Mar 31, 2023
1 GENERAL INFORMATION
Maruti Suzuki India Limited (âThe Companyâ) is a public limited company incorporated and domiciled in India, listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The address of its registered office is #1, Nelson Mandela Road, Vasant Kunj, New Delhi - 110070. The Company is a subsidiary of Suzuki Motor Corporation, Japan. The principal activities of the Company are manufacturing, purchase and sale of motor vehicles, components and spare parts. The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing.
2 SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared as a going concern in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below. Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
All assets and liabilities have been classified as current or non-current according to the Companyâs operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current noncurrent classification of assets and liabilities.
The principal accounting policies are set out below.
The board of directors have considered the financial position of the Company as at March 31,2023 and the projected cash flows and financial performance of the Company for at least twelve months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course.
The board of directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund the Companyâs operations.
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amount of revenues and expenses for the years presented. Actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are included in the following notes:
Provision for employee benefits requires that certain assumptions such as expected future salary increases, average life expectancy and discount rates etc. are made in order to determine the amount to be recorded for retirement benefit obligations. Substantial changes in the assumed development of any of these variables may significantly change the Companyâs retirement benefit obligations.
Income Tax: The Companyâs tax jurisdiction is in India. Significant judgements are involved in determining the provision for income taxes including judgement on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
Other litigations: Litigations often involve complex legal/ regulatory issues and are connected with a high degree of uncertainty. Accordingly, the assessment of whether an obligation exists on the balance sheet date as a result of an event in the past, and whether a future cash outflow is likely and the obligation can be reliably estimated, largely depends on estimations by the management.
The Company did not make any adjustments to the accounting for assets held as a lessor as a result of adopting the new lease standard.
2.7.2 The Company as Lessee
The Company assesses whether a contract contains a lease, at inception of a contract. At the date of commencement of the lease, the Company recognises a âright-of-useâ asset and a corresponding liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease
Right-of-use asset are measured at cost comprising the following:
- the amount of initial measurement of liability
- any lease payments made at or before the commencement date less the incentives received
- any initial direct costs, and
- restoration costs
They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use asset are depreciated over the shorter of assetâs useful life and the lease term on a straight-line basis. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Lease liabilities measured at amortised cost include the net present value of the following lease payments:
- fixed payments (including in-substance fixed payments), less any lease incentives receivable
- variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
- amounts expected to be payable by the Company under residual value guarantees
- the exercise price of purchase option if the Company is reasonably certain to exercise that option, and
- payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option.
Note 17 : Provision for Warranty and Product Recall
The Company creates provision based on historical warranty claim experience. In addition, assumptions on the amounts of potential costs are also included while creating the provisions. The provisions are regularly adjusted to reflect new information.
Note 4 : Property, Plant and Equipment - Useful Economic Life
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end.
Note 35 : Leases
Ind AS 116 requires lessees to determine 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. 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 the Companyâs 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.
2.5 Revenue Recognition
The Company recognises revenue when the amount of revenue and its related cost can be reliably measured and it is probable that future economic benefits will flow to the entity and degree of managerial involvement associated with ownership or effective control have been met for each of the Companyâs activities as described below. Amounts disclosed as revenue are net of returns, discounts, sales incentives, goods & service tax and value added taxes.
2.5.1 Sale of Goods
Revenue is recognised for domestic and export sales of vehicles, spare parts, and accessories when the Company transfers control over such products to the customer on dispatch from the factory and the port respectively, which is when control including risk and rewards and title of ownership passes to customer.
2.5.2 Income from Services
Revenue from engineering services are recognised as the related services are performed. Revenue from extended warranty is recognised on time proportion basis. Income from other services are accounted over the period of rendering of services. Invoicing in excess of revenues are classified as contract liabilities. Contract liabilities pertains to advance consideration received towards sale of extended warranty and other services by the Company.
2.5.3 Income from Royalty
Revenue from royalty is recognised on an accrual basis in accordance with the substance of the relevant arrangements.
2.6 Other Income
Dividend income from investments is recognised when the shareholdersâ right to receive payment has been established.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
2.7 Leases
2.7.1 The Company as Lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases. When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases, such increases are recognised in the reporting period in which such benefits accrue.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the rate of interest implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lesseeâs incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in the similar economic environment with similar terms, security and conditions.
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract in accordance with Ind AS 116 and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the nonlease components.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in the statement of profit and loss, unless they are directly attributable to qualifying assets. Variable lease payments are recognised in the statement of profit and loss in the reporting period in which the condition that triggers those payments that occur.
2.8 Foreign Currencies
2.8.1 Functional and Presentation Currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian rupee (''), which is the Companyâs functional and presentation currency.
2.8.2 Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the 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 statement of profit and loss. They are deferred in equity if they relate to qualifying cash flow hedges.
2.9 Borrowing Costs
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 surplus funds out of specific borrowings pending their expenditure on qualifying assets are 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.
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the employees render the related services are recognised in the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
Liabilities for leave encashment and compensated absences which are not expected to be settled wholly within the operating cycle after the end of the period in which the employees render the related service are measured at the present value of the estimated future cash outflows using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in statement of profit and loss.
The Company has defined benefit plans namely gratuity, provident fund and retirement allowance for employees. The gratuity fund and provident fund are recognised by the income tax authorities and are administered through trusts set up by the Company. Any shortfall in the size of the fund maintained by the trust is additionally provided for in statement of profit and loss.
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the reporting period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in statement of profit and loss as past service cost.
The Company has defined contribution plans for postemployment benefit namely the superannuation fund which is recognised by the income tax authorities. This fund is administered through a trust set up by the Company and the Companyâs contribution thereto is charged to statement of profit and loss every year. The Company has no further payment obligations once the contributions have been paid.
The Company also maintains an insurance policy to fund a post-employment medical assistance scheme, which is a defined contribution plan. The Companyâs contribution to State Plans namely Employeesâ State Insurance Fund and Employeesâ Pension Scheme are charged to the statement of profit and loss every year.
A liability for the termination benefit is recognised at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognises any related restructuring costs.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as
reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and incurred tax losses 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.
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 statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the income taxes are also recognised in other comprehensive income or directly in equity respectively.
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation
less accumulated impairment, if any. Freehold land is measured at cost and is not depreciated.
Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Other repairs and maintenance of revenue nature are charged to statement of profit and loss during the reporting period in which they are incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of asset and recognised in statement of profit and loss.
Depreciation is calculated using the straight-line method on a pro-rata basis from the commissioning month in which each asset is ready for intended use to allocate their cost, net of their residual values, over their estimated useful lives.
Estimated useful life of assets are as follows which is based on technical evaluation of the useful lives of the assets:
Particulars |
Useful Life |
Building |
3-60 years |
Plant and machinery other than Dies and Jigs |
8 years |
Dies and jigs |
5 years |
Electronic data processing equipment |
3 years |
Furniture and fixtures |
10 years |
Office appliances |
5 years |
Railway Sidings |
15 years |
Vehicles |
8-10 years |
The assetsâ residual values, estimated useful lives and depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
All assets, the individual written down value of which at the beginning of the year is '' 5,000 or less, are depreciated at the rate of 100%. Assets purchased during the year costing '' 5,000 or less are depreciated at the rate of 100%.
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are credited / debited to statement of profit and loss.
Freehold land and Leasehold land in the nature of perpetual lease is not amortised.
Lump sum royalty, computer software and engineering support fee are stated at cost less accumulated amortisation and impairment. Intangible assets are amortized over their respective individual estimated useful lives on a straightline basis, from the date that they are available for use. Amortization methods and useful lives are reviewed periodically including at each financial year end.
Intangible assets are amortized on a Straight Line basis over the estimated useful economic life in the statement of Profit and loss. The estimated useful life of intangible assets i.e. Software, Lump sum royalty and Engineering support fee has been estimated as of five years. The amortization period and the amortization method for an intangible asset is reviewed at the end of each financial year. If any of these expectations differ from previous estimates, such change is accounted for as a change in an accounting estimate. An intangible asset is derecognised when no future economic benefits are expected from use.
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are 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 asset for which the estimates of future cash flows have not been adjusted.
Inventories are valued at the lower of cost, determined on the weighted average basis and net realisable value.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Machinery spares (other than those supplied along with main plant and machinery, which are capitalised and depreciated accordingly) are charged to statement of profit and loss on consumption except those valued at '' 5,000 or less individually, which are charged to revenue in the year of purchase.
Provisions: Provisions are recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are determined by discounting the expected future cash flows at a pre tax rate that reflects current market assessment of the time value of money and the risks specific to the liability.
Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in statement of profit and loss. Subsequently, financial instruments are measured according to the category in which they are classified.
All purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
Classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company classifies its financial assets in the following measurement categories:
⢠Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠Those measured at amortised cost
The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset that meets the following two conditions is measured at amortised cost unless the asset is designated at fair value through profit or loss under the fair value option:
⢠Business model test : the objective of the Companyâs business model is to hold the financial asset to collect the contractual cash flows.
⢠Cash flow characteristic test : the contractual term of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option:
⢠Business model test : the financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets.
⢠Cash flow characteristic test : the contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are measured at fair value through profit or loss.
On initial recognition, the Company can make an irrevocable election (on an instrument by instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instrument. This election is not permitted if the equity instrument is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains / losses arising from changes in fair value recognised in other comprehensive income. This cumulative gain or loss is not reclassified to statement of profit and loss on disposal of the investments.
The Company has equity investments in certain entities which are not held for trading. The Company has elected the fair value through other comprehensive income irrevocable option for all such investments. Dividend on these investments are recognised in statement of profit and loss.
Investments representing equity interest in subsidiaries, associates and joint ventures are carried at cost less any provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable.
Investment in equity instrument are classified at fair value through profit or loss, unless the Company irrevocably
2.19.3 Financial Liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at fair value through profit or loss.
2.19.3.1 Trade and other Payables
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year which are unpaid.
2.19.3.2 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in statement of profit and loss over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in statement of profit and loss.
2.19.3.3 Foreign Exchange Gains or Losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in statement of profit and loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of the reporting period. For financial liabilities that are measured as at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognised in statement of profit and loss.
2.19.3.4 Lease Liabilities
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Financial assets that do not meet the amortised cost criteria or fair value through other comprehensive income criteria are measured at fair value through profit or loss. A financial asset that meets the amortised cost criteria or fair value through other comprehensive income criteria may be designated as at fair value through profit or loss upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets and liabilities or recognising the gains or losses on them on different bases.
Investments in debt based mutual funds are measured at fair value through profit or loss.
Financial assets which are fair valued through profit or loss are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in statement of profit and loss.
In the cash flow statement, cash and cash equivalents includes cash in hand, cheques and drafts in hand, balances with bank and deposits held at call with financial institutions, short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet and forms part of financing activities in the cash flow statement. Book overdraft are shown within other financial liabilities in the balance sheet and forms part of operating activities in the cash flow statement.
The Company assesses impairment based on expected credit losses (ECL) model to the following :
⢠financial assets measured at amortised cost
⢠financial assets measured at fair value through other comprehensive income
Expected credit loss are measured through a loss allowance at an amount equal to :
⢠the twelve month expected credit losses (expected credit losses that result from those default events
on the financial instruments that are possible within twelve months after the reporting date); or
⢠full life time expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
A financial asset is derecognised only when
⢠The Company has transferred the rights to receive cash flows from the financial asset or
⢠Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost or fair value through profit or loss the exchange differences are recognised in statement of profit and loss except for those which are designated as hedge instrument in a hedging relationship. Further change in the carrying amount of investments in equity instruments at fair value through other comprehensive income relating to changes in foreign currency rates are recognised in other comprehensive income.
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired.
The Company enters into foreign exchange forward contracts and certain other derivative financial instruments to manage its exposure to foreign exchange rate risks and commodity price risks. Further details of derivative financial instruments are disclosed in note 33.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The resulting gain or loss is recognised in statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument which is recognised in other comprehensive income (net of tax) and presented as a separate component of equity which is later reclassified to profit or loss when the hedge item affects profit or loss.
Derivatives embedded in a host contract that is an asset within the scope of Ind AS 109 are not separated. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Derivatives embedded in all other host contract are separated only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host and are measured at fair value through profit or loss. Embedded derivatives closely related to the host contracts are not separated.
The Company designates certain hedging instruments, in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an on-going basis, the Company documents whether the
2.28 Rounding of Amounts
All amounts disclosed in the financial statements and the accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III of the Companies Act 2013, unless otherwise stated.
3 APPLICABILITY OF NEW AND REVISED IND AS
Ministry of Corporate Affairs (âMCAâ) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time.
On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, as below-
Ind AS 1 - Presentation of Financial Statements - This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The
hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Changes in the fair value of these contracts that are designated and effective as hedges of future cash flows are recognised in other comprehensive income (net of tax) and the ineffective portion is recognised immediately in the statement of profit and loss. Amount accumulated in equity are reclassified to the profit or loss in the periods in which the forecasted transaction occurs.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions, any cumulative gain or loss on the hedging instrument recognised in other equity is retained there until the forecast transaction occurs.
Note 33 sets out details of the fair values of the derivative instruments used for hedging purposes.
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Government grants are recognised where there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received.
Government grants are recognised in statement of profit and loss on a systematic basis over the periods in which the Company recognises as expense the related cost for which the grants are intended to compensate.
Basic earning per share has been computed by dividing the net income by the weighted average number of shares outstanding during the year. Diluted earning per share has been computed using the weighted average number of
shares and diluted potential shares, except where the result would be anti-dilutive.
Final dividends on shares are recorded on the date of approval by the shareholders of the Company.
The Company pays / accrues for royalty in accordance with the relevant licence agreements.
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Acquisition related costs are recognized in statement of profit and loss as incurred. The acquireeâs identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognized at their fair value at the acquisition date, except certain assets and liabilities that are required to be measured as per the applicable standard.
Purchase consideration in excess of the Companyâs interest in the acquireeâs net fair value of identifiable assets, liabilities and contingent liabilities is recognized as goodwill. Excess of the Companyâs interest in the net fair value of the acquireeâs identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognized, after reassessment of fair value of net assets acquired, in the Capital Reserve.
A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination and the control is not transitory.
Business combinations involving entities under common control are accounted for using the pooling of interests method. The net assets of the transferor entity or business are accounted at their carrying amounts on the date of the acquisition subject to necessary adjustments required to harmonise accounting policies. Any excess or shortfall of the consideration paid over the share capital of transferor entity or business is recognised as capital reserve under equity.
Company has evaluated the amendment and the impact of the amendment is insignificant in the standalone financial statements.
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - This amendment has introduced a definition of âaccounting estimatesâ and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there is no impact on its standalone financial statements.
Ind AS 12 - Income Taxes - The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there should be no material impact on its standalone financial statements.
Mar 31, 2022
1 General Information
Maruti Suzuki India Limited (âThe Companyâ) is a public limited company incorporated and domiciled in India, listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The address of its registered office is #1, Nelson Mandela Road, Vasant Kunj, New Delhi - 110070. The Company is a subsidiary of Suzuki Motor Corporation, Japan. The principal activities of the Company are manufacturing, purchase and sale of motor vehicles, components and spare parts. The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing.
