Global Benchmarks: Infosys Technologies Limited

In examining the information (referred to) in Appendix 1-2, comment on how the statements of Infosys stack up to other companies in the industry in meeting the information needs of a nondomestic investor such as yourself. Specifically, what reporting practices raise issues for you?
What reporting practices do you find particularly helpful? In preparing your critique, compare the reporting practices of Infosys to a service provider in your country, most of whom maintain corporate Web sites on the Internet.


Being headquartered in India, which is considered as developing nation, Infosys, an Indian company, would not be expected to produce financial statements that would be better than those of similar companies from developed nations. However, Infosys managed to do away with this notion by producing high-quality, transparent, and extremely informative financial statements including various disclosures and statements.
There are no reporting practices from the Infosys’ financial statements that raise issues. These statements are rather much more helpful than financial statements prepared by other companies in the information technology industry. Infosys has had a track record of finalizing its accounts very quickly, being early with conducting the company’s annual general meetings in keeping with corporate legislations in India, and providing arguably the best presented and most transparent financial statements to its investors.
For ten years in a row, Infosys was the recipient of the Best Presented Annual Accounts Award established by India’s professional accounting organization The Institute of Chartered Accountants of India. In fact, the Infosys’ annual accounts also got the distinction of getting an award from the South Asia Federation of Accountants in the year 2000. Regardless of which year’s Annual Report of Infosys is being studied, investors, not just domestic but also non-domestic, are provided extensive financial information about the company.
While all the regular information as mandated by the various applicable legislations and rules and regulations of the countries where Infosys does business is provided, the company has consistently gone above and beyond its duty in making disclosures that could have a potential impact on investor decisions regarding their respective stakes in the company.
The company happens to be the first company in India to prepare its financial statements based on the United States Generally Accepted Accounting Principles (U.S. GAAP) financial reporting framework. The company also holds the distinction of being the first foreign private issuer in India to file with United States’ Securities and Exchange Commission (SEC), all the primary statements in keeping with the International Financial Reporting Standards (IFRS). Infosys annual reports, thus, are characterized by the following distinctive features. 
  1. The financial statements, such as the consolidated balance sheet, the consolidated profit and loss account, and the consolidated cash flow statement, are all signed not just by the Chief Executive Officer and Chief Financial Officer but by every director, including the managing director, the chairman, and the co-chairman. Having so many individuals of the top management sign off on the financial statements shows the company’s confidence about its annual accounts being free of material misstatements or intentional errors.
  2. The company attempts to provide extensive information on transactions with key management personnel.
  3. A comprehensive corporate governance report, including corporate governance guidelines, corporate governance ratings, board committees, board membership, board meetings, compliances with codes pertaining to corporate governance, among other such information.
  4. A detailed report on the company’s statutory obligations.
  5. Valuation of human resources based on the model propounded by Lev & Schwartz.
  6. A value-added statement reconciling the value-added generated by the company with its distribution towards salaries and bonuses, payments and repayments to capital providers, tax payments, and non-cash charges and reserves.
  7. Brand valuation based on the brand-earnings-multiple model propounded by Michael Birkin. 
  8. An Economic Value-Added Statement.
  9. A balance sheet including intangible assets. This balance sheet includes not just the traditionally incorporated intangible assets such as patents, copyrights, trademarks, and the like, but also the value of the company’s brands as well as the human resources.
  10. Intangible assets score sheet.
  11. Value Reporting.
  12. Financial statements substantially complying with GAAP requirements of countries such as Canada, United Kingdom, Germany, Australia, Japan, and France.
  13. Reports pertaining to compliance with the corporate governance standards of the aforementioned countries.

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The financial statements prepared by Infosys can be compared with those of Tata Consultancy Services (TCS), which again is an Indian company but with presence even outside of India. Comparing the TCS reporting practices with Infosys reporting practices on the above points brings out the following differences between the two companies’ reporting practices.
  1. Information on transactions with key management personnel is not presented.
  2. No report on the company’s statutory obligations is provided.
  3. No valuation of human resources is provided.
  4. No value-added statement is provided.
  5. No brand valuation is provided.
  6. No Economic Value-Added statement is provided.
  7. No balance sheet including intangible assets is provided.
  8. No intangible assets scoresheet is provided.
  9. Value reporting is not provided.
  10. No financial statements complying with GAAP of countries where TCS is present are provided. 
  11. No reports are provided for compliance with corporate governance standards of countries where TCS is present. 
Thus, the critique of Infosys’ reporting practices with that of another service provider (in this instance, TCS) clearly shows that reporting practices of Infosys are far more developed and allow for better disclosures and transparency on part of the company to its shareholders. In doing so, Infosys has often generously provided information for everyone to read that most companies classify as being meant only for internal decision-making purposes. It has pioneered transparent financial reporting and has set an example for other companies to follow.

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