Initial direct costs are expensed in the statement of profit and
loss at the inception of the lease.
g. Borrowing cost
Borrowing cost attributable to the acquisition or construction of fixed
assets which takes substantial period of time to get ready for its
intended use is capitalised as part of the cost of that asset. Other
borrowing costs are recognised as an expense in the year in which they
are incurred. The interest cost incurred for funding a qualifying asset
during the construction period is capitalized based on actual
investment in the asset at the average interest rate for specific
borrowings. All other borrowing cost are expensed in the period they
occur.
h. Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognized for the amount by which the assets' carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of the
assets1 fair value less costs to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows
(cash generating units).
i. Asset retirement obligations (ARO)
Provision for ARO is based on past experience and technical estimates.
j. Investment
Current Investments are valued at lower of cost and fair market value
determined on individual basis.
Non-current investments are valued at cost. Provision is made for
diminution in value to recognise a decline, if any, other than that of
temporary nature.
k. Inventory
Inventory is valued at the lower of cost and net realisable value. Cost
is determined on First in First out basis. Net realisable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make
the sale.
The Company provides for obsolete and slow-moving inventory based on
management estimates of the usability of inventory.
l. Revenue recognition and receivables
Mobile Services
Service revenue is recognised on completion of provision of services.
Service revenue includes income on roaming commission and an access
charge recovered from other operators, and is net of discounts and
waivers. Revenue, net of discount, is recognised on transfer of all
significant risks and rewards to the customer and when no significant
uncertainty exists regarding realisation of consideration.
Processing fees on recharge is being recognised over the estimated
customer relationship period or voucher validity period, as applicable.
Revenue from prepaid calling cards packs is recognised on the actual
usage basis.
Telemedia Services
Service revenue is recognised on completion of provision of services.
Revenue is recognised when no significant uncertainty exists regarding
realisation of consideration. Service Revenue includes access charges
recovered from other operators, and is net of discounts and waivers.
Airtel Business (Previously known as Enterprise Services)
Revenue, net of discount, from sale of goods is recognised on transfer
of all significant risks and rewards to the customer and when no
significant uncertainty exists regarding realisation of consideration.
Revenue on account of bandwidth service is recognised on time
proportion basis in accordance with the related contracts.
Service Revenue includes access charges recovered from other operators,
revenues from installation and provision of Internet and Satellite
Services. Installation charges are recognised as revenue on
satisfactory completion of installation of hardware and service revenue
is recognised from the date of satisfactory installation of equipment
and software at the customer site and provisioning of Internet and
Satellite Services.
Activation Income
Activation revenue and related direct activation costs, not exceeding
the activation revenue, are deferred and amortized over the related
estimated customer relationship period, as derived from the estimated
customer churn period.
Investing and Other Activities
Income on account of interest and other activities are recognised on an
accrual basis. Dividends are accounted for when the right to receive
the payment is established.
Provision for Doubtful Debts
The Company provides for amounts outstanding for more than 90 days in
case of active subscribers, roaming receivables, receivables for data
services and for entire outstanding from deactivated customers net off
security deposits or in specific cases where the management is of the
view that the amounts from certain customers are not recoverable.
For receivables due from the other operators on account of their
National Long Distance (NLD) and International Long Distance (ILD)
traffic for voice and Interconnect Usage Charges (IUC), the Company
provides for amounts outstanding for more than 120 days from the date
of billing, net of any amounts payable to the operators or in specific
cases where management is of the view that the amounts from these
operators are not recoverable.
Accrued Billing Revenue
Accrued billing revenue represent revenue recognized in respect of
Mobile, Broadband and Telephone, and Long Distance services provided
from the bill cycle date to the end of each month. These are billed in
subsequent periods as per the terms of the billing plans.
m. License fees - revenue share
With effect from August 1, 1999, the variable licence fee computed at
prescribed rates of revenue share is charged to the statement of profit
and loss in the year in which the related revenues are recognised.
Revenue for this purpose is identified as adjusted gross revenue as per
the respective license agreements.
n. Foreign currency translation, accounting for forward contracts and
derivatives
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company's monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise as mentioned below.
Forward Exchange Contracts covered under AS 11, 'The Effects of Changes
in Foreign Exchange Rates'
Exchange differences on forward exchange contracts and plain vanilla
currency options for establishing the amount of reporting currency and
not intended for trading & speculation purposes, are recognised in the
statement of profit and loss in the year in the which the exchange rate
changes. The premium or discount arising at the inception of forward
exchange contracts is amortised as expense or income over the life of
the contract. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is recognised as income or expense for
the year.
Exchange difference on forward contracts which are taken to establish
the amount other than the reporting currency arising due to the
difference between forward rate available at the reporting date for the
remaining maturity period and the contracted forward rate (or the
forward rate last used to measure a gain or loss on the contract for an
earlier period) are recognised in the statement of profit and loss for
the year.
Other Derivative Instruments, not in the nature of AS 11, 'The Effects
of Changes in Foreign Exchange Rates'
The Company enters into various foreign currency option contracts and
interest rate swap contracts that are not in the nature of forward
contracts designated under AS 11 as such and contracts that are not
entered to establish the amount of the reporting currency required or
available at the settlement date of a transaction; to hedge its risks
with respect to foreign currency fluctuations and interest rate
exposure arising out of import of capital goods using foreign currency
loan. In accordance with the ICAI announcement, at every year end, all
outstanding derivative contracts are fair valued on a mark-to-market
basis and any loss on valuation is recognised in the statement of
profit and loss, on each contract basis. Any gain on mark-to-market
valuation on respective contracts is not recognized by the Company,
keeping in view the principle of prudence as enunciated in AS 1,
'Disclosure of Accounting Policies'. Any reduction to fair values and
any reversals of such reductions are included in profit and loss
statement of the year.