2 Significant Accounting Policies
The financial statements have been prepared as a going concern in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below. Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
All assets and liabilities have been classified as current or non-current according to the Companyâs operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current non-current classification of assets and liabilities.
The principal accounting policies are set out below.
The board of directors have considered the financial position of the Company as at March 31,2022 and the projected cash flows and financial performance of the Company for at least twelve months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course.
The board of directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund the Companyâs operations.
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amount of revenues and expenses for the years presented. Actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are included in the following notes:
Note 32: Provision for Employee Benefits Provision for employee benefits requires that certain assumptions such as expected future salary increases, average life expectancy and discount rates etc. are made in order to determine the amount to be recorded for retirement benefit obligations. Substantial changes in the assumed development of any of these variables may significantly change the Companyâs retirement benefit obligations.
Note 17 & 37: Provision for Litigations
Income Tax: The Companyâs tax jurisdiction is in India. Significant judgements are involved in determining the provision for income taxes including judgement on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
Other litigations: Litigations often involve complex legal/regulatory issues and are connected with a high degree of uncertainty. Accordingly, the assessment of whether an obligation exists on the balance sheet date as a result of an event in the past, and whether a future cash outflow is likely and the obligation can be reliably estimated, largely depends on estimations by the management.
Note 17: Provision for warranty and product recall
The Company creates provision based on historical warranty claim experience. In addition, assumptions on the amounts of potential costs are also included while creating the provisions. The provisions are regularly adjusted to reflect new information.
Note 4: Property, Plant and Equipment - Useful economic life
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end.
Note 35: Leases
Ind AS 116 requires lessees to determine 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. 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 the Companyâs 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.
Estimation of Uncertainties Relating to the Global Health Pandemic from COVID-19:
The Company has considered possible effects that may result from pandemic relating to COVID-19 on the carrying amount of property, plant and equipment, investments, inventories, receivables and other current assets. In developing the assumptions relating to the possible future uncertanities in the economic conditions due to pandemic, the Company, as at the date of approval of these financial statements has used internal and external sources of information. The Company has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Companyâs financial statements may differ from that estimated as at the date of approval of these financial statements.
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, discounts, sales incentives, goods & service tax and value added taxes.
The Company recognises revenue when the amount of revenue and its related cost can be reliably measured and it is probable that future economic benefits will flow to the entity and degree of managerial involvement associated with ownership or effective control have been met for each of the Companyâs activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement.
2.5.1 Sale of Goods
Revenue is recognised for domestic and export sales of vehicles, spare parts, and accessories when the Company transfers control over such products to the customer on dispatch from the factory and the port respectively.
2.5.2 Income from Services
Revenue from engineering services are recognised as the related services are performed. Revenue from extended warranty is recognised on time proportion basis. Income from other services are accounted over the period of rendering of services. Invoicing in excess of revenues are classified as contract liabilities. Contract liabilities pertains to advance consideration received towards sale of extended warranty and other services by the Company.
2.5.3 Income from Royalty
Revenue from royalty is recognised on an accrual basis in accordance with the substance of the relevant arrangements.
2.6 Other Income
Dividend income from investments is recognised when the shareholdersâ right to receive payment has been established.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
2.7 Leases
2.7.1 The Company as Lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases. When the Company is an intermediate lessor, it accounts for
- amounts expected to be payable by the Company under residual value guarantees
- the exercise price of purchase option if the Company is reasonably certain to exercise that option, and
- payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the rate of interest implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lesseâs incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in the similar economic environment with similar terms, security and conditions.
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract in accordance with Ind AS 116 and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in the statement of profit and loss, unless they are directly attributable to qualifying assets. Variable lease payments are recognised in the statement of profit and loss in the period in which the condition that triggers those payments that occur.
2.8 Foreign Currencies
2.8.1 Functional and Presentation Currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian rupee (''), which is the Companyâs functional and presentation currency.
2.8.2 Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the 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. They are deferred in equity if they relate to qualifying cash flow hedges.
its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straightline basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases, such increases are recognised in the period in which such benefits accrue.
The Company did not make any adjustments to the accounting for assets held as a lessor as a result of adopting the new lease standard.
The Company assesses whether a contract contains a lease, at inception of a contract. At the date of commencement of the lease, the Company recognises a âright-of-useâ asset and a corresponding liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these shortterm 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
Right-of-use asset are measured at cost comprising the following:
- the amount of initial measurement of liability
- any lease payments made at or before the commencement date less the incentives received
- any initial direct costs, and
- restoration costs
They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use asset are depreciated over the shorter of assetâs useful life and the lease term on a straight-line basis. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Lease liabilities measured at amortised cost include the net present value of the following lease payments:
- fixed payments (including in-substance fixed payments), less any lease incentives receivable
- variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
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 surplus funds out of specific borrowings pending their expenditure on qualifying assets are 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.
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the employees render the related services are recognised in the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
Liabilities for leave encashment and compensated absences which are not expected to be settled wholly within the operating cycle after the end of the period in which the employees render the related service are measured at the present value of the estimated future cash outflows using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The Company has defined benefit plans namely gratuity, provident fund and retirement allowance for employees. The gratuity fund and provident fund are recognised by the income tax authorities and are administered through trusts set up by the Company. Any shortfall in the size of the fund maintained by the trust is additionally provided for in profit or loss.
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in profit or loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
The Company has defined contribution plans for post-employment benefit namely the superannuation fund which is recognised by the income tax authorities. This fund is administered through a trust set up by the Company and the Companyâs contribution thereto is charged to profit or loss every year. The Company has no further payment obligations once the contributions have been paid.
The Company also maintains an insurance policy to fund a postemployment medical assistance scheme, which is a defined contribution plan. The Companyâs contribution to State Plans namely Employeesâ State Insurance Fund and Employeesâ Pension Scheme are charged to the statement of profit and loss every year.
A liability for the termination benefit is recognised at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognises any related restructuring costs.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and incurred tax losses 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.
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 income taxes are also recognised in other comprehensive income or directly in equity respectively.
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any. Freehold land is measured at cost and is not depreciated.
Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Other repairs and maintenance of revenue nature are charged to profit or loss during the reporting period in which they are incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of asset and recognised in profit or loss.
Depreciation is calculated using the straight-line method on a pro-rata basis from the month in which each asset is put to use to allocate their cost, net of their residual values, over their estimated useful lives.
Estimated useful life of assets are as follows which is based on technical evaluation of the useful lives of the assets:
Building |
3-60 years |
Plant and machinery other than Dies and Jigs |
8 years |
Dies and jigs |
5 years |
Electronic data processing equipment |
3 years |
Furniture and fixtures |
10 years |
Office appliances |
5 years |
Vehicles |
8 years |
The assetsâ residual values, estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
All assets, the individual written down value of which at the beginning of the year is '' 5,000 or less, are depreciated at the rate of 100%. Assets purchased during the year costing '' 5,000 or less are depreciated at the rate of 100%.
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are credited/ debited to profit or loss.
Freehold land and Leasehold land in the nature of perpetual lease is not amortised.
Lump sum royalty, computer software and engineering support fee are stated at cost less accumulated amortisation and impairment. Intangible assets are amortised over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. Amortisation methods and useful lives are reviewed periodically including at each financial year end..
Intangible assets are amortised on a Straight-Line basis over the estimated useful economic life in the Statement of Profit and loss. The estimated useful life of intangible assets i.e. Software, Lump sum royalty and Engineering support fee has been estimated as of five years. The amortisation period and the amortisation method for an intangible asset is reviewed at the end of each financial year. If any of these expectations differ from previous estimates, such change is accounted for as a change in an accounting estimate. An intangible asset is derecognised when no future economic benefits are expected from use.
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are 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 asset for which the estimates of future cash flows have not been adjusted.
Inventories are valued at the lower of cost, determined on the weighted average basis and net realisable value.
The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Machinery spares (other than those supplied along with main plant and machinery, which are capitalised and depreciated accordingly) are charged to profit or loss on consumption except those valued at '' 5,000 or less individually, which are charged to revenue in the year of purchase.
2.16 Provisions and Contingencies
Provisions: Provisions are recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are determined by discounting the expected future cash flows at a pre tax rate that reflects current market assessment of the time value of money and the risks specific to the liability.
Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
2.17 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
2.18 Financial Assets
All purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases
2.18.2 Investments in Equity Instrument at Fair Value Through Other Comprehensive Income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument by instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instrument. This election is not permitted if the equity instrument is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains/losses arising from changes in fair value recognised in other comprehensive income. This cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
The Company has equity investments in certain entities which are not held for trading. The Company has elected the fair value through other comprehensive income irrevocable option for all such investments. Dividend on these investments are recognised in profit or loss.
2.18.3 Equity Investment in Subsidiaries, Associates and Joint Ventures
Investments representing equity interest in subsidiaries, associates and joint ventures are carried at cost less any provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable.
2.18.4 Financial Assets at Fair Value Through Profit or Loss (FVTPL)
Investment in equity instrument are classified at fair value through profit or loss, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Financial assets that do not meet the amortised cost criteria or fair value through other comprehensive income criteria are measured at fair value through profit or loss. A financial asset that meets the amortised cost criteria or fair value through other comprehensive income criteria may be designated as at fair value through profit or loss upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets and liabilities or recognising the gains or losses on them on different bases.
Investments in debt based mutual funds are measured at fair value through profit or loss.
Financial assets which are fair valued through profit or loss are measured at fair value at the end of each reporting period, with
or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
2.18.1 Classification of Financial Assets Classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost
The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset that meets the following two conditions is measured at amortised cost unless the asset is designated at fair value through profit or loss under the fair value option:
⢠Business model test: the objective of the Companyâs business model is to hold the financial asset to collect the contractual cash flows.
⢠Cash flow characteristic test: the contractual term of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option:
⢠business model test: the financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets.
⢠cash flow characteristic test: the contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are measured at fair value through profit or loss.
any gains or losses arising on remeasurement recognised in profit or loss.
2.18.5 Trade Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
2.18.6 Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents includes cash in hand, cheques and drafts in hand, balances with bank and deposits held at call with financial institutions, short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet and forms part of financing activities in the cash flow statement. Book overdraft are shown within other financial liabilities in the balance sheet and forms part of operating activities in the cash flow statement.
2.18.7 Impairment of Financial Assets
The Company assesses impairment based on expected credit losses (ECL) model to the following:
⢠financial assets measured at amortised cost
⢠financial assets measured at fair value through other comprehensive income
Expected credit loss are measured through a loss allowance at an amount equal to:
⢠the twelve month expected credit losses (expected credit losses that result from those default events on the financial instruments that are possible within twelve months after the reporting date); or
⢠full life time expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
2.18.8 Derecognition of Financial Assets A financial asset is derecognised only when
⢠The Company has transferred the rights to receive cash flows from the financial asset or
⢠Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
2.18.9 Foreign Exchange Gains and Losses The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost or fair value through profit or loss the exchange differences are recognised in profit or loss except for those which are designated as hedge instrument in a hedging relationship. Further change in the carrying amount of investments in equity instruments at fair value through other comprehensive income relating to changes in foreign currency rates are recognised in other comprehensive income.
2.19.1 Classification of Debt or Equity
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
2.19.2 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
2.19.3 Financial Liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at fair value through profit or loss.
2.19.3.1 Trade and Other Payables
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year which are unpaid.
2.19.3.2 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash
assets transferred or liabilities assumed, is recognised in profit or loss.
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in profit or loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of the reporting period. For financial liabilities that are measured as at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss.
The lease liability is initially measured at amortised cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired.
The Company enters into foreign exchange forward contracts and certain other derivative financial instruments to manage its exposure to foreign exchange rate risks and commodity price risks. Further details of derivative financial instruments are disclosed in note 33.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument which is recognised in other comprehensive income (net of tax) and presented as a separate component of equity which is later reclassified to profit or loss when the hedge item affects profit or loss.
Derivatives embedded in a host contract that is an asset within the scope of Ind AS 109 are not separated. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Derivatives embedded in all other host contract are separated only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host and are measured at fair value through profit or loss. Embedded derivatives closely related to the host contracts are not separated.
The Company designates certain hedging instruments, in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an on-going basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Changes in the fair value of these contracts that are designated and effective as hedges of future cash flows are recognised in other comprehensive income (net of tax) and the ineffective portion is recognised immediately in the profit or loss. Amount accumulated in equity are reclassified to the profit or loss in the periods in which the forecasted transaction occurs.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions, any cumulative gain or loss on the hedging instrument recognised in other equity is retained there until the forecast transaction occurs.
Note 33 sets out details of the fair values of the derivative instruments used for hedging purposes.
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the
normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Government grants are recognised where there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received. Government grants are recognised in statement of profit and loss on a systematic basis over the periods in which the Company recognises as expense the related cost for which the grants are intended to compensate.
Basic earning per share has been computed by dividing the net income by the weighted average number of shares outstanding during the year. Diluted earning per share has been computed using the weighted average number of shares and diluted potential shares, except where the result would be anti-dilutive.
Final dividends on shares are recorded on the date of approval by the shareholders of the Company.
The Company pays/accrues for royalty in accordance with the relevant licence agreements.
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Acquisition related costs are recognised in profit or loss as incurred. The acquireeâs identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their fair value at the acquisition date, except certain assets and liabilities that are required to be measured as per the applicable standard. Purchase consideration in excess of the Companyâs interest in the acquireeâs net fair value of identifiable assets, liabilities and contingent liabilities is recognised as goodwill. Excess of the Companyâs interest in the net fair value of the acquireeâs identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognised, after reassessment of fair value of net assets acquired, in the Capital Reserve.
Common Control
A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately
controlled by the same party or parties both before and after the business combination and the control is not transitory. Business combinations involving entities under common control are accounted for using the pooling of interests method. The net assets of the transferor entity or business are accounted at their carrying amounts on the date of the acquisition subject to necessary adjustments required to harmonise accounting policies. Any excess or shortfall of the consideration paid over the share capital of transferor entity or business is recognised as capital reserve under equity.
All amounts disclosed in the financial statements and the accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III of the Companies Act 2013, unless otherwise stated.
3 APPLICABILITY OF NEW AND REVISED IND AS
Ministry of Corporate Affairs (âMCAâ) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time.
Ind AS 16 - Property Plant and equipment - The amendment clarifies that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from the directly attributable costs considered as part of cost of an item of property, plant, and equipment. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2022. The Company is evaluating the impact of Ind AS 16 and its effect on the financial statements.
Ind AS 37 - Provisions, Contingent Liabilities and Contingent Assets - The amendment specifies that the âcost of fulfillingâ a contract comprises the âcosts that relate directly to the contractâ. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2022, although early adoption is permitted. The Company is evaluating the impact of Ind AS 37 and its effect on the financial statements.
Mar 31, 2021
The financial statements have been prepared as a going concern in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below. Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
All assets and liabilities have been classified as current or noncurrent according to the Companyâs operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current non-current classification of assets and liabilities.
The principal accounting policies are set out below.
