2. Summary of significant accounting policies

2.1 Basis of preparation and presentation
Compliance with Ind AS

These financial statements have been prepared in accordance with Indian Accounting Standards ('Ind
AS') prescribed under section 133 of the Companies Act, 2013 (‘the Act’) read with Rule 3 of the
Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time and other
relevant provisions of the Act.

Historical cost convention

The financial statements have been prepared on a historical cost basis, except for the following:

Recent pronouncements:

Ministry of Corporate Affairs (“MCA”) notifies new standard or amendment s to the existing standards
under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2023,
MCA Issued the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from
April 1, 2023, as below:

Ind AS 1 - Presentation of Financial Statements

The amendments require companies to disclose the material accounting policies rather than significant
accounting policies. Accounting policy information, together with other information, is material when it
can reasonably be expected to influence decisions of primary users of general purpose financial
statements.

Ind AS 12 - Income Taxes

The amendments clarify how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The amendments narrowed the scope of the recognition exemption in
paragraphs 15 and 24 of Ind AS 12 so that it no longer applies to transactions that, on initial recognition,
give rise to equal taxable and deductible temporary differences.

Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors

The amendments will help entities to distinguish between accounting policies and accounting estimates.
The definition of a change in accounting estimates has been replaced with a definition of accounting
estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements
that are subject to measurement uncertainty”. Entities develop accounting estimates if accounting
policies require items in financial statements to be measured in a way that involves measurement
uncertainty. The Company is assessing the impact of these changes and will accordingly incorporate the
same in the financial statements for the year ending March 31, 2024.

2.2 Foreign currency translation

a) Functional and presentation currency

These financial statements are presented in Indian rupees (Rs.) which is also the Company's
functional currency.

b) Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates at
the dates of transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign
currencies at year end exchange rates are generally recognised in profit or loss.

Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the fair value gain or loss.

2.3 Property, plant and equipment
Recognition and measurement

On transition to Ind AS, the Company has adopted previous GAAP carrying amount as deemed cost
for all the categories of property, plant and equipment.

Post transition to Ind AS, property, plant and equipment are measured at cost, which includes
capitalised borrowing costs, less accumulated depreciation and accumulated impairment losses, if any.

Cost of an item of property, plant and equipment comprises its purchase price, including import duties
and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly
attributable cost of bringing the item to its working condition for its intended use and estimated costs
of dismantling and removing the item and restoring the site on which it is located.

The cost of a self-constructed item of property, plant and equipment comprises the cost of materials
and direct labor and any other costs directly attributable to bringing the item to working condition for
its intended use, and estimated costs of dismantling and removing the item and restoring the site on
which it is located.

The costs of the property plant and equipment, which are not ready for their intended use on such
date, are disclosed as capital work-in-progress.

An item of property, plant and equipment and any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when
the asset is derecognised.

If significant parts of an item of property, plant and equipment have different useful lives, then they
are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in the
Statement of Profit or Loss.

Subsequent expenditure

Subsequent expenditure is capitalised only if it is probable that the future economic benefits
associated with the expenditure will flow to the Company.

Depreciation

Depreciation is calculated on cost of items of property, plant and equipment less their estimated
residual values over their estimated useful lives using the straight-line method, and is generally
recognised in the Statement of Profit and Loss. Assets acquired under finance leases are depreciated
over the shorter of the lease term and their useful lives unless it is reasonably certain that the
Company will obtain ownership by the end of the lease term. Freehold land is not depreciated.

Depreciation method, useful lives and residual values are reviewed at each financial year-end and
adjusted if appropriate. Based on internal assessment and supported by technical advice, the
management believes that its estimates of useful lives as given above best represent the period over
which management expects to use these assets which is different from the useful lives as prescribed
under Part C of Schedule II of the Companies Act, 2013.

Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (up to) the date on
which asset is ready for use (disposed off).

2.4 Impairment

i. Impairment of financial assets

The Company recognises loss allowances for expected credit losses on financial assets measured at
amortised cost.

At each reporting date, the Company assesses whether financial assets carried at amortised cost are
credit impaired. A financial asset is ‘credit impaired’ when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit impaired includes the following observable data:

- significant financial difficulty of the borrower or issuer;

- a breach of contract such as a default or being past due for one year or more;

- the restructuring of a loan or advance by the Company on terms that the Company would not
consider otherwise;

- it is probable that the borrower will enter bankruptcy or other financial reorganisation; or

- the disappearance of an active market for a security because of financial difficulties.

Loss allowances for trade receivables are always measured using the simplied approach.

The Company considers a financial asset to be in default when:

- the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by
the Company to actions such as realising security (if any is held); or

- the financial asset is one year or more past due.

Measurement of expected credit losses:

Expected credit losses are a probability weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due
to the Company in accordance with the contract and the cash flows that the Company expects to
receive).

Presentation of allowance for expected credit losses in the balance sheet:

Loss allowances for financial assets measured at amortised cost are deducted from the gross
carrying amount of the assets.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent
that there is no realistic prospect of recovery. This is generally the case when the Company
determines that the debtor does not have assets or sources of income that could generate sufficient
cash flows to repay the amounts subject to the write off. However, financial assets that are written
off could still be subject to enforcement activities in order to comply with the Company’s
procedures for recovery of amounts due.

ii) Impairment of non-financial assets:

The Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at
each reporting date to determine whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is estimated.

For impairment testing, assets that do not generate independent cash inflows are grouped together
into cash-generating units (CGUs). Each CGU represents the smallest group of assets that
generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.

The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its
fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time

value of money and the risks specific to the CGU (or the asset). In determining fair value less costs
of disposal, recent market transactions are taken into account. If no such transactions can be
identified, an appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded companies or other available fair value
indicators.

