Together good things happen - Airtel

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 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 & 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 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
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 profit and 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 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 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
Bharti Airtel Annual Report 2009-10
(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 Profit and Loss Account.
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