The board of directors have considered the financial position of the Company as at March 31,2021 and the projected cash flows and financial performance of the Company for at least twelve months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course.
The board of directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund the Companyâs operations.
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amount of revenues and expenses for the years presented. Actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are included in the following notes:
Note 32 : Provision for employee benefits Provision for employee benefits requires that certain assumptions such as expected future salary increases, average life expectancy and discount rates etc. are made in order to determine the amount to be recorded for retirement benefit obligations. Substantial changes in the assumed development of any of these variables may significantly change the Companyâs retirement benefit obligations.
Note 17 & 37 : Provision for litigations
Income Tax: The Companyâs tax jurisdiction is in India. Significant judgements are involved in determining the provision for income taxes including judgement on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
Other litigations: Litigations often involve complex legal/regulatory issues and are connected with a high degree of uncertainty. Accordingly, the assessment of whether an obligation exists on the balance sheet date as a result of an event in the past, and whether a future cash outflow is likely and the obligation can be reliably estimated, largely depends on estimations by the management.
Note 17 : Provision for warranty and product recall
The Company creates provision based on historical warranty claim experience. In addition, assumptions on the amounts of potential costs are also included while creating the provisions. The provisions are regularly adjusted to reflect new information.
control have been met for each of the Companyâs activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement.
2.5.1 Sale of goods
Revenue is recognised for domestic and export sales of vehicles, spare parts, and accessories when the Company transfers control over such products to the customer on dispatch from the factory and the port respectively.
2.5.2 Income from services
Revenue from engineering services are recognised as the related services are performed. Revenue from extended warranty is recognised on time proportion basis. Income from other services are accounted over the period of rendering of services.
Invoicing in excess of revenues are classified as contract liabilities. Contract liabilities pertains to advance consideration received towards sale of extended warranty and other services by the Company.
2.5.3 Income from royalty
Revenue from royalty is recognised on an accrual basis in accordance with the substance of the relevant arrangements.
2.6 Other Income
Dividend income from investments is recognised when the shareholdersâ right to receive payment has been established.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
2.7 Leases
Effective April 1, 2019, the Company has adopted Ind AS 116 âLeasesâ and applied to all lease contracts existing on the date of initial application, using the modified retrospective method along with transition option to recognise right-of-use assets (RoU) at an amount equal to the lease liability.
2.7.1 The Company as lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases. When the Company is an intermediate lessor, it accounts for
- amounts expected to be payable by the Company under residual value guarantees
- t he exercise price of purchase option if the Company is reasonably certain to exercise that option, and
- payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the rate of interest implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lesseâs incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in the similar economic environment with similar terms, security and conditions.
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract in accordance with Ind AS 116 and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in the statement of profit and loss, unless they are directly attributable to qualifying assets. Variable lease payments are recognised in the statement of profit and loss in the period in which the condition that triggers those payments that occur.
2.8 Foreign currencies
2.8.1 Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian rupee (''), which is the Companyâs functional and presentation currency.
2.8.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the 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. They are deferred in equity if they relate to qualifying cash flow hedges.
Note 4 : Property, Plant and Equipment - Useful economic life
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end.
Note 35 : Leases
Ind AS 116 requires lessees to determine 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. 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 the Companyâs 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.
Estimation of uncertainties relating to the global health pandemic from COVID-19 :
The Company has considered possible effects that may result from pandemic relating to COVID-19 on the carrying amount of property, plant and equipment, investments, inventories, receivables and other current assets. In developing the assumptions relating to the possible future uncertanities in the economic conditions due to pandemic, the Company, as at the date of approval of these financial statements has used internal and external sources of information. The Company has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered.The impact of COVID-19 on the Companyâs financial statements may differ from that estimated as at the date of approval of these financial statements.
2.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, discounts, sales incentives, goods & service tax and value added taxes.
The Company recognises revenue when the amount of revenue and its related cost can be reliably measured and it is probable that future economic benefits will flow to the entity and degree of managerial involvement associated with ownership or effective its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straightline basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases, such increases are recognised in the period in which such benefits accrue.
The Company did not make any adjustments to the accounting for assets held as a lessor as a result of adopting the new lease standard.
2.7.2 The Company as lessee
The Company assesses whether a contract contains a lease, at inception of a contract. At the date of commencement of the lease, the Company recognises a âright-of-useâ asset and a corresponding liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these shortterm and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease
Right-of-use asset are measured at cost comprising the following:
- the amount of initial measurement of liability
- any lease payments made at or before the commencement date less the incentives received
- any initial direct costs, and
- restoration costs
They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use asset are depreciated over the shorter of assetâs useful life and the lease term on a straight-line basis. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Lease liabilities measured at amortised cost include the net present value of the following lease payments:
- fixed payments (including in-substance fixed payments), less any lease incentives receivable
- variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in profit or loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Defined contribution plans
The Company has defined contribution plans for post-em ployment benefit namely the superannuation fund which is recognised by the income tax authorities. This fund is administered through a trust set up by the Company and the Companyâs contribution thereto is charged to profit or loss every year. The Company has no further payment obligations once the contributions have been paid.
The Company also maintains an insurance policy to fund a postemployment medical assistance scheme, which is a defined contribution plan. The Companyâs contribution to State Plans namely Employeesâ State Insurance Fund and Employeesâ Pension Scheme are charged to the statement of profit and loss every year.
Termination benefits
A liability for the termination benefit is recognised at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognises any related restructuring costs.
2.11 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.11.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Other repairs and maintenance of revenue nature are charged to profit or loss during the reporting period in which they are incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of asset and recognised in profit or loss.
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 surplus funds out of specific borrowings pending their expenditure on qualifying assets are 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.
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the employees render the related services are recognised in the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
Liabilities for leave encashment and compensated absences which are not expected to be settled wholly within the operating cycle after the end of the period in which the employees render the related service are measured at the present value of the estimated future cash outflows using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The Company has defined benefit plans namely gratuity, provident fund and retirement allowance for employees. The gratuity fund and provident fund are recognised by the income tax authorities and are administered through trusts set up by the Company. Any shortfall in the size of the fund maintained by the trust is additionally provided for in profit or loss.
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and incurred tax losses 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.
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 income taxes are also recognised in other comprehensive income or directly in equity respectively.
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any. Freehold land is measured at cost and is not depreciated.
Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Mar 31, 2019
Notes to the Financial Statements
1 General Information
Maruti Suzuki India Limited ("The Company") is a public limited company incorporated and domiciled in India, listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The address of its registered office is #1, Nelson Mandela Road, Vasant Kunj, New Delhi -110070. The Company is a subsidiary of Suzuki Motor Corporation, Japan. The principal activities of the Company are manufacturing, purchase and sale of motor vehicles, components and spare parts. The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing.
During the previous year, a Scheme of Amalgamation between the Company and its seven wholly owned subsidiaries, by the names of Maruti Insurance Business Agency Limited, Maruti Insurance Distribution Services Limited, Maruti Insurance Agency Network Limited, Maruti Insurance Agency Solutions Limited, Maruti Insurance Agency Services Limited, Maruti Insurance Agency Logistics Limited and Maruti Insurance Broker Limited became effective w.e.f. the appointed date, i.e., April 1, 2016 on completion of all required formalities on July 11, 2017 and approval of National Company Law Tribunal.
2 Significant Accounting Policies
2.1 Statement of compliance
The financial statements have been prepared as a going concern in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 ("the Act") read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
2.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below. Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
All assets and liabilities have been classified as current or non-current according to the Company''s operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current non-current classification of assets and liabilities.
The principal accounting policies are set out below.
2.3 Going concern
The board of directors have considered the financial position of the Company as at March 31, 2019 and the projected cash flows and financial performance of the Company for at least twelve months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course.
The board of directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund the Company''s operations.
2.4 Use of estimates and judgements
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amount of revenues and expenses for the years presented. Actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are included in the following notes:
Note 32 : Provision for employee benefits
Provision for employee benefits requires that certain assumptions such as expected future salary increases, average life expectancy and discount rates etc. are made in order to determine the amount to be recorded for retirement benefit obligations. Substantial changes in the assumed development of any of these variables may significantly change the Company''s retirement benefit obligations.
Note 17 & 38 : Provision for litigations
Income Tax: The Company''s tax jurisdiction is India. Significant judgements are involved in determining the provision for income taxes including judgement on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.
Other litigations: Litigations often involve complex legal/ regulatory issues and are connected with a high degree of uncertainty. Accordingly, the assessment of whether an obligation exists on the balance sheet date as a result of an event in the past, and whether a future cash outflow is likely and the obligation can be reliably estimated, largely depends on estimations by the management.
Note 17 : Provision for warranty and product recall
The Company creates provision based on historical warranty claim experience. In addition, assumptions on the amounts of potential costs are also included while creating the provisions. The provisions are regularly adjusted to reflect new information.
Note 4 : Property, Plant and Equipment - Useful economic life
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Company''s assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end.
2.5 Revenue recognition
Effective April 1, 2018, the Company adopted Ind AS 115 ''Revenue from Contracts with Customers''. First time adoption has been conducted retrospectively with cumulative effect of initially applying this standard as on the transition date. The effect on the transition to Ind AS 115 is insignificant.
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty (till 30th June, 2017) and net of returns, discounts, sales incentives, goods & service tax and value added taxes.
The Company recognises revenue when the amount of revenue and its related cost can be reliably measured and
it is probable that future economic benefits will flow to the entity and degree of managerial involvement associated with ownership or effective control have been met for each of the Company''s activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement.
2.5.1 Sale of goods
Revenue is recognised for domestic and export sales of vehicles, spare parts, and accessories when the Company transfers control over such products to the customer on dispatch from the factory and the port respectively.
2.5.2 Income from services
Revenue from engineering services are recognised as the related services are performed. Revenue from extended warranty is recognised on time proportion basis. Income from other services are accounted over the period of rendering of services. Invoicing in excess of revenues are classified as contract liabilities. Contract liabilities pertains to advance consideration received towards sale of extended warranty and other services by the Company.
2.5.3 Income from royalty
Revenue from royalty is recognised on an accrual basis in accordance with the substance of the relevant arrangements.
2.6 Other Income
Dividend income from investments is recognised when the shareholders'' right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
2.7 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
2.7.1 The Company as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Company''s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company''s net investment outstanding in respect of the leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Company''s expected inflationary cost increases, such increases are recognised in the period in which such benefits accrue.
2.7.2 The Company as lessee
Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company''s general policy on borrowing costs (see note 2.9 below).
Rental expense from operating leases is recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases, such increases are recognised in the period in which such benefits accrue.
Upfront amount paid for land taken on lease is amortised over the period of lease.
2.8 Foreign currencies
2.8.1 Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian rupee (Rs), which is the Company''s functional and presentation currency.
2.8.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the 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. They are deferred in equity if they relate to qualifying cash flow hedges.
2.9 Borrowing costs
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 surplus funds out of specific borrowings pending their expenditure on qualifying assets are deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.10 Employee benefits
2.10.1 Short-term obligations
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the employees render the related services are recognised in the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
2.10.2 Other long-term employee benefit obligations
Liabilities for leave encashment and compensated absences which are not expected to be settled wholly within the operating cycle after the end of the period in which the employees render the related service are measured at the present value of the estimated future cash outflows using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
2.10.3 Post-employment obligations Defined benefit plans
The Company has defined benefit plans namely gratuity, provident fund and retirement allowance for employees. The gratuity fund and provident fund are recognised by the income tax authorities and are administered through trusts set up by the Company. Any shortfall in the size of the fund maintained by the trust is additionally provided for in profit or loss.
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in profit or loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Defined contribution plans
The Company has defined contribution plans for post-employment benefit namely the superannuation fund which is recognised by the income tax authorities. This fund is administered through a trust set up by the Company and the Company''s contribution thereto is charged to profit or loss every year. The Company has no further payment obligations once the contributions
have been paid. The Company also maintains an insurance policy to fund a post-employment medical assistance scheme, which is a defined contribution plan. The Company''s contribution to State Plans namely Employees'' State Insurance Fund and Employees'' Pension Scheme are charged to the statement of profit and loss every year.
Termination benefits
A liability for the termination benefit is recognised at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognises any related restructuring costs.
2.11 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.11.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
2.11.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and incurred tax losses 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.
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.
2.11.3 Current and deferred tax for the year
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 income taxes are also recognised in other comprehensive income or directly in equity respectively.
2.12 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any. Freehold land is measured at cost and is not depreciated.
Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Other repairs and maintenance of revenue nature are charged to profit or loss during the reporting period in which they are incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of asset and recognised in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method on a pro-rata basis from the month in which each asset is put to use to allocate their cost, net of their residual values, over their estimated useful lives.
Estimated useful life of assets are as follows which is based on technical evaluation of the useful lives of the assets:
Building |
3-60 years |
Plant and machinery other than Dies and Jigs |
8 years |
Dies and jigs |
5 years |
Electronic data processing equipment |
3 years |
Furniture and fixtures |
10 years |
Office appliances |
5 years |
Vehicles |
8 years |
The assets'' residual values, estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
All assets, the individual written down value of which at the beginning of the year is Rs. 5,000 or less, are depreciated at the rate of 100%. Assets purchased during the year costing Rs. 5,000 or less are depreciated at the rate of 100%.
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are credited / debited to profit or loss.
Freehold land and Leasehold land in the nature of perpetual lease is not amortised.
2.13 Intangible assets
2.13.1 Intangible assets acquired separately
Lump sum royalty and engineering support fee is carried at cost which is incurred and stated in the relevant licence agreement with the technical knowhow / engineering support provider less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight line basis over their estimated useful lives. The estimated useful lives and amortisation method are reviewed at end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
2.13.2 Amortisation methods and useful lives
Lump sum royalty and engineering support fee is amortised on a straight line basis over its estimated useful life i.e. 5 years from the start of production of the related model. An intangible asset is derecognised when no future economic benefits are expected from use.
2.14 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are 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 asset for which the estimates of future cash flows have not been adjusted.
2.15 Inventories
Inventories are valued at the lower of cost, determined on the weighted average basis and net realisable value.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Machinery spares (other than those supplied along with main plant and machinery, which are capitalised and depreciated accordingly) are charged to profit or loss on consumption except those valued at Rs. 5,000 or less individually, which are charged to revenue in the year of purchase.
2.16 Provisions and contingencies
Provisions: Provisions are recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are determined by discounting the expected future cash flows at a pre tax rate that reflects current market assessment of the time value of money and the risks specific to the liability.
Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
2.17 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
2.18 Financial assets
All purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
2.18.1 Classification of financial assets
Classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost
The classification depends on the Company''s business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset that meets the following two conditions is measured at amortised cost unless the asset is designated at fair value through profit or loss under the fair value option:
⢠Business model test: the objective of the Company''s business model is to hold the financial asset to collect the contractual cash flows.
⢠Cash flow characteristic test : the contractual term of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option:
⢠business model test : the financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets.
⢠cash flow characteristic test: the contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are measured at fair value through profit or loss.
