In October 2020, TCS announced that it was making a precautionary provision of Rs

The facts of the TCS - Epic case dates back in the year 2014 when TCS's US subsidiary Tata America International Corporation had entered into an agreement to set up system for Epic. Epic however later found and alleged that some of the TCS employees stole the Intellectual Property and thus dued the latter for $ 240 million Compensatory damages and Other Punitive damages. After years of proceedings, the US Court of Appeals, Chicago recently in the 2020 held TCS to pay Compensatory of $ 140 million and also directed the lower courts to verify the punitive damages and make decision thereon.

Now considering the above facts with that stated in the IAS 37 r.w Ind AS 37, the following facts makes this $ 140 million or Equivalent Rs. 1218 Crore to be provided in the financial statement:

• Liability is certain in terms of time ie event or money
• There is a present obligation caused due to event occurred in the past
• There is probable that this will.result in a cash outflow
• Such a cash flow can be reliably measured.

Considering all these facts, it is correct to provide for he damages than present it as contingent liability in the annual report.

The provision is made by charging the income Statement ie reducing the net income and increasing the current liability in the balance sheet as it is payable to the plaintiff or Court towards charges as the case may be.