The Company’s corporate assets (e.g., central office building for providing support to various
CGUs) do not generate independent cash inflows. To determine impairment of a corporate asset,
recoverable amount is determined for the CGUs to which the corporate asset belongs. An
impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated
recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated
recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss.
Impairment loss recognised in respect of a CGU is allocated to reduce the carrying amounts of
assets of the CGU (or group of CGUs) on a pro rata basis.

In respect of assets for which impairment loss has been recognised in prior periods, the Company
reviews at each reporting date whether there is any indication that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. Such a reversal is made only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.

2.5 Inventories

Inventories are measured at the lower of cost and net realisable value. In case of finished goods and
work-in-progress, costs include an appropriate share of fixed overhead based on normal operating
capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses. The net realisable value of work-in-progress is determined
with reference to the selling prices of related finished products.

The comparison of cost and net realisable value is made on an item-by-item basis.

2.6 Revenue recognition
Services

Revenue from services is recognised in the accounting period in which the services are rendered. For
fixed-price contracts, revenue is recognised based on the actual service provided to the end of the
reporting period as a proportion of the total services to be provided.

Estimates of revenues, costs or extent of progress towards completion are revised if circumstances
change. Any resulting increase or decrease in estimated revenue or costs reflected in profit or loss in
the period in which the circumstances that give rise to the revision becomes known by management.

Interest

Interest income is recognised using the time proportion basis taking into account the amount
outstanding and the interest rate applicable.

2.7 Leases

As a lessee

The Company’s lease asset classes primarily consist of leases for buildings. The Company assesses
whether a contract contains a lease, at inception of a contract. A contract is, or contains, 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: (i) the contract involves the use of an identified asset (ii) the
Company has substantially all of the economic benefits from use of the asset through the period of the
lease and (iii) the Company has the right to direct the use of the asset.

At the date of commencement of the lease, the Company recognises a right-of-use asset (“ROU”) and
a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with
a term of year or less (short-term leases) and low value leases. For these short-term and low value
leases, the Company recognises the lease payments as an operating expense on a straight-line basis
over the term of the lease.

As a lessee, the Company determines the lease term as the non-cancellable period of a lease adjusted
with any option to extend or terminate the lease, if the use of such option is reasonably certain. The
Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby
assesses whether it is reasonably certain that any options to extend or terminate the contract will be
exercised. In evaluating the lease term, the Company considers factors such as any significant
leasehold improvements undertaken over the lease term, costs relating to the termination of the lease
and the importance of the underlying asset to I nfosys’s operations taking into account the location of
the underlying asset and the availability of suitable alternatives. The lease term in future periods is
reassessed to ensure that the lease term reflects the current economic circumstances.

The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They are subsequently measured at cost less
accumulated depreciation and impairment losses. Right-of-use assets are depreciated from the
commencement date on a straight-line basis over the shorter of the lease term and useful life of the
underlying asset.

As a lessor

Lease income from operating leases where the Company is a lessor is recognised in income on a
straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are
added to the carrying amount of the underlying asset and recognised as expense over the lease term on
the same basis as lease income. The respective leased assets are included in the balance sheet based
on their nature.

2.8 Borrowing cost

Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended
use or sale, are added to the cost of those assets, until such time as the assets are substantially ready
for their intended use or sale.

Interest income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the Statement of Profit or Loss in the period in which they
are incurred.

2.9 Employee benefits

Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which the Company pays fixed
contributions and will have no legal or constructive obligation to pay further amounts. The Company
makes specified monthly contributions towards Government administered provident fund scheme.
Obligations for contributions to defined contribution plans are recognised as an employee benefit
expense in the Statement of Profit or Loss in the periods during which the related services are
rendered by employees.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The
Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of
future benefit that employees have earned in the current and prior periods, discounting that amount
and deducting the fair value of any plan assets.

The Company's gratuity plan is a defined benefit plan. The present value of gratuity obligation under
such defined benefit plans is determined based on actuarial valuations carried out by an independent
actuary using the Projected Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measure each unit separately to build up
the final obligation. The obligation is measured at the present value of estimated future cash flows.
The discount rates used for determining the present value of obligation under defined benefit plans, is
based on the market yields on Government securities as at the Balance Sheet date, having maturity
periods approximating to the terms of related obligations.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the
return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest),
are recognised in OCI. The Company determines the net interest expense (income) on the net defined
benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit
obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking
into account any changes in the net defined benefit liability (asset) during the period as a result of
contributions and benefit payments. Net interest expense and other expenses related to defined benefit
plans are recognised in the Statement of Profit or Loss.

2.10 Income tax

Income tax comprises current and deferred tax. It is recognised in the statement of profit and loss
except to the extent that it relates to an item recognised directly in equity or in other comprehensive
income.

Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the
year and any adjustment to the tax payable or receivable in respect of previous years. The amount of
current tax reflects the best estimate of the tax amount expected to be paid or received after
considering the uncertainty, if any related to income taxes. It is measured using tax rates (and tax
laws) enacted or substantively enacted by the reporting date.

Minimum alternate tax (‘MAT’) paid in a year is charged to the statement of profit and loss as current
tax. The Company recognises MAT credit available as an asset only to the extent that 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 Company
recognises MAT credit as an asset in accordance with the 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 credit to the statement of profit and loss and shown as ‘MAT Credit Entitlement’.
The Company reviews the ‘MAT credit entitlement’ asset at each reporting date and writes down the
asset to the extent the Company does not have convincing evidence that it will pay normal tax during
the specified period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the Ind AS financial statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible temporary differences to
the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other than in a business combination) of
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In
addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial
recognition of goodwill.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.

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.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognised in other comprehensive income or directly in equity respectively.