2.18.2 Investments in equity instrument at fair value through other comprehensive income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument by instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instrument. This election is not permitted if the equity instrument is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains / losses arising from changes in fair value recognised in other comprehensive income. This cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
The Company has equity investments in certain entities which are not held for trading. The Company has elected the fair value through other comprehensive income irrevocable option for all such investments. Dividend on these investments are recognised in profit or loss.
2.18.3 Equity investment in subsidiaries, associates and joint ventures
Investments representing equity interest in subsidiaries, associates and joint ventures are carried at cost less any provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable.
2.18.4 Financial assets at fair value through profit or loss (FVTPL)
Investment in equity instrument are classified at fair value through profit or loss, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Financial assets that do not meet the amortised cost criteria or fair value through other comprehensive income criteria are measured at fair value through profit or loss. A financial asset that meets the amortised cost criteria or fair value through other comprehensive income criteria may be designated as at fair value through profit or loss upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets and liabilities or recognising the gains or losses on them on different bases.
Investments in debt based mutual funds are measured at fair value through profit or loss.
Financial assets which are fair valued through profit or loss are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss.
2.18.5 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
2.18.6 Cash and cash equivalents
In the cash flow statement, cash and cash equivalents includes cash in hand, cheques and drafts in hand, balances with bank and deposits held at call with financial institutions, short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet and forms part of financing activities in the cash flow statement. Book overdraft are shown within other financial liabilities in the balance sheet and forms part of operating activities in the cash flow statement.
2.18.7 Impairment of financial assets
The Company assesses impairment based on expected credit losses (ECL) model to the following :
⢠financial assets measured at amortised cost
⢠financial assets measured at fair value through other comprehensive income
Expected credit loss are measured through a loss allowance at an amount equal to :
⢠the twelve month expected credit losses (expected credit losses that result from those default events on the financial instruments that are possible within twelve months after the reporting date); or
⢠full life time expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
2.18.8 Derecognition of financial assets
A financial asset is derecognised only when
⢠The Company has transferred the rights to receive cash flows from the financial asset or
⢠Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
2.18.9 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost or fair value through profit or loss the exchange differences are recognised in profit or loss except for those which are designated as hedge instrument in a hedging relationship. Further change in the carrying amount of investments in equity instruments at fair value through other comprehensive income relating to changes in foreign currency rates are recognised in other comprehensive income.
2.19 Financial liabilities and equity instruments
2.19.1 Classification of debt or equity
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
2.19.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
2.19.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at fair value through profit or loss.
2.19.3.1 Trade and other payables
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year which are unpaid.
2.19.3.2 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
2.19.3.3 Foreign exchange gains or losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in profit or loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of the reporting period. For financial liabilities that are measured as at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss.
2.19.3.4 Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
2.20 Derivative financial instruments
The Company enters into foreign exchange forward contracts and certain other derivative financial instruments to manage its exposure to foreign exchange rate risks and commodity price risks. Further details of derivative financial instruments are disclosed in note 33.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument which is recognised in other comprehensive income (net of tax) and presented as a separate component of equity which is later reclassified to profit or loss when the hedge item affects profit or loss.
2.20.1 Embedded derivatives
Derivatives embedded in a host contract that is an asset within the scope of Ind AS 109 are not separated. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Derivatives embedded in all other host contract are separated only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host and are measured at fair value through profit or loss. Embedded derivatives closely related to the host contracts are not separated.
2.21 Hedge accounting
The Company designates certain hedging instruments, in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an on-going basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Changes in the fair value of these contracts that are designated and effective as hedges of future cash flows are recognised in other comprehensive income (net of tax) and the ineffective portion is recognised immediately in the profit or loss. Amount accumulated in equity are reclassified to the profit or loss in the periods in which the forecasted transaction occurs.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions, any cumulative gain or loss on the hedging instrument recognised in other equity is retained there until the forecast transaction occurs.
Note 33 sets out details of the fair values of the derivative instruments used for hedging purposes.
2.22 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
2.23 Government Grant
Government grants are recognised where there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received.
Government grants are recognised in statement of profit and loss on a systematic basis over the periods in which the Company recognises as expense the related cost for which the grants are intended to compensate.
2.24 Earning Per Share
Basic earning per share has been computed by dividing the net income by the weighted average number of shares outstanding during the year. Diluted earning per share has been computed using the weighted average number of shares and diluted potential shares, except where the result would be anti-dilutive.
2.25 Dividends
Final dividends on shares are recorded on the date of approval by the shareholders of the Company.
2.26 Royalty
The Company pays / accrues for royalty in accordance with the relevant licence agreements.
2.27 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Acquisition related costs are recognized in profit or loss as incurred. The acquiree''s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognized at their fair value at the acquisition date, except certain assets and liabilities that are required to be measured as per the applicable standard.
Purchase consideration in excess of the Company''s interest in the acquiree''s net fair value of identifiable assets, liabilities and contingent liabilities is recognized as goodwill. Excess of the Company''s interest in the net fair value of the acquiree''s identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognized, after reassessment of fair value of net assets acquired, in the Capital Reserve.
Common control
A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination and the control is not transitory.
Business combinations involving entities under common control are accounted for using the pooling of interests method. The net assets of the transferor entity or business are accounted at their carrying amounts on the date of the acquisition subject to necessary adjustments required to harmonise accounting policies. Any excess or shortfall of the consideration paid over the share capital of transferor entity or business is recognised as capital reserve under equity.
2.28 Rounding of amounts
All amounts disclosed in the financial statements and the accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III of the Companies Act 2013, unless otherwise stated.
3 Applicability Of New And Revised Ind AS
3.1 Ministry of Corporate affairs has notified Ind AS 116 - Leases, which is effective from April 1, 2019, which will replace the existing lease standard, Ind AS 17 Leases and related interpretations. The new standard sets out the principles for the recognition, measurement, presentation and disclosure of lease for both parties to a contract i.e. the lessee and the lessor. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of profit and loss. The standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward lessor accounting requirements. The Company is evaluating the impact of Ind AS 116 and its effect on the financial statements.
3.2 Appendix C to Ind AS 12, Uncertainty over Income Tax Treatments: On March 30, 2019, Ministry of Corporate Affairs ("MCA") has notified Appendix C to Ind AS 12, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Company is evaluating the requirements and its effect on the financial statements.
3.3 Amendments to Ind AS 12 - Income Taxes On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, ''Income Taxes'', in connection with accounting for dividend distribution taxes.The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company does not expect any impact from this pronouncement.
3.4 Amendment to Ind AS 19 - plan amendment, curtailment or settlement- On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, ''Employee Benefits'', in connection with accounting for plan amendments, curtailments and settlements. The amendments require an entity:
1) to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and
2) to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling. Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company does not have any impact on account of this amendment.
4 Property, Plant and Equipment and Capital Work-in-Progress
As at 31.03.2019 |
As at 31.03.2018 |
|
Carrying amount of |
||
Freehold Land |
38,419 |
31,403 |
Leasehold Land ^ |
525 |
525 |
Buildings |
18,826 |
16,900 |
Plant & Machinery |
88,296 |
78,439 |
Electronic Data Processing (EDP) Equipment |
519 |
570 |
Furniture, Fixtures and Office Appliances |
1,595 |
1,387 |
Vehicles |
1,387 |
1,249 |
149,567 |
130,473 |
|
Capital work-in-progress |
16,001 |
21,259 |
165,568 |
151,732 |
^ In the nature of perpetual lease
Mar 31, 2018
1. General Information
Maruti Suzuki India Limited ("The Company") is a public limited company incorporated and domiciled in India, listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The address of its registered office is #1, Nelson Mandela Road, Vasant Kunj, New Delhi - 110070. The Company is a subsidiary of Suzuki Motor Corporation, Japan. The principal activities of the Company are manufacturing, purchase and sale of motor vehicles, components and spare parts. The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing.
During the year, a Scheme of Amalgamation between the Company and its seven wholly owned subsidiaries, by the names of Maruti Insurance Business Agency Limited, Maruti Insurance Distribution Services Limited, Maruti Insurance Agency Network Limited, Maruti Insurance Agency Solutions Limited, Maruti Insurance Agency Services Limited, Maruti Insurance Agency Logistics Limited and Maruti Insurance Broker Limited became effective w.e.f. the appointed date, i.e., April 1, 2016 on completion of all required formalities on July 11, 2017 and approval of National Company Law Tribunal.
2. Significant Accounting Policies
2.1 Statement of compliance
The financial statements have been prepared as a going concern in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 ("the Act") read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
2.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below. Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
All assets and liabilities have been classified as current or noncurrent according to the Companyâs operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current non-current classification of assets and liabilities.
The principal accounting policies are set out below.
2.3 Going concern
The board of directors have considered the financial position of the Company at 31st March 2018 and the projected cash flows and financial performance of the Company for at least twelve months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course.
The board of directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund the Company''s operations.
2.4 Use of estimates and judgments
The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amount of revenues and expenses for the years presented. Actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following notes:
2.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, sales incentives, goods & service tax and value added taxes.
The Company recognizes revenue when the amount of revenue and its related cost can be reliably measured and it is probable that future economic benefits will flow to the entity and specific criteria in relation to significant risk and reward and degree of managerial involvement associated with ownership or effective control have been met for each of the Company''s activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement.
2.5.1 Sale of goods
Domestic and export sales are accounted on transfer of significant risks and rewards to the customer and also no continuing involvement of management to the degree associated with ownership nor effective control over the goods sold which takes place on dispatch of goods from the factory and the port respectively.
2.5.2 Income from services
Income from services are accounted over the period of rendering of services.
2.5.3 Income from royalty
Revenue from royalty is recognized on an accrual basis in accordance with the substance of the relevant arrangements.
2.5.4 Dividend and interest income
Dividend income from investments is recognized when the shareholders'' right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
2.6 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
2.6.1 The Company as less or
Amounts due from lessees under finance leases are recognized as receivables at the amount of the Company''s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company''s net investment outstanding in respect of the leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Company''s expected inflationary cost increases, such increases are recognized in the period in which such benefits accrue.
2.6.2 The Company as lessee
Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the less or is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company''s general policy on borrowing costs (see note 2.8 below).
Rental expense from operating leases is recognized on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases, such increases are recognized in the period in which such benefits accrue.
Upfront amount paid for land taken on lease is amortized over the period of lease.
2.7 Foreign currencies
2.7.1 Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian rupee (''), which is the Companyâs functional and presentation currency.
2.7.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the 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 recognized in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges.
2.8 Borrowing costs
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 surplus funds out of specific borrowings pending their expenditure on qualifying assets are deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
2.9 Employee benefits
2.9.1 Short-term obligations
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the employees render the related services are recognized in the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
2.9.2 Other long-term employee benefit obligations
Liabilities for leave encashment and compensated absences which are not expected to be settled wholly within the operating cycle after the end of the period in which the employees render the related service are measured at the present value of the estimated future cash outflows which is expected to be paid using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
2.9.3 Post-employment obligations Defined benefit plans
The Company has defined benefit plans namely gratuity, provident fund and retirement allowance for employees. The gratuity fund and provident fund are recognized by the income tax authorities and are administered through trusts set up by the Company. Any shortfall in the size of the fund maintained by the trust is additionally provided for in profit or loss.
The liability or asset recognized in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in profit or loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost.
Defined contribution plans
The Company has defined contribution plans for post-employment benefit namely the superannuation fund which is recognized by the income tax authorities. This fund is administered through a trust set up by the Company and the Companyâs contribution thereto is charged to profit or loss every year. The Company has no further payment obligations once the contributions have been paid. The Company also maintains an insurance policy to fund a post-employment medical assistance scheme, which is a defined contribution plan. The Companyâs contribution to State
Plans namely Employeesâ State Insurance Fund and Employeesâ Pension Scheme are charged to the statement of profit and loss every year.
Termination benefits
A liability for the termination benefit is recognized at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognizes any related restructuring costs.
2.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.10.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
2.10.2 Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences and incurred tax losses to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized 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.
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 realized, 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.
2.10.3 Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the income taxes are also recognized in other comprehensive income or directly in equity respectively.
2.11 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any. Freehold land is measured at cost and is not depreciated.
Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. Other repairs and maintenance of revenue nature are charged to profit or loss during the reporting period in which they are incurred.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of asset and recognized in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method on a prorate basis from the month in which each asset is put to use to allocate their cost, net of their residual values, over their estimated useful lives.
The assets'' residual values, estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
All assets, the individual written down value of which at the beginning of the year is '' 5,000 or less, are depreciated at the rate of 100%. Assets purchased during the year costing '' 5,000 or less are depreciated at the rate of 100%.
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are credited / debited to profit or loss.
Freehold land and Leasehold land in the nature of perpetual lease is not amortized.
2.12 Intangible assets
2.12.1 Intangible assets acquired separately
Lump sum royalty and engineering support fee is carried at cost which is incurred and stated in the relevant license agreement with the technical knowhow / engineering support provider less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight line basis over their estimated useful lives. The estimated useful lives and amortization method are reviewed at end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
2.12.2 Amortization methods and useful lives
Lump sum royalty and engineering support fee is amortized on a straight line basis over its estimated useful life i.e. 5 years from the start of production of the related model. An intangible asset is derecognized when no future economic benefits are expected from use.
2.13 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are 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 asset for which the estimates of future cash flows have not been adjusted.
2.14 Inventories
Inventories are valued at the lower of cost, determined on the weighted average basis and net realizable value.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Machinery spares (other than those supplied along with main plant and machinery, which are capitalized and depreciated accordingly) are charged to profit or loss on consumption except those valued at '' 5,000 or less individually, which are charged to revenue in the year of purchase.
2.15 Provisions and contingencies
Provisions: Provisions are recognized when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are determined by discounting the expected future cash flows at a pre tax rate that reflects current market assessment of the time value of money and the risks specific to the liability.
Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
2.16 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
2.17 Financial assets
All purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.
2.17.1 Classification of financial assets
Classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at amortized cost
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset that meets the following two conditions is measured at amortized cost unless the asset is designated at fair value through profit or loss under the fair value option:
- Business model test : the objective of the Company''s business model is to hold the financial asset to collect the contractual cash flows.
- Cash flow characteristic test : the contractual term of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option:
- business model test : the financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets.
- cash flow characteristic test : the contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are measured at fair value through profit or loss.
2.17.2 Investments in equity instrument at fair value through other comprehensive income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument by instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instrument. This election is not permitted if the equity instrument is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains / losses arising from changes in fair value recognized in other comprehensive income. This cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
The Company has equity investments in certain entities which are not held for trading. The Company has elected the fair value through other comprehensive income irrevocable option for all such investments. Dividend on these investments are recognized in profit or loss.
2.17.3 Equity investment in subsidiaries, associates and joint ventures
Investments representing equity interest in subsidiaries, associates and joint ventures are carried at cost less any provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable.
2.17.4 Financial assets at fair value through profit or loss (FVTPL)
Investment in equity instrument are classified at fair value through profit or loss, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Financial assets that do not meet the amortized cost criteria or fair value through other comprehensive income criteria are measured at fair value through profit or loss. A financial asset that meets the amortized cost criteria or fair value through other comprehensive income criteria may be designated as at fair value through profit or loss upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets and liabilities or recognizing the gains or losses on them on different bases.