Embedded Derivative Instruments
The Company occasionally enters into contracts that do not in their
entirety meet the definition of a derivative instrument that may
contain "embedded" derivative instruments - implicit or explicit terms
that affect some or all of the cash flow or the value of other
exchanges required by the contract in a manner similar to a derivative
instrument. The Company assesses whether the economic characteristics
and risks of the embedded derivative are clearly and closely related to
the economic characteristics and risks of the remaining component of
the host contract and whether a separate, non-embedded instrument with
the same terms as the embedded instrument would meet the definition of
a derivative instrument. When it is determined that (1) the embedded
derivative possesses economic characteristics and risks that are not
clearly and closely related to the economic characteristics and risks
of the host contract and (2) a separate, stand-alone instrument with
the same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract, carried at fair value
as a trading or non-hedging derivative instrument. At every year end,
all outstanding embedded derivative instruments are fair valued on
mark-to-market basis and any loss on valuation is recognized in the
statement of profit and loss for the year. Any reduction in mark to
market valuations and reversals of such reductions are included in
profit and loss statement of the year.
Translation of Integral and Non-Integral Foreign Operation
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
In translating the financial statements of a non-integral foreign
operation for incorporation in financial statements, the assets and
liabilities, both monetary and non-monetary are translated at the
closing rate; income and expense items are translated at exchange rate
at the date of transaction for the year; and all resulting exchange
differences are accumulated in a foreign currency translation reserve
until the disposal of the net investment.
Foreign exchange contracts for trading and speculation purpose
Foreign exchange contracts intended for trading and/or speculation are
fair valued on a mark-to-market basis and any gain or loss on such
valuation is recognised in the statement of profit and loss for the
year.
o. Employee benefits
(a) Short term employee benefits are recognised in the year during
which the services have been rendered.
(b) All employees of the Company are entitled to receive benefits under
the Provident Fund, which is a defined contribution plan. Both the
employee and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees' state insurance schemes, which are also
defined contribution schemes recognized and administered by the
Government of India.
The Company's contributions to both these schemes are expensed in the
statement of profit and loss. The Company has no further obligations
under these plans beyond its monthly contributions.
(c) Some employees of the Company are entitled to superannuation, a
defined contribution plan which is administered through Life Insurance
Corporation of India ("LIC"). Superannuation benefits are recorded as
an expense as incurred.
(d) The compensated absences are provided for based on actuarial
valuation. The actuarial valuation is done as per projected unit credit
method at the end of each year.
(e) The Company provides for gratuity obligations through a defined
benefit retirement plan (the 'Gratuity Plan') covering all employees.
The Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuations as per the
Projected Unit Credit Method at the end of each year in accordance with
Accounting Standard 15, "Employee Benefits". The Company makes annual
contributions to the LIC for the Gratuity Plan in respect of employees
at certain circles.
(f) Other long term employee benefits are provided based on actuarial
valuation made at the end of each year. The actuarial valuation is done
as per projected unit credit method.
(g) Actuarial gains and losses are recognized as and when incurred.
p. Pre-operative expenditure
Expenditure incurred by the Company from the date of acquisition of
license for a new circle or from the date of start-up of new venture or
business, up to the date of commencement of commercial operations of
the circle or the new venture or business, not directly attributable to
fixed assets are charged to the statement of profit and loss in the
year in which such expenditure is incurred.
q. Taxes
Current Income Tax
Current Income Tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian Income Tax Act, 1961.
Deferred Tax
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised and reviewed at each balance sheet date, only to the
extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. In situations, where the Company has unabsorbed
depreciation or carry forward tax losses, all deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that they can be realised against future taxable profits. At
each balance sheet date, unrecognised deferred tax assets of earlier
years are re-assessed and recognised to the extent that it has become
reasonably or virtually certain, as the case may be, that future
taxable income will be available against which such deferred tax assets
can be realized.
MAT Credit
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the ICAI, the said asset is created by way of a credit to the
statement of profit and loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each balance sheet date
and writes down the carrying amount of MAT Credit Entitlement to the
extent there is no longer convincing evidence to the effect that
Company will pay normal income tax during the specified period.
r. Share based compensation
Employee stock compensation are valued using Black Scholes/Monte
Carlo/Lattice valuation option - pricing model and the fair value is
recognised as an expense over the period in which the options vest. The
difference between the actual purchase cost of shares issued upon
exercise of options and the sum of fair value of the option and
exercise price is adjusted against General Reserve.
s. Segmental reporting
a) Primary Segment
The Company operates in three primary business segments viz. Mobile
Services, Telemedia Services and Airtel Business.
b) Secondary Segment
The Company has operations serving customers within India as well as in
other countries located outside India. The operations in India
constitute the major part, which is the only reportable segment, the
remaining portion being attributable to others.
t. Earnings per share
The earnings considered in ascertaining the Company's Earnings Per
Share ('EPS') comprise the net profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the year. The
weighted average number of equity shares outstanding during the year is
adjusted for events of share splits/bonus issue post year end and
accordingly, the EPS is restated for all periods presented in these
financial statements. The diluted EPS is calculated on the same basis
as basic EPS, after adjusting for the effects of potential dilutive
equity shares unless impact is anti dilutive.
The weighted average number of equity shares outstanding during the
year are adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares).
u. Provisions and contingencies
Provisions are recognised when the Company has a present obligation as
a result of past event; it is more likely than not that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted
to its present value and are determined based on best estimate required
to settle the obligation at the balance sheet date. These are reviewed
at each balance sheet date and adjusted to reflect the current best
estimates.
