Analysis of Accounting
Policies and Disclosures:
Infosys Annual Report
By: Nikhil Bhavsar
Introduction
Infosys Limited is a global leader in consulting, technology, outsourcing, and
next-generation services. Headquartered in Bengaluru, India, the company
operates across more than 50 countries with over 320,000 employees.
Infosys is listed on both the NSE and BSE in India, and on the NYSE in the US.
Its financial statements are prepared in compliance with Indian Accounting
Standards (Ind AS), which are substantially converged with International
Financial Reporting Standards (IFRS). This report analyzes the accounting
policies and disclosures of Infosys Limited for the year 2024–25, focusing on
key areas as required.
1. Revenue Recognition (IFRS 15)
Infosys recognizes revenue from contracts with customers when control of
the promised goods or services is transferred to the customer, in an amount
that reflects the consideration expected in exchange. The company applies
both fixed-price and time-and-material contracts. Revenue for fixed-price
contracts is recognized using the percentage-of-completion method, based
on actual costs incurred compared to estimated total costs.
Compliance with IFRS 15: The approach aligns with the five-step model of
IFRS 15. The company discloses judgments in estimating contract costs,
variable consideration, and allocation of transaction price.
2. Property, Plant, and Equipment (IAS 16)
Infosys measures PPE initially at cost and subsequently at cost less
accumulated depreciation and impairment losses. Depreciation is provided on
a straight-line basis over estimated useful lives, which range from 3–10 years
for computers and 22–25 years for buildings.
Compliance with IAS 16: This is consistent with IAS 16’s cost model. The
company does not use the revaluation model. Useful lives and residual values
are reviewed annually.
3. Intangible Assets (IAS 38)
Infosys recognizes purchased intangible assets such as software licenses at
cost, amortized over 2–5 years. Internally generated intangibles, such as
software developed for internal use, are capitalized when recognition criteria
are met. Research costs are expensed as incurred.
Compliance with IAS 38: Policies align with IAS 38, distinguishing between
research and development phases. Estimates include assessment of useful
lives and impairment indicators.
4. Impairment of Assets (IAS 36)
Infosys assesses assets for impairment whenever there are indicators that
carrying amounts may not be recoverable. Goodwill and indefinite-life
intangibles are tested annually for impairment using a discounted cash flow
method.
Compliance with IAS 36: Policies are aligned with IFRS requirements, with
significant reliance on assumptions such as future cash flows and discount
rates.
5. Leases (IFRS 16)
Infosys recognizes right-of-use assets and lease liabilities for most lease
arrangements. Lease liabilities are measured at the present value of future
lease payments, while right-of-use assets are depreciated over the lease
term. Short-term leases and low-value assets are expensed on a straight-line
basis.
Compliance with IFRS 16: Fully consistent with IFRS 16 requirements for
lessees.
6. Inventories (IAS 2)
Infosys holds inventories mainly in the form of hardware and software
packages for resale. Inventories are valued at the lower of cost or net
realizable value, using the weighted average cost method.
Compliance with IAS 2: Aligns with IAS 2 requirements. Write-downs are
made for obsolete and slow-moving items.
7. Financial Instruments (IFRS 9)
Infosys classifies financial assets as amortized cost, fair value through other
comprehensive income (FVOCI), or fair value through profit or loss (FVTPL).
Derivative instruments such as forward contracts are measured at fair value.
Expected credit loss (ECL) model is applied for impairment of receivables.
Compliance with IFRS 9: Classification, measurement, and ECL impairment
model comply with IFRS 9.
8. Provisions and Contingent Liabilities (IAS 37)
Infosys recognizes provisions for legal claims and other obligations when a
present obligation exists and outflow of resources is probable. Contingent
liabilities are disclosed but not recognized.
Compliance with IAS 37: Policies align with recognition and measurement
requirements, with disclosures on uncertainties.
9. Earnings Per Share (IAS 33)
Basic EPS is calculated by dividing net profit attributable to equity
shareholders by the weighted average number of equity shares outstanding.
Diluted EPS considers the impact of potential equity shares such as stock
options.
Compliance with IAS 33: EPS is calculated and disclosed in line with IAS 33.
10. Events After the Reporting Period (IAS 10)
Infosys discloses material events occurring between the reporting date and
approval of financial statements. Adjusting events (e.g., litigation
settlements) are recognized, while non-adjusting events (e.g., dividends
declared) are disclosed.
Compliance with IAS 10: Policies align with IAS 10 requirements.
Conclusion
The analysis indicates that Infosys follows accounting policies consistent with
IFRS and Ind AS requirements. The company provides comprehensive
disclosures with clarity on judgments and estimates, enhancing transparency
for stakeholders. Overall, Infosys demonstrates high-quality financial
reporting aligned with global best practices.
References
1. Infosys Limited, Annual Report 2024–25
2. International Financial Reporting Standards (IFRS): IFRS 9, IFRS 15, IFRS
16, IAS 2, IAS 10, IAS 16, IAS 33, IAS 36, IAS 37, IAS 38