Investments in debt based mutual funds are measured at fair value through profit and loss.
Financial assets which are fair valued through profit or loss are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognized in profit or loss.
2.17.5 Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost less provision for impairment.
2.17.6 Cash and cash equivalents
In the cash flow statement, cash and cash equivalents includes cash in hand, cheques and drafts in hand, balances with bank and deposits held at call with financial institutions, short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet and forms part of financing activities in the cash flow statement. Book overdraft are shown within other financial liabilities in the balance sheet and forms part of operating activities in the cash flow statement.
2.17.7 Impairment of financial assets
The Company assesses impairment based on expected credit losses (ECL) model to the following :
- financial assets measured at amortized cost
- financial assets measured at fair value through other comprehensive income
Expected credit loss are measured through a loss allowance at an amount equal to :
- the twelve month expected credit losses (expected credit losses that result from those default events on the financial instruments that are possible within twelve months after the reporting date); or
- full life time expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 18, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
2.17.8 Derecognition of financial assets
A financial asset is derecognized only when
- The Company has transferred the rights to receive cash flows from the financial asset or
- Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
2.17.9 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortized cost or fair value through profit or loss the exchange differences are recognized in profit or loss except for those which are designated as hedge instrument in a hedging relationship. Further change in the carrying amount of investments in equity instruments at fair value through other comprehensive income relating to changes in foreign currency rates are recognized in other comprehensive income.
2.18 Financial liabilities and equity instruments
2.18.1 Classification of debt or equity
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
2.18.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
2.18.3 Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest rate method or at fair value through profit or loss.
2.18.3.1 Trade and other payables
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year which are unpaid.
2.18.3.2 Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
2.18.3.3 Foreign exchange gains or losses
For financial liabilities that are denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments and are recognized in profit or loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of the reporting period. For financial liabilities that are measured as at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognized in profit or loss.
2.18.3.4 Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
2.19 Derivative financial instruments
The Company enters into foreign exchange forward contracts and certain other derivative financial instruments to manage its exposure to foreign exchange rate risks and commodity price risks. Further details of derivative financial instruments are disclosed in note 33.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument which is recognized in other comprehensive income (net of tax) and presented as a separate component of equity which is later reclassified to profit or loss when the hedge item affects profit or loss.
2.19.1 Embedded derivatives
Derivatives embedded in a host contract that is an asset within the scope of Ind AS 109 are not separated. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Derivatives embedded in all other host contract are separated only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host and are measured at fair value through profit or loss. Embedded derivatives closely related to the host contracts are not separated.
2.20 Hedge accounting
The Company designates certain hedging instruments, in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an on-going basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Changes in the fair value of these contracts that are designated and effective as hedges of future cash flows are recognized in other comprehensive income (net of tax) and the ineffective portion is recognized immediately in the profit or loss. Amount accumulated in equity are reclassified to the profit or loss in the periods in which the forecasted transaction occurs.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions, any cumulative gain or loss on the hedging instrument recognized in other equity is retained there until the forecast transaction occurs.
Note 33 sets out details of the fair values of the derivative instruments used for hedging purposes.
2.21 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
2.22 Government Grant
Government grants are recognized where there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received. Government grants are recognized in statement of profit and loss on a systematic basis over the periods in which the company recognizes as expense the related cost for which the grants are intended to compensate.
2.23 Earning Per Share
Basic earnings per share has been computed by dividing the net income by the weighted average number of shares outstanding during the year. Diluted earnings per share has been computed using the weighted average number of shares and diluted potential shares, except where the result would be anti-dilutive.
2.24 Dividends
Final dividends on shares are recorded on the date of approval by the shareholders of the Company.
2.25 Royalty
The Company pays / accrues for royalty in accordance with the relevant license agreements.
2.26 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Acquisition related costs are recognized in profit or loss as incurred. The acquirerâs identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognized at their fair value at the acquisition date, except certain assets and liabilities that are required to be measured as per the applicable standard.
Purchase consideration in excess of the Companyâs interest in the acquirerâs net fair value of identifiable assets, liabilities and contingent liabilities is recognized as goodwill. Excess of the Companyâs interest in the net fair value of the acquirerâs identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognized, after reassessment of fair value of net assets acquired, in the Capital Reserve.
Common control
A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination and the control is not transitory.
Business combinations involving entities under common control are accounted for using the pooling of interests method. The net assets of the transferor entity or business are accounted at their carrying amounts on the date of the acquisition subject to necessary adjustments required to harmonies accounting policies. Any excess or shortfall of the consideration paid over the share capital of transferor entity or business is recognized as capital reserve under equity.
2.27 Rounding of amounts
All amounts disclosed in the financial statements and the accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III of the Companies Act 2013, unless otherwise stated.
3. Applicability of New and Revised Ind AS
3.1 Ministry of Corporate affairs has notified Ind AS 115 - Revenue from Contracts with Customers, which is effective from April 1,
2018. The new standard outlines a single comprehensive control-based model for revenue recognition and supersedes current revenue recognition guidance based on risks on rewards. The Company is evaluating the requirements of Ind AS 115 and its effect on the financial statements.
3.2 Appendix B to Ind AS 21, Foreign Currency Transactions and Advance Consideration: On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment is effective from April 1, 2018. The Company is evaluating the requirements of Ind AS 21 and its effect on the financial statements.
3.3 Amendments to Ind AS 12 - Recognition of Deferred Tax Assets for Unrealised Losses
The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.
Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognized in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.
These amendments are effective for annual periods beginning on or after 1 April 2018. These amendments are not expected to have material effect on Companyâs financial statements
4.1 Notes on property, plant and equipment
1 Immovable properties having carrying value of '' 27 million (as at 31.03.17 '' 27 million) are not yet registered in the name of the Company.
2 Plant and Machinery includes a Gas Turbine jointly owned by the Company with its group companies and other companies (prorata cost amounting to '' 374 million, carrying amount as at 31st March 2018 Nil (as at 31.03.17 Nil).
3 A part of freehold land of the Company situated at Gurugram, Manesar and Gujarat has been made available to its group companies / fellow subsidiary for their business purpose.
4 Based on technical evaluation and market considerations, the Company has, with effect from 1st April 2016, revised the estimated useful life of dies & jigs, included in plant and machinery, from 4 years to 5 years. This had resulted in depreciation expense for the financial year 2016-17 being lower by '' 2,411 million.
5.1 Notes on intangible assets
Based on technical evaluation and market considerations, the Company has, with effect from 1st April 2016, revised the estimated useful life of intangible asset from 4 years to 5 years. This had resulted in amortization expense for the financial year 2016-17 being lower by '' 307 million.
During the year, a dividend of Rs, 75 per share, total dividend Rs, 22,656 million (previous year : Rs, 35 per share, total dividend Rs, 10,573 million) was paid to equity shareholders.
The Board of Directors recommended a final dividend of Rs, 80 per share (nominal value of Rs, 5 per share) for the financial year 2017
18. This dividend is subject to approval by the shareholders at the Annual General Meeting and has not been accounted as liability in these financial statements. The total expected amount of cash outflow is Rs, 29,134 million including dividend distribution tax of Rs, 4,968 million.
This reserves represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income, net of amount reclassified to retained earnings when those assets have been disposed of.
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognized and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedging item.
15.1 Summary of borrowing arrangements
Loan repayable on demand from banks (Cash credit and Overdraft) amounting to Rs, 1,108 million at an interest rate of 8.30% to 8.70%, repayable within 0-3 days (as at 31.03.17: Rs, 4,836 million at an interest rate of 7.25% to 10.50%, repayable within 0-5 days)
15.2 Breach of loan agreement
There has been no breach of covenants mentioned in the loan agreements during the reporting periods.
Provisions for employee benefits
The provision for employee benefits include compensated absences and retirement allowance.
Provision for warranty and product recall
Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled as and when warranty claims will arise. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.
Provision for litigation / disputes
In the ordinary course of business, the Company faces claims by various parties. The Company assesses such claims and monitors the legal environment on an ongoing basis, with the assistance of external legal counsel, wherever necessary. The Company records a liability for any claims where a potential loss probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Company provides disclosure in the financial statements but does not record a liability in its accounts unless the loss becomes probable (also refer to note 38).
Mar 31, 2017
1.1 Statement of compliance
The financial statements have been prepared as a going concern in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
Upto the year ended 31st March, 2016, the Company prepared the financial statements in accordance with the requirements of previous GAAP, which includes standards notified under the Companies (Accounting Standards) Rules, 2006 and other relevant provisions of the Act. These are the Companyâs first Ind AS financial statements. The date of transition to the Ind AS is 1st April, 2015. Refer to note 43.1 for the details of first-time adoption exemptions availed by the Company.
1.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below. Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
The principal accounting policies are set out below.
All assets and liabilities have been classified as current or noncurrent according to the Companyâs operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current non-current classification of assets and liabilities.
1.3 Going concern
The board of directors have considered the financial position of the Company at 31st March 2017 and the projected cash flows and financial performance of the Company for at least twelve months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course.
The board of directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund the Companyâs operations.
1.4 Use of estimates and judgements
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amount of revenues and expenses for the years presented. Actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are included in the following notes:
Note 32 : Provision for employee benefits
Note 17 & 38 : Provision for litigations
Note 17 : Provision for warranty and product recall
1.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, sales incentives, value added taxes.
The Company recognises revenue when the amount of revenue and its related cost can be reliably measured and it is probable that future economic benefits will flow to the entity and specific criteria in relation to significant risk and reward and degree of managerial involvement associated with ownership or effective control have been met for each of the Companyâs activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transactions and the specifics of each arrangement.
1.5.1 Sale of goods
Domestic and export sales are accounted on transfer of significant risks and rewards to the customer and also no continuing involvement of management to the degree associated with ownership nor effective control over the goods sold which takes place on dispatch of goods from the factory and the port respectively.
1.5.2 Income from services
Income from services are accounted over the period of rendering of services.
1.5.3 Income from royalty
Revenue from royalty is recognised on an accrual basis in accordance with the substance of the relevant arrangement.
1.5.4 Dividend and interest income
Dividend income from investments is recognised when the shareholdersâ right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
1.6 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
1.6.1 The Company as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases, such increases are recognised in the period in which such benefits accrue.
1.6.2 The Company as lessee
Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs general policy on borrowing costs (see note 2.8 below).
Rental expense from operating leases is recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognised in the period in which such benefits accrue.
Upfront amount paid for land taken on lease is amortised over the period of lease.
1.7 Foreign currencies
1.7.1 Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian rupee (INR), which is the Companyâs functional and presentation currency.
1.7.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the 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. They are deferred in equity if they relate to qualifying cash flow hedges.
1.8 Borrowing costs
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 are deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
1.9 Employee benefits
1.9.1 Short-term obligations
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the employees render the related services are recognised in the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
1.9.2 Other long-term employee benefit obligations
Liabilities for leave encashment and compensated absences which are not expected to be settled wholly within the operating cycle after the end of the period in which the employees render the related service are measured at the present value of the estimated future cash outflows which is expected to be paid using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
1.9.3 Post-employment obligations
Defined benefit plans
The Company has defined benefit plans namely gratuity, provident fund and retirement allowance for employees. The gratuity fund and provident fund are recognised by the income tax authorities and are administered through trusts set up by the Company.
Any shortfall in the size of the fund maintained by the trust is additionally provided for in profit or loss.
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in profit or loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Defined contribution plans
The Company has defined contribution plans for postemployment benefit namely the superannuation fund which is recognised by the income tax authorities. This fund is administered through a trust set up by the Company and the Companyâs contribution thereto is charged to profit or loss every year. The Company has no further payment obligations once the contributions have been paid. The Company also maintains an insurance policy to fund a post-employment medical assistance scheme, which is a defined contribution plan. The Companyâs contribution to State Plans namely Employeesâ State Insurance Fund and Employeesâ Pension Scheme are charged to the statement of profit and loss every year.
Termination benefits
A liability for the termination benefit is recognised at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognises any related restructuring costs.
1.10 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
1.10.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
1.10.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and incurred tax losses 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.
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.
1.10.3 Current and deferred tax for the year
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 income taxes are also recognised in other comprehensive income or directly in equity respectively.
1.11 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any. Freehold land is measured at cost and is not depreciated.
Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. The other repairs and maintenance of revenue nature are charged to profit or loss during the reporting period in which they are incurred.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of its property, plant and equipment recognised as at 1st April 2015, measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method on a pro-rata basis from the month in which each asset is put to use to allocate their cost, net of their residual values, over their estimated useful lives.
Estimated useful life of assets are as follows which is based on technical evaluation of the useful lives of the assets:
The assetsâ residual values, estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
All assets, the individual written down value of which at the beginning of the year is Rs.5,000 or less, are depreciated at the rate of 100%. Assets purchased during the year costing Rs.5,000 or less are depreciated at the rate of 100%.
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are credited / debited to profit or loss.
Freehold land/Leasehold land in the nature of perpetual lease is not amortised.
1.12 Intangible assets
1.12.1 Intangible assets acquired separately
Lump sum royalty and engineering support fee is carried at cost which is incurred and stated in the relevant licence agreement with the technical knowhow / engineering support provider less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight line basis over their estimated useful lives. The estimated useful lives and amortisation method are reviewed at end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
1.12.2 Amortisation methods and useful lives
Lump sum royalty and engineering support fee is amortised on a straight line basis over its estimated useful life i.e. 5 years from the start of production of the related model. An intangible asset is derecognised when no future economic benefits are expected from use.
1.12.3 Deemed cost on transition to Ind AS
For transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as of 1st April, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
1.13 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are 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 asset for which the estimates of future cash flows have not been adjusted.
1.14 Inventories
Inventories are valued at the lower of cost, determined on the weighted average basis and net realisable value.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Loose tools are written off over a period of three years except for tools valued at Rs.5,000 or less individually which are charged to profit or loss in the year of purchase.
Machinery spares (other than those supplied along with main plant and machinery, which are capitalised and depreciated accordingly) are charged to profit or loss on consumption except those valued at Rs.5,000 or less individually, which are charged to revenue in the year of purchase.
1.15 Provisions and contingencies
Provisions: Provisions are recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are determined by discounting the expected future cash flows at a pre tax rate that reflects current market assessment of the time value of money and the risks specific to the liability.
Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
1.16 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
1.17 Financial assets
All purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
1.17.1 Classification of financial assets
Classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at amortised cost
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset that meets the following two conditions is measured at amortised cost unless the asset is designated at fair value through profit or loss under the fair value option:
- Business model test : the objective of the Companyâs business model is to hold the financial asset to collect the contractual cash flows.
- Cash flow characteristic test : the contractual term of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated at fair value through profit or loss under the fair value option:
- business model test : the financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets.
- cash flow characteristic test : the contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are measured at fair value through profit or loss.
1.17.2 Investments in equity instrument at fair value through other comprehensive income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument by instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instrument. This election is not permitted if the equity instrument is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains / losses arising from changes in fair value recognised in other comprehensive income. This cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
The Company has equity investments in certain entities which are not held for trading. The Company has elected the fair value through other comprehensive income irrevocable option for all such investments. Dividend on these investments are recognised in profit or loss.