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company or a present obligation that is not
recognized because it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
or the amount of the obligation cannot be measured with sufficient
reliability. Information on contingent liabilities is disclosed in the
notes to the financial statements, unless the possibility of an outflow
of resources embodying economic benefits is remote.
v. Multiple element contracts with vendors
The Company enters into multiple element contracts with vendors for
supply of goods and rendering of services. The consideration under this
contracts is/may be determined independent of the value of supplies
received and services availed. Accordingly, the supplies and services
are accounted for based on their relative fair values to the overall
consideration. The supplies with finite life under such contracts are
accounted under as Tangible assets or as Intangible assets in view of
the substance of these contracts and existence of economic ownership in
these assets.
w. Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash in hand and at bank and short-term investments with an
original maturity of three months or less.
Mar 31, 2011
1. BASIS OF PREPARATION
The financial statements have been prepared to comply in all material
respects with the Notifi ed accounting standards issued by Companies
(Accounting Standards) Rules, 2006, ('as amended') and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis
except in case of assets for which revaluation is carried out. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the
reporting year end. Although these estimates are based upon
management's best knowledge of current events and actions, actual
results could differ from these estimates.
3. FIXED ASSETS
Fixed Assets are stated at cost of acquisition and subsequent
improvements thereto, including taxes and duties (net of cenvat
credit), freight and other incidental expenses related to acquisition
and installation. Capital work-in-progress is stated at cost.
Site restoration cost obligations are capitalised when it is probable
that an outfl ow of resources will be required to settle the obligation
and a reliable estimate of the amount can be made.
The intangible component of license fee payable by the Company for
cellular and basic circles, upon migration to the National Telecom
Policy (NTP 1999), i.e. Entry Fee, has been capitalised as an asset and
the one time license fee paid by the Company for acquiring new licences
(post NTP 1999) (basic, cellular, national long distance and
international long distance services) has been capitalised as an
intangible asset.
4. DEPRECIATION/AMORTISATION
Depreciation on fixed assets is provided on the straight line method
based on useful lives of respective assets as estimated by the
management or at the rates prescribed under Schedule XIV of the
Companies Act, 1956, whichever is higher. Leasehold land is amortised
over the period of lease. Depreciation rates adopted by the Company are
as follows:
Useful lives
Leasehold Land Period of lease
Building 20 years
Building on Leased Land 20 years
Leasehold Improvements Period of lease or 10 years
whichever is less
Plant and Machinery 3 years to 20 years
Computer and Software 3 years
Offi ce Equipment 2 years/5 years
Furniture and Fixtures 5 years
Vehicles 5 years
Software up to Rs. 500 thousand is fully amortised within one year from
the date it is placed in service.
Bandwidth capacity is amortised on straight-line basis over the period
of the agreement subject to a maximum of 18 years i.e. estimated useful
life of bandwith.
The Entry Fee capitalised is amortised over the period of the license
and the one time licence fee is amortised over the balance period of
licence from the date of commencement of commercial operations.
3G spectrum fees is being amortised over the period of license from the
effective date of launch of 3G services.
The site restoration cost obligation capitalised is depreciated over
the period of the useful life of the related asset.
Fixed Assets costing up to Rs. 5 thousand (other than identifi ed CPE)
are being fully depreciated within one year from the date of
acquisition.
5. REVENUE RECOGNITION AND RECEIVABLES
Mobile Services
Service revenue is recognised on completion of provision of services.
Service revenue includes income on roaming commission and an access
charge recovered from other operators, and is net of discounts and
waivers. Revenue, net of discount, is recognised on transfer of all
signifi cant risks and rewards to the customer and when no signifi cant
uncertainty exists regarding realisation of consideration.
Processing fees on recharge is being recognised over the estimated
customer relationship period or voucher validity period, as applicable.
Revenue from prepaid calling cards packs is recognised on the actual
usage basis.
Telemedia Services
Service revenue is recognised on completion of provision of services.
Revenue is recognised when no signifi cant uncertainty exists regarding
realisation of consideration. Service Revenue includes access charges
recovered from other operators, and is net of discounts and waivers.
Enterprise Services
Revenue, net of discount, from sale of goods is recognised on transfer
of all signifi cant risks and rewards to the customer and when no
signifi cant uncertainty exists regarding realisation of consideration.
Revenue on account of bandwidth service is recognised on time
proportion basis in accordance with the related contracts.
Service Revenue includes access charges recovered from other operators,
revenues from registration, installation and provision of Internet and
Satellite services. Registration fees is recognised at the time of
dispatch and invoicing of Start up Kits. Installation charges are
recognised as revenue on satisfactory completion of installation of
hardware and service revenue is recognised from the date of
satisfactory installation of equipment and software at the customer
site and provisioning of Internet and Satellite services.
Activation Income
Activation revenue and related direct activation costs, not exceeding
the activation revenue, are deferred and amortised over the related
estimated customer relationship period, as derived from the estimated
customer churn period.
Investing and other Activities
Income on account of interest and other activities are recognised on an
accrual basis. Dividends are accounted for when the right to receive
the payment is established.
Provision for doubtful debts
The Company provides for amounts outstanding for more than 90 days in
case of active subscribers, roaming receivables, receivables for data
services and for entire outstanding from deactivated customers net off
security deposits or in specifi c cases where management is of the view
that the amounts from certain customers are not recoverable.
For receivables due from the other operators on account of their
National Long Distance (NLD) and International Long Distance (ILD)
traffi c for voice and Interconnect Usage charges (IUC), the Company
provides for amounts outstanding for more than 120 days from the date
of billing, net of any amounts payable to the operators or in specifi c
cases where management is of the view that the amounts from these
operators are not recoverable.