1.17.3 Equity investment in subsidiaries, associates and joint ventures
Investments representing equity interest in subsidiaries, associates and joint ventures are carried at cost less any provision for impairment. Investments are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable.
1.17.4 Financial assets at fair value through profit or loss (FVTPL)
Investment in equity instrument are classified at fair value through profit or loss, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Financial assets that do not meet the amortised cost criteria or fair value through other comprehensive income criteria are measured at fair value through profit or loss. A financial asset that meets the amortised cost criteria or fair value through other comprehensive income criteria may be designated as at fair value through profit or loss upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets and liabilities or recognising the gains or losses on them on different bases.
Investments in debt based mutual funds are measured at fair value through profit and loss.
Financial assets which are fair valued through profit or loss are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss.
1.17.5 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
1.17.6 Cash and cash equivalents
In the cash flow statement, cash and cash equivalents includes cash in hand, cheques and drafts in hand, balances with bank and deposits held at call with financial institutions, short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet and forms part of financing activities in the cash flow statement. Book overdraft are shown within other financial liabilities in the balance sheet and forms part of operating activities in the cash flow statement.
1.17.7 Impairment of financial assets
The Company assesses impairment based on expected credit losses (ECL) model to the following :
- financial assets measured at amortised cost
- financial assets measured at fair value through other comprehensive income
Expected credit loss are measured through a loss allowance at an amount equal to :
- the twelve month expected credit losses (expected credit losses that result from those default events on the financial instruments that are possible within twelve months after the reporting date); or
- full life time expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 18, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
1.17.8 Derecognition of financial assets
A financial asset is derecognised only when
- The Company has transferred the rights to receive cash flows from the financial asset or
- Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
1.17.9 Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost or fair value through profit or loss the exchange differences are recognised in profit or loss except for those which are designated as hedge instrument in a hedging relationship. Further change in the carrying amount of investments in equity instruments at fair value through other comprehensive income relating to changes in foreign currency rates are recognised in other comprehensive income.
1.18 Financial liabilities and equity instruments
1.18.1 Classification of debt or equity
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
1.18.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
1.18.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at fair value through profit or loss.
1.18.3.1 Trade and other payables
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year which are unpaid.
1.18.3.2 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
1.18.3.3 Foreign exchange gains or losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in profit or loss.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the exchange rate at the end of the reporting period. For financial liabilities that are measured as at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss.
1.18.3.4 Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired.
1.19 Derivative financial instruments
The Company enters into foreign exchange forward contracts and certain other derivative financial instruments to manage its exposure to foreign exchange rate risks and commodity price risks. Further details of derivative financial instruments are disclosed in note 33.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument which is recognised in other comprehensive income (net of tax) and presented as a separate component of equity which is later reclassified to profit or loss when the hedge item affects profit or loss.
1.19.1 Embedded derivatives
Derivatives embedded in a host contract that is an asset within the scope of Ind AS 109 are not separated. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Derivatives embedded in all other host contract are separated only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host and are measured at fair value through profit or loss. Embedded derivatives closely related to the host contracts are not separated.
1.20 Hedge accounting
The Company designates certain hedging instruments, in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an on-going basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Changes in the fair value of these contracts that are designated and effective as hedges of future cash flows are recognised in other comprehensive income (net of tax) and the ineffective portion is recognised immediately in the profit or loss. Amount accumulated in equity are reclassified to the profit or loss in the periods in which the forecasted transaction occurs.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecast transactions, any cumulative gain or loss on the hedging instrument recognised in other equity is retained there until the forecast transaction occurs.
Note 33 sets out details of the fair values of the derivative instruments used for hedging purposes.
1.21 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty
1.22 Earning Per Share
Basic earning per share has been computed by dividing the net income by the weighted average number of shares outstanding during the year. Diluted earning per share has been computed using the weighted average number of shares and diluted potential shares, except where the result would be anti-dilutive.
1.23 Dividends
Final dividends on shares are recorded on the date of approval by the shareholders of the Company.
1.24 Royalty
The Company pays / accrues for royalty in accordance with the relevant licence agreements.
1.25 Rounding of amounts
All amounts disclosed in the financial statements and the accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III of the Companies Act 2013, unless otherwise stated.
Mar 31, 2015
1.1 General Information
The Company is primarily in the business of manufacturing, purchase and
sale of motor vehicles, components and spare parts ("automobiles"). The
other activities of the Company comprise facilitation of Pre-Owned Car
sales, Fleet Management and Car Financing. The Company is a public
company listed on the Bombay Stock Exchange (BSE) and the National
Stock Exchange (NSE).
1.2 Basis for Preparation of Financial Statements
These financial statements have been prepared as a going concern in
accordance with the generally accepted accounting principles in India
under the historical cost convention on an accrual basis and comply in
all material aspects with the Companies Act, 2013, applicable rules and
other relevant provisions of the Companies Act, 2013 and Accounting
Standard 30, Financial Instruments: Recognition and Measurement issued
by the Institute of Chartered Accountants of India to the extent it
does not contradict with any other accounting standard referred to in
Companies Act, 2013.
All assets and liabilities have been classified as current or
non-current as per the Company's operating cycle and other criteria set
out in the Schedule III to the Companies Act, 2013. Based on the nature
of products and the time between the acquisition of assets for
processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current - non current classification of assets and
liabilities.
1.3 Revenue Recognition
Revenue is Recognised as follows:
(a) Domestic and export sales on transfer of significant risks and
rewards to the customer which takes place on dispatch of goods from the
factory and port respectively.
(b) Income from services on completion of rendering of services.
1.4 Fixed Assets
Tangible Assets
a) Fixed assets (except freehold land which is carried at cost) are
carried at cost of acquisition or construction or at manufacturing cost
(in case of own manufactured assets) in the year of capitalisation less
accumulated depreciation.
b) Assets acquired under finance leases are capitalised at the lower of
their fair value and the present value of minimum lease payments.
Intangible Assets
Lumpsum royalty is stated at cost incurred as per the relevant licence
agreements with the technical know-how provider less accumulated
amortisation.
1.5 Borrowing Costs
Borrowing costs that are 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.
1.6 Depreciation / Amortisation
a) Tangible fixed assets except leasehold land are depreciated on the
straight line method on a pro-rata basis from the month in which each
asset is put to use.
Depreciation has been provided in accordance with useful lives
prescribed in the Companies Act, 2013 except for certain fixed assets
where, based on technical evaluation of the useful lives of the assets,
higher depreciation has been provided on the straight line method over
the following useful lives:
Plant and Machinery 8 - 11 Years
Dies and Jigs 4 Years
Electronic Data Processing 3 Years Equipment
In respect of assets whose useful lives has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful lives of the assets.
b) Leasehold land is amortised over the period of lease.
c) All assets, the individual written down value of which at the
beginning of the year is Rs. 5,000 or less, are depreciated at the rate
of 100%. Assets purchased during the year costing Rs. 5,000 or less are
depreciated at the rate of 100%.
d) Lump sum royalty is amortised on a straight line basis over its
estimated useful life i.e. 4 years from the start of production of the
related model.
1.7 Inventories
a) Inventories are valued at the lower of cost, determined on the
weighted average basis and net realisable value.
b) The cost of finished goods and work in progress comprises raw
materials, direct labour, other direct costs and related production
overheads. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and
the estimated costs necessary to make the sale.
c) Loose Tools are written off over a period of three years except for
tools valued at Rs. 5,000 or less individually which are charged to
revenue in the year of purchase.
d) Machinery spares (other than those supplied along with main plant
and machinery, which are capitalised and depreciated accordingly) are
charged to revenue on consumption except those valued at Rs. 5,000 or
less individually, which are charged to revenue in the year of
purchase.
1.8 Investments
Investment that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long term investments. Current investments are valued at
the lower of cost and fair value. Long-term investments are valued at
cost except in the case of other than temporary decline in value, in
which case the necessary provision is made.
1.9 Research and Development
Revenue expenditure on research and development is charged against the
profit for the year in which it is incurred. Capital expenditure on
research and development is shown as an addition to fixed assets and
depreciated accordingly.
1.10 Foreign Currency Transactions and Derivative Instruments
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transactions. Exchange differences
arising on settlement of transactions are recognised as income or
expense in the year in which they arise.
b) At the balance sheet date, all monetary assets and liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the balance sheet date by recognising the exchange
difference in the Statement of Profit and Loss. However, the exchange
difference arising on foreign currency monetary items that qualify and
are designated as hedge instruments in a cash flow hedge is initially
recognised in 'hedge reserve' and subsequently transferred to the
Statement of Profit and Loss on occurrence of the underlying hedged
transaction.
c) Effective April 1, 2008, the Company adopted Accounting
Standard - 30, "Financial Instruments: Recognition and Measurement"
issued by The Institute of Chartered Accountants of India to the extent
the adoption does not contradict with the accounting standards
specified under section 133 of the Companies Act, 2013 ("the Act") and
other regulatory requirements. All derivative contracts (except for
forward foreign exchange contracts where underlying assets or
liabilities exist) are fair valued at each reporting date. For
derivative contracts designated in a hedging relationship, the Company
records the gain or loss on effective hedges, if any, in a hedge
reserve, until the transaction is complete. On completion, the gain or
loss is transferred to the Statement of Profit and Loss of that period.
Changes in fair value relating to the ineffective portion of the hedges
and derivatives not qualifying or not designated as hedges are
recognised in the Statement of Profit and Loss in the accounting period
in which they arise.
d) In the case of forward foreign exchange contracts where an
underlying asset or liability exists, the difference between the
forward rate and the exchange rate at the inception of the contract is
recognised as income or expense over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of a
forward contract is recognised as income or expense in the year in
which such cancellation or renewal is made.
1.11 Employee Benefit Costs
Short - Term Employee Benefits:
Recognised as an expense at the undiscounted amount in the Statement of
Profit and Loss for the year in which the related service is rendered.
Post Employment and Other Long Term Employee Benefits:
(i) The Company has Defined Contribution Plans for post employment
benefit namely the Superannuation Fund which is recognised by the
income tax authorities. This Fund is administered through a Trust set
up by the Company and the Company's contribution thereto is charged to
the Statement of Profit and Loss every year. The Company also
maintains an insurance policy to fund a post-employment medical
assistance scheme, which is a Defined Contribution Plan administered by
The New India Insurance Company Limited. The Company's contribution to
State Plans namely Employees' State Insurance Fund and Employees'
Pension Scheme are charged to the Statement of Profit and Loss every
year.
(ii) The Company has Defined Benefit Plans namely Gratuity, Provident
Fund & Retirement Allowance for employees and Other Long Term Employee
Benefits i.e. Leave Encashment / Compensated Absences, the liability
for which is determined on the basis of an actuarial valuation at the
end of the year based on the Projected Unit Credit Method and any
shortfall in the size of the fund maintained by the Trust is
additionally provided for in the Statement of Profit and Loss. The
Gratuity Fund and Provident Fund are recognised by the income tax
authorities and are administered through Trusts set up by the Company.
Termination benefits are immediately recognised as an expense.
Gains and losses arising out of actuarial valuations are recognised
immediately in the Statement of Profit and Loss as income or expense.
1.12 Customs Duty
Custom duty available as drawback is initially recognised as purchase
cost and is credited to consumption of materials on exported vehicles.
1.13 Government Grants
Government grants are recognised in the Statement of Profit and Loss in
accordance with the related schemes and in the period in which these
accrue.
1.14 Taxes
Tax expense for the year, comprising current tax and deferred tax, is
included in determining the net profit or loss for the year.
Current tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income Tax Act and at the prevailing
tax rates.
Deferred tax is recognised for all timing differences, subject to the
consideration of prudence in respect of deferred tax assets. Deferred
tax assets are recognised and carried forward only to the extent there
is a reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. At each Balance Sheet date, the Company reassesses
unrecognised deferred tax assets, if any.
Minimum Alternate Tax credit is recognised as an asset only when and to
the extent and when there is convincing evidence that the Company will
pay normal income tax during the specified period. Such asset is
reviewed at each balance sheet date and the carrying amount of the MAT
credit asset is written down to the extent there is no longer
convincing evidence to the effect that the Company will pay normal
income tax during the specified period.
1.15 Dividend Income
Dividend from investments is recognised when the right to receive the
payment is established and when no significant uncertainty as to
measurability or collectability exists.
1.16 Interest Income
Interest income is recognised on the time proportion basis determined
by the amount outstanding and the rate applicable and where no
significant uncertainty as to measurability or collectability exists.
1.17 Impairment of Assets
At each Balance Sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the Statement of Profit and Loss to the extent the
carrying amount exceeds the recoverable amount.
1.18 Royalty
a) The Company pays / accrues for royalty in accordance with the
relevant licence agreements with the technical know-how provider.
b) The lump sum royalty incurred towards obtaining technical assistance
/ technical know-how to manufacture a new model/ car, ownership of
which rests with the technical know how provider, is recognised as an
intangible asset. Royalty payable on sale of products i.e. running
royalty is charged to the Statement of Profit and Loss as and when
incurred.
1.19 Provisions and Contingencies
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the balance
sheet date and are not discounted to their present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
1.20 Leases
As a lessee
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit and Loss on a straight-line basis over the period
of the lease or the terms of underlying agreement/s, as the case may
be.
As a lessor
The Company has leased certain tangible assets and such leases where
the Company has substantially retained all the risks and rewards of
ownership are classified as operating leases. Lease income on such
operating leases are recognised in the Statement of Profit and Loss on
a straight line basis over the lease term which is representative of
the time pattern in which benefit derived from the use of the leased
asset is diminished.
1.21 Cash and Cash Equivalents
In the Cash Flow Statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.
1.22 Segment Reporting
The accounting policies adopted for segment reporting are in conformity
with the accounting policies adopted for the Company. Revenue and
expenses have been identified to segments on the basis of their
relationship to the operating activities of the segment. Revenue and
expenses, which relate to the Company as a whole and are not allocable
to segments on a reasonable basis, have been included under
'Unallocated expenses / income'.
1.23 Earnings per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earning
considered in ascertaining the Company's earnings per share is the net
profit for the period and any attributable tax thereto for the period.
The weighted average number of equity shares outstanding during the
period and for all period presented is adjusted for events other than
the conversion of potential equity shares that have changed the number
of equity shares outstanding, without a corresponding change in
resources. For the purpose of calculating diluted earnings per share,
the net profit or loss for the period attributable to equity
shareholders and the weighted average number of shares outstanding
during the period is adjusted for the effects of all dilutive potential
equity shares.
Mar 31, 2014
1.1 General Information
The Company is primarily in the business of manufacturing, purchase and
sale of motor vehicles, components and spare parts ("automobiles"). The
other activities of the Company comprise facilitation of Pre-Owned Car
sales, Fleet Management and Car Financing. The Company is a public
company listed on the Bombay Stock Exchange (BSE) and the National
Stock Exchange (NSE).