Accrued Billing revenue
Accrued billing revenue represent revenue recognized in respect of
Mobile, Broadband and Telephone, and Long Distance services provided
from the bill cycle date to the end of each month. These are billed in
subsequent periods as per the terms of the billing plans.
6. INVENTORY
Inventory is valued at the lower of cost and net realisable value.
Cost is determined on First-in-First-out basis. Net realisable value is
the estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make
the sale.
The Company provides for obsolete and slow-moving inventory based on
management estimates of the usability of inventory.
7. INVESTMENT
Current Investments are valued at lower of cost and fair market value
determined on individual basis.
Long-term Investments are valued at cost. Provision is made for
diminution in value to recognise a decline, if any, other than that of
temporary nature.
8. LICENSE FEES Ã REVENUE SHARE
With effect from August 1, 1999, the variable Licence fee computed at
prescribed rates of revenue share is charged to the Profit and Loss
Account in the year in which the related revenues are recognised.
Revenue for this purpose identifi ed as adjusted gross revenue as per
the respective license agreements.
9. FOREIGN CURRENCY TRANSLATION, ACCOUNTING FOR FORWARD CONTRACTS AND
DERIVATIVES
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company's monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognised as income or
as expenses in the year in which they arise as mentioned below.
Forward Exchange Contracts covered under AS 11, 'The Effects of Changes
in Foreign Exchange Rates'
Exchange differences on forward exchange contracts and plain vanilla
currency options for establishing the amount of reporting currency and
not intended for trading and speculation purposes, are recognised in
the Profit and Loss account in the year in the which the exchange rate
changes. The premium or discount arising at the inception of forward
exchange contracts is amortised as expense or income over the life of
the contract. Any Profit or loss arising on cancellation or renewal
of such forward exchange contract is recognised as income or expense
for the year.
Exchange difference on forward contracts which are taken to establish
the amount other than the reporting currency arising due to the
difference between forward rate available at the reporting date for the
remaining maturity period and the contracted forward rate (or the
forward rate last used to measure a gain or loss on the contract for an
earlier period) are recognised in the Profit and loss account for the
year.
Other Derivative Instruments, not in the nature of AS 11, 'The Effects
of Changes in Foreign Exchange Rates'
The Company enters into various foreign currency option contracts and
interest rate swap contracts that are not in the nature of forward
contracts designated under AS 11 as such and contracts that are not
entered to establish the amount of the reporting currency required or
available at the settlement date of a transaction; to hedge its risks
with respect to foreign currency fl uctuations and interest rate
exposure arising out of import of capital goods using foreign currency
loan. At every year end all outstanding derivative contracts are fair
valued on a mark-to-market basis and any loss on valuation is
recognised in the Profit and loss account, on each contract basis. Any
gain on mark-to-market valuation on respective contracts is not
recognised by the Company, keeping in view the principle of prudence as
enunciated in AS 1, 'Disclosure of Accounting Policies'. Any reducti on
to fair values and any reversals of such reductions are included in
Profit and loss statement of the year.
Embedded Derivative Instruments
The Company occasionally enters into contracts that do not in their
entirety meet the defi nition of a derivative instrument that may
contain "embedded" derivative instruments à implicit or explicit terms
that affect some or all of the cash fl ow or the value of other
exchanges required by the contract in a manner similar to a derivative
instrument. The Company assesses whether the economic characteristics
and risks of the embedded derivative are clearly and closely related to
the economic characteristics and risks of the remaining component of
the host contract and whether a separate, non-embedded instrument with
the same terms as the embedded instrument would meet the defi nition of
a derivative instrument. When it is determined that (1) the embedded
derivative possesses economic characteristics and risks that are not
clearly and closely related to the economic characteristics and risks
of the host contract and (2) a separate, standalone instrument with the
same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract, carried at fair value
as a trading or non-hedging derivative instrument. At every year end,
all outstanding embedded derivative instruments are fair valued on
mark-to-market basis and any loss on valuation is recognised in the
Profit and loss account for the year. Any reduction in mark to market
valuations and reversals of such reductions are included in Profit and
loss statement of the year.
Translation of Integral and Non-Integral Foreign Operation
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Company itself.
In translating the financial statements of a non-integral foreign
operation for incorporation in financial statements, the assets and
liabilities, both monetary and non-monetary are translated at the
closing rate; income and expense items are translated at exchange rate
at the date of transaction for the year; and all resulting exchange
differences are accumulated in a foreign currency translation reserve
until the disposal of the net investment.
Foreign exchange contracts for trading and speculation purpose
Foreign exchange contracts intended for trading and/or speculation are
fair valued on a mark-to-market basis and any gain or loss on such
valuation is recognised in the Profit and Loss Account for the year.
10. EMPLOYEE BENEFITS
(a) Short-term employee benefi ts are recognised in the year during
which the services have been rendered.
(b) All employees of the Company are entitled to receive benefi ts
under the Provident Fund, which is a defi ned contribution plan. Both
the employee and the employer make monthly contributions to the plan at
a predetermined rate (presently 12%) of the employees' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company
are covered under the employees' state insurance schemes, which are
also defi ned contribution schemes recognised and administered by the
Government of India.
The Company's contributions to both these schemes are expensed in the
Profit and Loss Account. The Company has no further obligations under
these plans beyond its monthly contributions.
(c) Some employees of the Company are entitled to superannuation, a
defi ned contribution plan which is administered through Life Insurance
Corporation of India ("LIC"). Superannuation benefi ts are recorded as
an expense as incurred.
(d) Short-term compensated absences are provided for, based on
estimates. Long-term compensated absences are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method at the end of each period/year.
(e) The Company provides for gratuity obligations through a defi ned
benefi t retirement plan (the 'Gratuity Plan') covering all employees.
The Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuations as per the
Projected Unit Credit Method at the end of each period/year in
accordance with Accounting Standard 15, "Employee Benefi ts." The
Company makes annual contributions to the LIC for the Gratuity Plan in
respect of employees at certain circles.
(f) Other Long-term employee benefi ts are provided based on actuarial
valuation made at the end of each period/ year. The actuarial valuation
is done as per projected unit credit method.
(g) Actuarial gains and losses are recognised as and when incurred.
11. PRE-OPERATIVE EXPENDITURE
Expenditure incurred by the Company from the date of acquisition of
license for a new circle or from the date of start-up of new venture or
business, up to the date of commencement of commercial operations of
the circle or the new venture or business, not directly attributable to
fixed assets are charged to the Profit and Loss account in the year
in which such expenditure is incurred.
12. LEASES
a) Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefi ts of ownership of the leased term, are classifi ed as
operating leases. Lease Rentals with respect to assets taken on
'Operating Lease' are charged to the Profit and Loss Account on a
straight-line basis over the lease term.
Leases which effectively transfer to the Company substantially all the
risks and benefi ts incidental to ownership of the leased item are
classifi ed as fi nance lease. Assets acquired on 'Finance Lease'
which transfer risk and rewards of ownership to the Company are
capitalised as assets by the Company at the lower of fair value of the
leased property or the present value of the minimum lease payments.
Amortisation of capitalised leased assets is computed on the Straight
Line method over the useful life of the assets. Lease rental payable
is apportioned between principal and fi nance charge using the internal
rate of return method. The fi nance charge is allocated over the lease
term so as to produce a constant periodic rate of interest on the
remaining balance of liability.
b) Where the Company is the lessor
Lease income in respect of 'Operating Lease' is recognised in the Profi
t and Loss Account on a straight-line basis over the lease term.
Finance leases as a dealer lessor are recognized as a sale transaction
in the Profit and Loss Account and are treated as other outright
sales.
Finance Income is recognised based on a pattern refl ecting a constant
periodic rate of return on the net investment of the lessor outstanding
in respect of the lease.
c) Initial direct costs are expensed in the Profit and Loss Account at
the inception of the lease.
13. TAXATION
Current Income tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian Income Tax Act, 1961.
Deferred income taxes refl ects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised and reviewed at each balance sheet date, only to the
extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. In situations where the Company has unabsorbed
depreciation or carry forward tax losses, all deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that they can be realised against future taxable Profits. At
each balance sheet date, unrecognised deferred tax assets of earlier
years are re-assessed and recognised to the extent that it has become
reasonably or virtually certain, as the case may be, that future
taxable income will be available against which such deferred tax assets
can be realised.
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specifi ed period. In the year in
which the MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in Guidance Note issued
by the ICAI, the said asset is created by way of a credit to the Profi
t and Loss account and shown as MAT Credit Entitlement. The Company
reviews the same at each balance sheet date and writes down the
carrying amount of MAT Credit Entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
Income Tax during the specifi ed period.
14. BORROWING COST
Borrowing cost attributable to the acquisition or construction of fi
xed assets which takes substantial period of time to get ready for its
intended use is capitalised as part of the cost of that asset. Other
borrowing costs are recognised as an expense in the year in which they
are incurred. The interest cost incurred for funding a qualifying asset
during the acquisition/construction period is capitalised based on
actual investment in the asset at the average interest rate.
15. IMPAIRMENT OF ASSETS
The carrying amounts of assets are reviewed at each balance sheet date
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the assets' carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of the
assets' fair value less costs to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifi able cash flows
(cash generating units).
16. SEGMENTAL REPORTING
a) Primary Segment
The Company operates in three primary business segments viz. Mobile
Services, Telemedia Services and Enterprise Services.
b) Secondary Segment
The Company has operations within India as well as in other countries
through entities located outside India. The operations in India
constitute the major part, which is the only reportable segment, the
remaining portion being attributable to others.
17. EARNINGS PER SHARE
The earnings considered in ascertaining the Company's Earnings Per
Share ('EPS') comprise the net Profit after tax. The number of shares
used in computing basic EPS is the weighted average number of shares
outstanding during the period. The weighted average number of equity
shares outstanding during the year is adjusted for events of share
splits/bonus issue post year end and accordingly, the EPS is restated
for all periods presented in these financial statements. The diluted
EPS is calculated on the same basis as basic EPS, after adjusting for
the effects of potential dilutive equity shares unless impact is anti
dilutive.
The weighted average number of equity shares outstanding during the
year are adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares).
18. ASSET RETIREMENT OBLIGATIONS (ARO)
Provision for ARO is based on past experience and technical estimates.
19. PROVISIONS
Provisions are recognised when the Company has a present obligation as
a result of past event; it is more likely than not that an outfl ow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to refl ect the current best
estimates.
20. EMPLOYEE STOCK OPTIONS OUTSTANDING
Employee Stock options outstanding are valued using Black Scholes/
Monte Carlo/ Lattice valuation option à pricing model and the fair
value is recognised as an expense over the period in which the options
vest. The difference between the actual purchase cost of shares issued
upon exercise of options and the sum of fair value of the option and
exercise price is adjusted against General Reserve.
21. CASH AND CASH EQUIVALENTS
Cash and Cash equivalents in the Balance Sheet comprise cash in hand
and at bank and short-term investments.
Mar 31, 2010
1 BASIS OF PREPARATION
The financial statements have been prepared to comply in all material
respects with the Notified accounting standards by Companies
(Accounting Standards) Rules, 2006, (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis
except in case of assets for which revaluation is carried out. The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
3. FIXED ASSETS
Fixed Assets are stated at cost of acquisition and subsequent
improvements thereto, including taxes & duties (net of cenvat credit),
freight and other incidental expenses related to acquisition and
installation. Capital work-in-progress is stated at cost.
Site restoration cost obligations are capitalized when it is probable
that an outflow of resources will be required to settle the obligation
and a reliable estimate of the amount can be made.
The intangible component of license fee payable by the Company for
cellular and basic circles, upon migration to the National Telecom
Policy (NTP 1999), i.e. Entry Fee, has been capitalised as an asset and
the one time license fee paid by the Company for acquiring new licences
(post NTP-99) (basic, cellular, national long distance and
international long distance services) has been capitalised as an
intangible asset.
4. DEPRECIATION/AMORTISATION
Depreciation on fixed assets is provided on the straight line method
based on useful lives of respective assets as estimated by the
management or at the rates prescribed under Schedule XIV of the
Companies Act, 1956, whichever is higher. Leasehold land is amortised
over the period of lease. Depreciation rates adopted by the
Company are as follows:
Useful lives
Leasehold Land Period of lease
Building 20years
Building on Leased Land 20years
Leasehold Improvements Period of lease or 10 years
whichever is less
Plant & Machinery 3 years to 20 years
Computer & Software 3 years
Office Equipment 2 years/5 years
Furniture and Fixtures 5 years
Vehicles 5 years
Software up to Rs 500 thousand is fully depreciated in the financial
year placed in service.
Bandwidth capacity is amortised on straight line basis over the period
of the agreement subject to a maximum of 18 years.
The Entry Fee capitalised is amortised over the period of the license
and the one time licence fee is amortised over the balance period of
licence from the date of commencement of commercial operations.
The site restoration cost obligation capitalized is depreciated over
the period of the useful life of the related asset.
Fixed Assets costing upto Rs 5 thousand are being fully depreciated
within oneyearfrom the date of acquisition.
5. REVENUE RECOGNITION AND RECEIVABLES
Mobile Services
Service revenue is recognised on completion of provision of services.
Service revenue includes income on roaming commission and an access
charge recovered from other operators, and is net of discounts and
waivers. Revenue, net of discount, is recognised on transfer of all
significant risks and rewards to the customer and when no significant
uncertainty exists regarding realisation of consideration.
Processing fees on recharge is being recognised over the estimated
customer relationship period or voucher validity period, as applicable.
Revenue from prepaid calling cards packs is recognised on the actual
usage basis.
Telemedia Services (Erstwhile Broadband & Telephone Services)
Service revenue is recognised on completion of provision of services.
Revenue is recognised when no significant uncertainty exists regarding
realisation of consideration.
Service Revenues includes access charges passed on to other operators,
and is net of discounts and waivers.
Enterprise Services (Erstwhile Enterprise Services - Carrier Segment
and Enterprise Services - Corporate Segment)
Revenue, net of discount, from sale of goods is recognised on transfer
of all significant risks and rewards to the customer and when no
significant uncertainty exists regarding realisation of consideration.
Revenue on account of bandwidth service is recognised on time
proportion basis in accordance with the related contracts.
Service Revenues includes access charges passed on to other operators,
revenues from registration, installation and provision of Internet and
Satellite services. Registration fees is recognised at the time of
dispatch and invoicing of Start up Kits. Installation charges are
recognised as revenue on satisfactory completion of installation of
hardware and service revenue is recognised from the date of
satisfactory installation of equipment and software at the customer
site and provisioning of Internet and Satellite services.
Activation Income
Activation revenue and related direct activation costs, not exceeding
the activation revenue, are deferred and amortised over the related
estimated customer relationship period, as derived from the estimated
customer churn period.
Investing and other Activities
Income on account of interest and other activities are recognised on an
accrual basis. Dividends are accounted for when the right to receive
the payment is established.
Provision for doubtful debts
The Company provides for amounts outstanding for more than 90 days in
case of active subscribers, roaming receivables and for entire
outstanding from deactivated customers net off security deposits or in
specific cases where management is of the view that the amounts from
certain customers are not recoverable.
For receivables due from the other operators on account of their
National Long Distance (NLD) and International Long Distance (ILD)
traffic and Interconnect Usage charges (IUC), the Company provides for
amounts outstanding for more than 120 days from the date of billing,
net of any amounts payable to the operators or in specific cases where
management is of the view that the amounts from these operators are not
recoverable.
Accrued Billing revenue
Accrued billing revenue represent revenue recognised in respect of
Mobile, Broadband and Telephone, and Long Distance services provided
from the bill cycle date to the end of each month. These are billed in
subsequent periods as per the terms of the billing plans.
6. INVENTORY
Inventory is valued at the lower of cost and net realisable value. Cost
is determined on First in First out basis. Net realisable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make
the sale.
The Company provides for obsolete and slow-moving inventory based on
management estimates of the usability of inventory.
7. INVESTMENT
Current Investments are valued at lower of cost and fair market value
determined on individual basis.
Long term Investments are valued at cost. Provision is madefor
diminution in value to recognise a decline, if any, other than that of
temporary nature.
8. LICENSE FEES - REVENUE SHARE
With effect from August 1, 1999, the variable Licence fee computed at
prescribed rates of revenue share is charged to the Profit and Loss
Account in the year in which the related revenues are recognised.
Revenue for this purpose identified as adjusted gross revenue as per
the respective license agreements.
9. FOREIGN CURRENCYTRANSLATION, ACCOUNTING FOR FORWARD CONTRACTS &
DERIVATIVES
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Companys monetary items at rates differentfrom
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognised as income or
as expenses in the year in which they arise as mentioned below.