1.2 Basis for Preparation of Financial Statements
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on an accrual basis. These financial statements have
been prepared to comply in all material respects with the applicable
accounting principles in India, the applicable accounting standards
notifed under Section 211(3C) [Companies (Accounting Standards) Rules,
2006 as amended] of the Companies Act, 1956, issued pursuant to the
Companies (Accounting Standards) Rules, 2006 as per Section 211(3C) of
the Companies Act, 1956 read with the General Circular 15/2013 dated
13th September 2013 of the Ministry of Corporate Affairs in respect of
Section 133 of the Companies Act, 2013, Accounting Standard 30,
Financial Instruments: Recognition and Measurement issued by the
Institute of Chartered Accountants of India to the extent it does not
contradict with any other accounting standard referred to in Section
211 (3C) [Companies (Accounting Standards) Rules, 2006 as amended] of
the Act, other recognised accounting practices and policies and the
relevant provisions of the Companies Act, 1956.
All assets and liabilities have been classified as current or non-
current as per the Company''s operating cycle and other criteria set out
in the Revised Schedule VI to the Companies Act, 1956. Based on the
nature of products and the time between the acquisition of assets for
processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current  non current classifcation of assets and
liabilities.
1.3 Revenue Recognition
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer which takes place on dispatch of
goods from the factory and port respectively.
The Company recognises income from services on rendering of services.
1.4 Fixed Assets
Tangible Assets
a) Fixed assets (except freehold land which is carried at cost) are
carried at cost of acquisition or construction or at manufacturing cost
(in case of own manufactured assets) in the year of capitalisation less
accumulated depreciation.
b) Assets acquired under finance leases are capitalised at the lower of
their fair value and the present value of minimum lease payments.
Intangible Assets
Lumpsum royalty is stated at cost incurred as per the relevant licence
agreements with the technical know-how provider less accumulated
amortisation.
1.5 Borrowing Costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised till
the month in which each asset is put to use as part of the cost of that
asset.
1.6 Depreciation / Amortisation
a) Tangible fixed assets except leasehold land are depreciated on the
straight line method on a pro-rata basis from the month in which each
asset is put to use.
Depreciation has been provided at the rates prescribed in Schedule XIV
to the Companies Act, 1956 except for certain fixed assets where, based
on the management''s estimate of the useful lives of the assets, higher
depreciation has been provided on the straight line method over the
following useful lives:
In respect of assets whose useful life has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful lives of the assets.
b) Leasehold land is amortised over the period of lease.
c) All assets, the individual written down value of which at the
beginning of the year is Rs. 5,000 or less, are depreciated at the rate
of 100%. Assets purchased during the year costing Rs. 5,000 or less are
depreciated at the rate of 100%.
d) Lump sum royalty is amortised on a straight line basis over 4 years
from the start of production of the related model.
1.7 Inventories
a) Inventories are valued at the lower of cost, determined on the
weighted average basis and net realisable value.
b) The cost of fnished goods and work in progress comprises raw
materials, direct labour, other direct costs and related production
overheads. Net realisable value is the selling price in the ordinary
course of business, less the estimated costs of completion and the
estimated costs necessary to make the sale.
c) Tools are written off over a period of three years except for tools
valued at Rs. 5,000 or less individually which are charged to revenue in
the year of purchase.
d) Machinery spares (other than those supplied along with main plant
and machinery, which are capitalised and depreciated accordingly) are
charged to revenue on consumption except those valued at Rs. 5,000 or
less individually, which are charged to revenue in the year of
purchase.
1.8 Investments
Current investments are valued at the lower of cost and fair value.
Long-term investments are valued at cost except in the case of other
than temporary decline in value, in which case the necessary provision
is made.
1.9 Research And Development
Revenue expenditure on research and development is charged against the
Profit for the year in which it is incurred. Capital expenditure on
research and development is shown as an addition to fixed assets and
depreciated accordingly.
1.10 Foreign Currency Translations And Derivative Instruments
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transactions. Exchange differences
arising on settlement of transactions are recognised as income or
expense in the year in which they arise.
b) At the balance sheet date, all monetary assets and liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the balance sheet date by recognising the exchange
difference in the statement of Profit and loss. However, the exchange
difference arising on foreign currency monetary items that qualify and
are designated as hedge instruments in a cash fow hedge is initially
recognised in ''hedge reserve'' and subsequently transferred to the
statement of Profit and loss on occurrence of the underlying hedged
transaction.
c) Effective 1st April 2008, the Company adopted Accounting Standard -
30, "Financial Instruments: Recognition and Measurement" issued by The
Institute of Chartered Accountants of India to the extent the adoption
does not contradict with the accounting standards notifed under Section
211(3C) of the Companies Act, 1956 and other regulatory requirements.
All derivative contracts (except for forward foreign exchange contracts
where underlying assets or liabilities exist) are fair valued at each
reporting date. For derivative contracts designated in a hedging
relationship, the Company records the gain or loss on effective hedges,
if any, in a hedge reserve, until the transaction is complete. On
completion, the gain or loss is transferred to the statement of Profit
and loss of that period. Changes in fair value relating to the
ineffective portion of the hedges and derivatives not qualifying or not
designated as hedges are recognised in the statement of Profit and loss
in the accounting period in which they arise.
d) In the case of forward foreign exchange contracts where an
underlying asset or liability exists, the difference between the
forward rate and the exchange rate at the inception of the contract is
recognised as income or expense over the life of the contract. Profit or
loss arising on cancellation or renewal of a forward contract is
recognised as income or expense in the year in which such cancellation
or renewal is made.
1.11 Employee benefit Costs
Short - Term Employee benefits:
Recognised as an expense at the undiscounted amount in the statement of
Profit and loss for the year in which the related service is rendered.
Post Employment and Other Long Term Employee benefits:
(i) The Company has Defined Contribution Plans for post employment
benefit namely the Superannuation Fund which is recognised by the income
tax authorities. This Fund is administered through a Trust set up by
the Company and the Company''s contribution thereto is charged to the
statement of Profit and loss every year. The Company also maintains an
insurance policy to fund a post-employment medical assistance scheme,
which is a Defined Contribution Plan administered by The New India
Insurance Company Limited. The Company''s contribution to State Plans
namely Employees'' State Insurance Fund and Employees'' Pension Scheme
are charged to the statement of Profit and loss every year.
(ii) The Company has Defined benefit Plans namely Gratuity, Provident
Fund & Retirement Allowance for employees and Other Long Term Employee
benefits i.e. Leave Encashment / Compensated Absences, the liability for
which is determined on the basis of an actuarial valuation at the end
of the year based on the Projected Unit Credit Method and any shortfall
in the size of the fund maintained by the Trust is additionally
provided for in the statement of Profit and loss. The Gratuity Fund and
Provident Fund are recognised by the income tax authorities and are
administered through Trusts set up by the Company.
Termination benefits are immediately recognised as an expense.
Gains and losses arising out of actuarial valuations are recognised
immediately in the statement of Profit and loss as income or expense.
1.12 Customs Duty
Custom duty available as drawback is initially recognised as purchase
cost and is credited to consumption of materials on exported vehicles.
1.13 Government Grants
Government grants are recognised in the statement of Profit and loss in
accordance with the related schemes and in the period in which these
accrue.
1.14 Taxes
Tax expense for the year, comprising current tax and deferred tax, is
included in determining the net Profit/ (loss) for the year.
Current tax is recognised based on assessable Profit computed in
accordance with the Income Tax Act and at the prevailing tax rate.
Deferred tax is recognised for all timing differences. Deferred tax
assets are carried forward to the extent it is reasonably / virtually
certain (as the case may be) that future taxable Profit will be
available against which such deferred tax assets can be realised. Such
assets are reviewed at each balance sheet date and written down to
refect the amount that is reasonably/ virtually certain (as the case
may be) to be realised.
Minimum Alternative Tax credit is recognised as an asset only to the
extent and when there is convincing evidence that the Company will pay
normal income tax during the specified period. Such asset is reviewed
at each balance sheet date and the carrying amount is written down to
the extent there is no longer convincing evidence to the effect that
the Company will pay normal tax during the specified period.
Deferred tax assets and liabilities are measured at the tax rates that
have been enacted or substantively enacted at the balance sheet date.
1.15 Dividend Income
Dividend from investments is recognised when the right to receive the
payment is established and when no significant uncertainty as to
measurability or collectability exits.
1.16 Interest Income
Interest income is recognised on the time basis determined by the
amount outstanding and the rate applicable and where no significant
uncertainty as to measurability or collectability exists.
1.17 Impairment of Assets
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the statement of Profit and loss to the extent the
carrying amount exceeds the recoverable amount.
1.18 Royalty
a) The Company pays / accrues for royalty in accordance with the
relevant licence agreements with the technical know- how provider.
b) The lump sum royalty incurred towards obtaining technical assistance
/ technical know-how to manufacture a new model/ car, ownership of
which rests with the technical know how provider, is recognised as an
intangible asset in accordance with the requirements of Accounting
Standard-26 "Intangible Assets". Royalty payable on sale of products
i.e. running royalty is charged to the statement of Profit and loss as
and when incurred.
1.19 Provisions and Contingencies
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the balance
sheet date and are not discounted to their present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
1.20 Leases
As a lessee
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases are charged to the statement of
Profit and loss on a straight-line basis over the period of the lease or
the terms of underlying agreement/s, as the case may be.
As a lessor
The Company has leased certain tangible assets and such leases where
the Company has substantially retained all the risks and rewards of
ownership are classified as operating leases. Lease income on such
operating leases are recognised in the statement of Profit and loss on a
straight line basis over the lease term which is representative of the
time pattern in which benefit derived from the use of the leased asset
is diminished.
1.21 Cash And Cash Equivalents
In the cash fow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.
2. SHARE CAPITAL
Rights, preferences and restriction attached to shares
The Company has one class of equity shares with a par value of Rs. 5 per
share. Each shareholder is eligible for one vote per share held. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting, except in
case of interim dividend. In the event of liquidation, the equity
shareholders are eligible to receive the remaining assets of the
Company, after distribution of all preferential amounts, in proportion
to their shareholding.
Shares allotted as fully paid up pursuant to contract(s) without
payment being received in cash (during 5 years immediately preceding
31st March 2014)
13,170,000 Equity Shares have been allotted as fully paid up during FY
2012-13 to Suzuki Motor Corporation pursuant to the scheme of
amalgamation with Suzuki Powertrain India Limited.
4. LONG TERM BORROWINGS (Refer Note 10)
1. Foreign currency loans from banks include:
- loan amounting to Rs. 2,499 million (Previous year Rs. 2,264 million)
(USD 41.71 million) taken from Japan Bank of International Cooperation
(JBIC) at an interest rate of LIBOR 0.125, repayable in 6 half yearly
instalments starting September 2014 (acquired pursuant to a scheme of
amalgamation, refer note 37). Out of the above, Rs. 833 million (Previous
year Rs. Nil) repayable within one year has been transferred to current
maturities of long term debts. The repayment of the loan is guaranteed
by Suzuki Motor Corporation, Japan (the holding company).
- other long term foreign currency loans amounting to Rs. 1,827 million
(Previous year Rs. 1,656 million) (USD 30 million) taken from banks
during the previous year at an average interest rate of Libor 1.375
and repayable in July 2015.
2. A loan amounting to Rs. 1,666 million (Previous year Rs. 1,509 million)
(USD 27.80 million) taken from the holding company at an interest rate
of LIBOR 0.48, repayable in 6 half yearly instalments starting
September 2014 (acquired pursuant to a scheme of amalgamation, refer
note 37). Out of the above, Rs. 555 million (Previous year Rs. Nil)
repayable within one year has been transferred to current maturities of
long term debts.
Mar 31, 2013
1.1 GENERAL INFORMATION
The Company is primarily in the business of manufacturing, purchase and
sale of motor vehicles, components and spare parts ("automobiles").
The other activities of the Company comprise facilitation of Pre-Owned
Car sales, Fleet Management and Car Financing.The Company is a public
company listed on the Bombay Stock Exchange (BSE) and the National
Stock Exchange (NSE).
1.2 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India underthe
historicalcost convention on an accrual basis. These financial
statements have been prepared to comply in all material respects with
the applicable accounting principles in India, the applicable
accounting standards notified under Section 211(3C) [Companies
(Accounting Standards) Rules, 2006 as amended] ofthe Companies Act,
1956, Accounting Standard 30, Financial Instruments: Recognition and
Measurement issued bythe Institute of Chartered Accountants of India to
the extent it does not contradict any other accounting standard
referred to Section 211 (3C) [Companies (Accounting Standards) Rules,
2006 as amended] ofthe Act, other recognised accounting practices and
policies and the relevant provisions ofthe Companies Act, 1956.
Allassets and liabilities have been classified as current or
non-current as per the Company''s operating cycle and other criteria
set out in the Revised Schedule VI to the Companies Act, 1956. Based on
the nature of products and the time between the acquisition of assets
for processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current - non current classification of assets and
liabilities.
1.3 REVENUE RECOGNITION
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer which takes place on dispatch of
goods from the factory and port respectively.
The Company recognises income from services on rendering of services.
1.4 FIXED ASSETS Tangible Assets
a) Fixed assets (except freehold land which is carried at cost) are
carried at cost of acquisition or construction or at manufacturing cost
(in case of own manufactured assets) in the year of capitalisation less
accumulated depreciation.
b) Assets acquired under finance leases are capitalised atthe lower of
their fair value and the present value of minimum lease payments.
Intangible Assets
Lumpsum royalty is stated at cost incurred as per the relevant licence
agreements with the technical know-how providers less accumulated
amortisation.
1.5 BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised till
the month in which each asset is putto use as partofthe cost of that
asset.
1.6 DEPRECIATION / AMORTISATION
a) Tangible fixed assets except leasehold land are depreciated on the
straight line method on a pro- rata basis from the month in which each
asset is put to use.
Depreciation has been provided at the rates prescribed in Schedule XIV
to the Companies Act, 1956 except for certain fixed assets where, based
on the management''s estimate ofthe useful lives of the assets, higher
depreciation has been provided on the straight line method over the
following useful lives:
PlantandMachinery 8-11 Years
DiesandJigs 4 Years
Electronic DataProcessing 3 Years
Equipment
In respect of assets whose useful life has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful lives of the assets.
b) Leasehold land is amortised over the period of lease.
c) All assets, the individual written down value of which atthe
beginning ofthe year is Rs. 5,000 or less, are depreciated at the rate
of 100 per cent. Assets purchased during the year costing Rs. 5,000 or
less are depreciated at the rate of 100 per cent.
d) Lump sum royalty is amortised on a straight line basis over 4 years
from the start of production ofthe related model.
1.7 INVENTORIES
a) Inventories are valued at the lower of cost, determined on the
weighted average basis and net realisable value.
b) Tools are written off over a period of three years except for tools
valued atRs. 5,000 or less individually which are charged to revenue in
the year of purchase.
c) Machinery spares (other than those supplied along with main plantand
machinery,which are capitalised and depreciated accordingly) are
charged to revenue on consumption except those valued at Rs. 5,000 or
less individually, which are charged to revenue in the year of
purchase.
1.8 INVESTMENTS
Current investments are valued at the lower of cost and fair value.