Forward Exchange Contracts covered under AS 11, The Effects of Changes
in Foreign Exchange Rates
Exchange differences on forward exchange contracts & plain vanilla
currency options for establishing the amount of reporting currency and
not intended for trading & speculation purposes, are recognised in the
Profit & Loss account in the period/year in which the exchange rate
changes. The premium or discount arising at the inception of forward
exchange contracts is amortised as expense or income over the life of
the contract. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is recognised as income or expense for
the year.
Exchange difference on forward contracts which are taken to establish
the amount other than the reporting currency arising due to the
difference between forward rate available at the reporting date for the
remaining maturity period and the contracted forward rate (or the
forward rate last used to measure a gain or loss on the contract for an
earlier period) are recognised in the profit and lossaccountfortheyear.
Other Derivative Instruments, not in the nature of AS 11, The Effects
of Changes in Foreign Exchange Rates
The Company enters into various foreign currency option contracts &
interest rate swap contracts that are not in the nature of forward
contracts designated under AS 11 as such and contracts that are not
entered to establish the amount of the reporting currency required or
available at the settlement date of a transaction; to hedge its risks
with respect to foreign currency fluctuations and interest rate
exposure arising out of import of capital goods using foreign currency
loan. At every year end all outstanding derivative contracts are fair
valued on a marked-to-market basis and any loss on valuation is
recognised in the profit and loss account, on each contract basis. Any
gain on marked-to-market valuation on respective contracts is not
recognized by the Company, keeping in view the principle of prudence as
enunciated in AS 1, Disclosure of Accounting Policies. Any reduction
to fair values and any reversals of such reductions are included in
profit and loss statement of theyear.
Embedded Derivative Instruments
The Company occasionally enters into contracts that do not in their
entirety meet the definition of a derivative instrument that may
contain "embedded" derivative instruments - implicit or explicit terms
that affect some or all of the cash flow or the value of other
exchanges required by the contract in a manner similar to a derivative
instrument. The Company assesses whether the economic characteristics
and risks of the embedded derivative are clearly and closely related to
the economic characteristics and risks of the remaining component of
the host contract and whether a separate, non-embedded instrument with
the same terms as the embedded instrument would meet the definition of
a derivative instrument. When it is determined that (1) the embedded
derivative possesses economic characteristics and risks that are not
clearly and closely related to the economic characteristics and risks
of the host contract and (2) a separate, stand-alone instrument with
the same terms would qualify as a derivative instrument, the embedded
derivative is separated from the host contract, carried atfairvalueasa
trading or non-hedging derivative instrument. At every period/year end,
all outstanding embedded derivative instruments are fair valued on
mark-to-market basis and any loss on valuation is recognized in the
profit & loss account for the period/year. Any reduction in mark to
market valuations and reversals of such reductions are included in
profitand loss statement of the period/year.
Translation of Integral and Non-Integral Foreign Operation
The financial statements of an integral foreign operation are
translated as if the transactions of the foreign operation have been
those of the Com pany itself.
In translating the financial statements of a non-integral foreign
operation for incorporation in financial statements, the assets and
liabilities, both monetary and non-monetary are translated at the
closing rate; income and expense items are translated at exchange rate
at the date of transaction for the period/year; and all resulting
exchange differences are accumulated in a foreign currency translation
reserve until the disposal of the net investment.
Foreign exchange contracts for trading and speculation purpose
Foreign exchange contracts intended for trading and/or speculation are
fair valued on a marked-to- market basis and any loss on such valuation
is recognised in the Profit & Loss Account for the period.
10.EMPLOYEE BENEFITS
(a) Short term employee benefits are recognised in the year during
which the services have been rendered.
(b) All employees of the Company are entitled to receive benefits under
the Provident Fund, which is a defined contribution plan. Both the
employee and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees state insurance schemes, which are also
defined contribution schemes recognized and administered by the
Government of India.
The Companys contributions to both these schemes are expensed in the
Profit and Loss Account.
The Company has no further obligations under these plans beyond its
monthly contributions.
(c) Some employees of the Company are entitled to superannuation, a
defined contribution plan which is administered through Life Insurance
Corporation of India ("LIC"). Superannuation benefits are recorded as
an expense as incurred.
(d) Short term compensated absences are provided for, based on
estimates. Long term compensated absences are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method.
(e) The Company provides for gratuity obligations through a defined
benefit retirement plan (the Gratuity Plan) covering all employees.
The Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuations as per the
Projected Unit Credit Method at the end of each financial year in
accordance with Accounting Standard 15 (revised), "Employee Benefits ".
The Company makes annual contributions to the LIC for the Gratuity Plan
in respect of employees at certain circles.
(f) Other Long term service benefits are provided based on actuarial
valuation made at the end of each period/year. The actuarial valuation
is done as per projected unit credit method.
(g) Actuarial gains and losses are recognized as and when incurred.
11.PRE-OPERATIVE EXPENDITURE
Expenditure incurred by the Company from the date of acquisition of
license for a new circle or from the date of start-up of new ventures
or business, up to the date of commencement of commercial operations of
the circle or the new venture or business, not directly attributable to
fixed assets are charged to the Profit and Loss account in theyear in
which such expenditure is incurred.
12. LEASES
a) Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Lease Rentals with respect to assets taken on
Operating Lease are charged to the Profit and Loss Account on a
straight-line basis over the lease term.
Leases which effectively transfer to the Company substantially all the
risks and benefits incidental to
ownership of the leased item are classified as finance lease. Assets
acquired on Finance Lease which transfer risk and rewards of
ownership to the Company are capitalized as assets by the Company at
the lower of fair value of the leased property or the present value of
the minimum lease payments or where applicable, estimated fair valueof
such assets.
Amortization of capitalised leased assets is computed on the Straight
Line method over the useful life of the assets. Lease rental payable is
apportioned between principal and finance charge using the internal
rate of return method. The finance charge is allocated over the lease
term so as to produce a constant periodic rate of interest on the
remaining balance of liability.
b) Where the Company isthelessor:
Lease income in respect of Operating Lease is recognised in the
Profit and Loss Account on a straight-line basis over the lease term.
Finance leases as a dealer lessor are recognized as a sale transaction
in the Profit and loss account and are treated as other outright sales.
Finance Income is recognized based on a pattern reflecting a constant
periodic rate of return on the net investment of the lessor outstanding
in respect of the lease.
c) Initial direct costs are expensed in the Profit and Loss Account at
the inception of the lease.
13.TAXATION
Current Income tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian IncomeTaxAct, 1961
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised and reviewed at each balance sheet date, only to the
extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. In situations where the Company has unabsorbed
depreciation or carry forward tax losses, all deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that they can be realised against future taxable profits. At
each balance sheet date, unrecognised deferred tax assets of earlier
years are re-assessed and recognised to the extent that it has become
reasonably certain that future taxable income will be available against
which such deferred tax assets can be realized.
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the
period/year in which the MAT credit becomes eligible to be recognized
as an asset in accordance with the recommendations contained in
Guidance Note issued by the ICAI, the said asset is created by way of a
credit to the Profit and Loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each balance sheet date
and writes down the carrying amount of MAT Credit Entitlement to the
extent there is no longer convincing evidence to the effect that
Company will pay normal Income Tax during the specified period.
Finance Act 2009, abolished Fringe Benefit Tax effective April 1,
2009. Accordingly, the Company has not accounted for any fringe benefit
tax.
14.MISCELLANEOUS EXPENDITURE
Premium on redemption of debentures is recognised as an expense to the
Profit and Loss Account over the period of the related contract.
15.BORROWINGCOST
Borrowing cost attributable to the acquisition or construction of fixed
assets which takes substantial period of time to get ready for its
intended use is capitalised as part of the cost of that asset. Other
borrowing costs are recognised as an expense in the year in which they
are incurred.
16.IMPAIRMENT OF ASSETS
The carrying amounts of assets are reviewed at each balance sheet date
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognized for the amount by which the assets carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of the
assets fair value less costs to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows
(cash generating units).
17.SEGMENTAL REPORTING
a) Primary Segment
The Company operates in three primary business segments viz. Mobile
Services, Telemedia Services and Enterprise Services (Erstwhile
Enterprises Services Carrier and Enterprise Services Corporate).
b) Secondary Segment
The Company has operations within India as well as in other countries
through entities located outside India. The operations in India
constitute the major part, which is the only reportable segment, the
remaining portion being attributable to others.
18. EARNINGS PER SHARE
The earnings considered in ascertaining the Companys Earnings per
Share (EPS) comprise the net profit after tax. The number of shares
used in computing basic EPS is the weighted average number of shares
outstanding during the period. The weighted average number of equity
shares outstanding during the year is adjusted for events of share
splits/bonus issue post period end and accordingly, the EPS is restated
for all periods presented in these financial statements. The diluted
EPS is calculated on the same basis as basic EPS, after adjusting for
the effects of potential dilutive equity shares unless impact is anti
dilutive.
The weighted average number of equity shares outstanding during the
year are adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares).
19.WARRANTY AND ASSET RETIREMENT OBLIGATIONS (ARO)
Provision for warranty and ARO is based on past experience and
technical estimates.
20. PROVISIONS
Provisions are recognised when the Company has a present obligation as
a result of past event; it is more likely than not that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
21. EMPLOYEE STOCK OPTIONS OUTSTANDING
Employee Stock options outstanding are valued using Black Scholes /
Lattice valuation option - pricing model and the fair value is
recognised as an expense over the period in which the options vest.
22. CASH AND CASH EQUIVALENTS
Cash and Cash equivalents in the Balance Sheet comprise cash in hand
and at bank and short-term investments.
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Bharti Airtel Ltd. குறித்த கூடுதல் தகவல்களை
-
Bharti Airtel Ltd. டூல்ஸ்
- பல்க் டீல்ஸ்
- பிளாக் டீல்ஸ்
-
Bharti Airtel Ltd. நிறுவன தகவல்கள்
- நிறுவன சுயவிவரம்
- நிறுவன வரலாறு
- நிர்வாக குழு
- மூலதன வடிவம்
- புராடெக்ட் மிக்ஸ்
- வங்கியாளர்/தணிக்கையாளர்/பதிவாளர்
-
நிறுவன வரலாறு
- உரிமை
- மும்பை பங்குச் சந்தையில் விலை வரலாறு
- என்எஸ்இ விலை வரலாறு
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Bharti Airtel Ltd. முக்கிய நிதியில் விகிதங்கள்
- விகிதங்கள்
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Bharti Airtel Ltd. முடிவுகள்
- காலாண்டு முடிவுகள்
- அரையாண்டு முடிவுகள்
- 9 மாத முடிவுகள்
- வருடாந்திர முடிவுகள்
-
Bharti Airtel Ltd. நிதியியல் தகவல்கள்
- தணிக்கை முடிவுகள்
- பணப்பாய்வு
- இருப்பு நிலைக்குறிப்பு
-
Bharti Airtel Ltd. அறிக்கை
- கணக்கியல் கோட்பாடுகள்
- தணிக்கையாளர்கள் அறிக்கை
- இயக்குநர்கள் அறிக்கை
- கணக்கு குறிப்புகள்
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Bharti Airtel Ltd. கார்ப்பரேட் அறிவிப்புகள்
- புத்தக முடிவு
- ஈவுத்தொகை
- நிர்வாகக் குழுக் கூட்டங்கள்