Long-term investments are valued at cost except in the case of other
than temporary decline in value, in which case the necessary provision
is made.
1.9 RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged against the
profit for the year in which it is incurred. Capital expenditure on
research and development is shown as an addition to fixed assets and
depreciated accordingly.
1.10 FOREIGN CURRENCY TRANSLATIONS AND DERIVATIVE INSTRUMENTS
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transactions. Exchange differences
arising on settlement of transactions are recognised as income or
expense in the year in which they arise.
b) At the balance sheet date, all monetary assets and liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the balance sheet date by recognising the exchange
difference in the statement of profit and loss. However, the exchange
difference arising on foreign currency monetary items that qualify and
are designated as hedge instruments in a cash flow hedge is initially
recognised in ''hedge reserve'' and subsequently transferred to the
statement of profit and loss on occurrence of the underlying hedged
transaction.
c) Effective 1st April 2008, the Company adopted Accounting
Standard-30,"Financial Instruments: Recognition and Measurement"
issued by The Institute of Chartered Accountants of India to the extent
the adoption does not contradict with the accounting standards notified
under Section 211(3C) ofthe Companies Act,1956 and other regulatory
requirements. All derivative contracts (except for forward foreign
exchange contracts where underlying assets or liabilities exist) are
fair valued at each reporting date. For derivative contracts designated
in a hedging relationship, the Company records the gain or loss on
effective hedges, if any, in a hedge reserve, until the transaction is
complete. On completion, the gain or loss is transferred to the
statement of profit and loss of that period. Changes in fair value
relating to the ineffective portion of the hedges and derivatives not
qualifying or not designated as hedges are recognised in the statement
of profit and loss in the accounting period in which they arise.
d) In the case of forward foreign exchange contracts where an
underlying asset or liability exists, the difference between the
forward rate and the exchange rate at the inception of the contract is
recognised as income or expense over the life of the contract. Profit
or loss arising on cancellation or renewal of a forward contract is
recognised as income or expense in the year in which such cancellation
or renewal is made.
1.11 EMPLOYEE BENEFIT COSTS
Short-Term Employee Benefits:
Recognised as an expense at the undiscounted amount in the statement of
profit and loss for the year in which the related service is rendered.
Post Employment and Other Long Term Employee Benefits:
(i) The Company has Defined Contribution Plans for post employment
benefit namely the Superannuation Fund which is recognised by the
income tax authorities. This Fund is administered through a Trust set
up by the Company and the Company''s contribution thereto is charged
to statement of profit and loss every year. The Company also maintains
an insurance policy to fund a post-employment medical assistance
scheme, which is a Defined Contribution Plan administered by The New
India Insurance Company Limited. The Company''s contribution to State
Plans namely Employees'' State Insurance Fund and Employees'' Pension
Scheme are charged to the statement of profit and loss every year.
(ii) The Company has Defined Benefit Plans namely Gratuity, Provident
Fund and Retirement Allowance for employees and Other Long Term
Employee Benefits i.e. Leave Encashment / Compensated Absences, the
liability for which is determined on the basis of an actuarial
valuation at the end of the year based on the Projected Unit Credit
Method and any shortfall in the size of the fund maintained bythe Trust
is additionally provided for in the statement of profit and loss. The
Gratuity Fund and Provident Fund are recognised by the income tax
authorities and is administered through Trusts setup bythe Company.
Termination benefits are immediately recognised as an expense.
Gains and losses arising out of actuarial valuations are recognised
immediately in the statement of profit and loss as income or expense.
1.12 CUSTOMS DUTY
Custom duty available as drawback is initially recognised as purchase
cost and is credited to consumption of materials on exported vehicles.
1.13 GOVERNMENT GRANTS
Government grants are recognised in the statement of profit and loss in
accordance with the related schemes and in the period in which these
accrue.
1.14 TAXES
Tax expense for the year, comprising current tax and deferred tax, is
included in determining the net profit/ (loss) forthe year.
Current tax is recognised based on assessable profit computed in
accordance with the Income Tax Act and atthe prevailing tax rate.
Deferred tax is recognised for all timing differences. Deferred tax
assets are carried forward to the extent it is reasonably / virtually
certain (as the case may be) that future taxable profit will be
available against which such deferred tax assets can be realised. Such
assets are reviewed at each balance sheet date and written down to
reflect the amount that is reasonably/virtually certain (as the case
may be) to be realised.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extentthere is convincing evidence that the Company will pay
normal income tax during the specified period. Such asset is reviewed
at each balance sheet date and the carrying amount is written down to
the extentthere is no longer convincing evidence to the effect that the
Company will pay normal tax during the specified period.
Deferred tax assets and liabilities are measured at the tax rates that
have been enacted or substantively enacted at the balance sheet date.
1.15 DIVIDEND INCOME
Dividend from investments is recognised when the right to receive the
payment is established and when no significant uncertainty as to
measurability or collectability exits.
1.16 INTEREST INCOME
Interest income is recognised on the time basis determined by the
amount outstanding and the rate applicable and where no significant
uncertainty as to measurability or collectability exists.
1.17 IMPAIRMENT OF ASSETS
At each balance sheet date,the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the statement of profit and loss to the extent the
carrying amount exceeds the recoverable amount.
1.18 ROYALTY
a) The Company pays /accrues for royalty in accordance with the
relevant licence agreements with the technical know- how provider.
b) The lumpsum royalty incurred towards obtaining technical assistance
/ technical know-how to manufacture a new model/ car, ownership of
which rests with the technical know how provider, is recognised as an
intangible asset in accordance with the requirements of Accounting
Standard-26 "Intangible Assets". Royalty payable on sale of
products i.e. running royalty is charged to the statement of profit and
loss as and when incurred.
1.19 PROVISIONS AND CONTINGENCIES
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event.it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the balance
sheet date and are not discounted to their present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
1.20 LEASES
As a lessee
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
statement of profit and loss on a straight-line basis overthe period of
the lease or the terms of underlying agreement/s as the case may be.
As a lessor
The Company has leased certain tangible assets and such leases where
the Company has substantially retained all the risks and rewards of
ownership are classified as operating leases. Lease income on such
operating leases are recognised in the statement of profit and loss on
a straight line basis over the lease term which is representative of
the time pattern in which benefit derived from the use of the leased
asset is diminished.
1.21 CASH AND CASH EQUIVALENTS
In the cash flow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.
Mar 31, 2012
1.1 GENERAL INFORMATION
The Company is primarily in the business of manufacturing, purchase and
sale of motor vehicles and spare parts ("automobiles"). The other
activities of the Company comprise facilitation of Pre-Owned Car sales,
Fleet Management and Car Financing. The Company is a public company
listed on the Bombay Stock Exchange (BSE) and the National Stock
Exchange (NSE).
1.2 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on an accrual basis. These financial statements have
been prepared to comply in all material respects with all the
applicable accounting principles in India, the applicable accounting
standards notified under Section 211(3C) of the Companies Act, 1956,
Accounting Standard 30, Financial Instruments: Recognition and
Measurement issued by the Institute of Chartered Accountants of India
to the extent it does not contradict with any other accounting standard
referred to Section 211 (3C) of the Act, other recognised accounting
practices and policies and the relevant provisions of the Companies
Act, 1956.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current - non current classification of
assets and liabilities.
1.3 REVENUE RECOGNITION
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer which takes place on dispatch of
goods from the factory / stockyard / storage area and port
respectively.
1.4 FIXED ASSETS
a) Fixed assets (except freehold land which is carried at cost) are
carried at cost of acquisition or construction or at manufacturing cost
(in case of own manufactured assets) in the year of capitalisation less
accumulated depreciation.
b) Assets acquired under finance leases are capitalised at the lower of
their fair value and the present value of minimum lease payments.
1.5 BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised till
the month in which each asset is put to use as part of the cost of that
asset.
1.6 DEPRECIATION / AMORTISATION
a) Fixed assets except leasehold land are depreciated on the straight
line method on a pro-rata basis from the month in which each asset is
put to use.
Depreciation has been provided at the rates prescribed in Schedule XIV
to the Companies Act, 1956 except for certain fixed assets where, based
on the management's estimate of the useful lives of the assets, higher
depreciation has been provided on the straight line method over the
following useful lives:
Plant and Machinery 8 - 11 Years
Dies and Jigs 4 Years
Electronic Data Processing Equipment 3 Years
In respect of assets whose useful lives has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful lives of the assets.
b) Leasehold land is amortised over the period of lease.
c) All assets, the individual written down value of which at the
beginning of the year is Rs. 5,000 or less, are depreciated at the rate
of 100 per cent. Assets purchased during the year costing Rs. 5,000 or
less are depreciated at the rate of 100 per cent.
d) Lump sum royalty is amortised on a straight line basis over 4 years
from the start of production of the related model.
1.7 INVENTORIES
a) Inventories are valued at the lower of cost, determined on the
weighted average basis, and net realisable value.
b) Tools are written off over a period of three years except for tools
valued at Rs. 5,000 or less individually which are charged to revenue in
the year of purchase.
c) Machinery spares (other than those supplied along with main plant
and machinery, which are capitalised and depreciated accordingly) are
charged to revenue on consumption except those valued at Rs. 5,000 or
less individually, which are charged to revenue in the year of
purchase.
1.8 INVESTMENTS
Current investments are valued at the lower of cost and fair value.
Long-term investments are valued at cost except in the case of a
decline in value other than temporary, in which case the necessary
provision is made.
1.9 RESEARCH AND DEVELOPMENT
Revenue expenditure on Research and Development is charged against the
profit for the year in which it is incurred. Capital expenditure on
Research and Development is shown as an addition to fixed assets and
depreciated accordingly.
1.10 FOREIGN CURRENCY TRANSLATIONS AND DERIVATIVE INSTRUMENTS
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transactions. Exchange differences
arising on settlement of transactions are recognised as income or
expense in the year in which they arise.
b) At the balance sheet date, all monetary assets and liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the balance sheet date by recognising the exchange
difference in profit and loss account. However, the exchange difference
arising on foreign currency monetary items that qualify and are
designated as hedge instruments in a cash flow hedge is initially
recognised in 'hedge reserve' and subsequently transferred to the
statement of profit & loss on occurrence of the underlying hedged
transaction.
c) Effective 1st April, 2008, the Company adopted Accounting Standard
-30, "Financial Instruments: Recognition and Measurement" issued by
The Institute of Chartered Accountants of India to the extent the
adoption does not contradict with the accounting standards notified
under Section 211(3C) of the Companies Act, 1956 and other regulatory
requirements.
d) All derivative contracts (except for forward foreign exchange
contracts where underlying assets or liabilities exist) are fair valued
at each reporting date. For derivative contracts designated in a
hedging relationship, the Company records the gain or loss on effective
hedges, if any, in a hedge reserve, until the transaction is complete.
On completion, the gain or loss is transferred to the statement of
profit and loss of that period. Changes in fair value relating to the
ineffective portion of the hedges and derivatives not qualifying or not
designated as hedges are recognised in the statement of profit and loss
in the accounting period in which they arise.
e) In the case of forward foreign exchange contracts where an
underlying asset or liability exists, the difference between the
forward rate and the exchange rate at the inception of the contract is
recognised as income or expense over the life of the contract. Profit
or loss arising on cancellation or renewal of a forward contract is
recognised as income or expense in the year in which such cancellation
or renewal is made.
1.11 EMPLOYEE BENEFIT COSTS
Short - Term Employee Benefits:
Recognised as an expense at the undiscounted amount in the statement of
profit and loss for the year in which the related service is rendered.
Post Employment and Other Long Term Employee Benefits :
(i) The Company has Defined Contribution Plans for post employment
benefit namely the Superannuation Fund which is recognised by the
income tax authorities. This Fund is administered through a Trust set
up by the Company and the Company's contribution thereto is charged to
revenue every year. The Company also maintains an insurance policy to
fund a post-employment medical assistance scheme, which is a Defined
Contribution Plan administered by The New India Insurance Company
Limited. The Company's contribution to State Plans namely Employees'
State Insurance Fund and Employees' Pension Scheme are charged to
statement of profit and loss every year.
(ii) The Company has Defined Benefit Plans namely Gratuity, Provident
Fund and Retirement Allowance for employees and Other Long Term
Employee Benefits i.e. Leave Encashment / Compensated Absences, the
liability for which is determined on the basis of an actuarial
valuation at the end of the year based on Projected Unit Credit Method
and any shortfall in the size of the fund maintained by the Trust is
additionally provided for in the statement of profit and loss. The
Gratuity Fund and Provident Fund are recognised by the income tax
authorities and is administered through Trusts set up by the Company.
Termination benefits are immediately recognised as an expense.
Gains and losses arising out of actuarial valuations are recognised
immediately in the statement of profit and loss as income or expense.
1.12 CUSTOMS DUTY
Custom duty available as drawback is initially recognised as purchase
cost and is credited to consumption of materials on exported vehicles.
1.13 GOVERNMENT GRANTS
Government grants are recognised in the statement of profit and loss in
accordance with the related schemes and in the period in which these
accrue.
1.14 TAXES
Tax expense for the year, comprising current tax and deferred tax, is
included in determining the net profit/ (loss) for the year.
Current tax is recognised based on assessable profit computed in
accordance with the Income Tax Act and at the prevailing tax rate.
Deferred tax is recognised for all timing differences. Deferred tax
assets are carried forward to the extent it is reasonably / virtually
certain that future taxable profit will be available against which such
deferred tax assets can be realised.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period.
Deferred tax assets / Minimum Alternative Tax credit are reviewed at
each balance sheet date and written down/ written up to reflect the
amount that is reasonably/ virtually certain (as the case may be) to be
realised.
Deferred tax assets and liabilities are measured at the tax rates that
have been enacted or substantively enacted at the balance sheet date.
1.15 DIVIDEND INCOME
Dividend from investments is recognised when the right to receive the
payment is established and when no significant uncertainty as to
measurability or collectability exits.
1.16 INTEREST INCOME
Interest income is recognised on the time basis determined by the
amount outstanding and the rate applicable and where no significant
uncertainty as to measurability or collectability exists.
1.17 IMPAIRMENT OF ASSETS
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the statement of profit and loss to the extent the
carrying amount exceeds the recoverable amount.
1.18 ROYALTY
a) The Company pays / accrues for royalty in accordance with the
relevant agreements with the technical know-how providers.
b) The lump sum royalty incurred towards obtaining technical assistance
/ technical know how to manufacture a new model/ car, ownership of
which rests with the technical know how provider, is recognised as an
intangible asset in accordance with the requirements of Accounting
Standard-26 "Intangible Assets". Royalty payable on sale of products
i.e. running royalty is charged to profit and loss account as and when
incurred.
1.19 PROVISIONS AND CONTINGENCIES
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made, is termed
as a contingent liability.
1.20 CASH AND CASH EQUIVALENTS
In the cash flow statement, cash and cash equivalents includes cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.
Mar 31, 2011
1) BASIS FOR PREPARATION OF ACCOUNTS
These financial statements have been prepared to comply in all material
respects with all the applicable accounting principles in India, the
applicable accounting standards notified under section 211(3C) of the
Companies Act, 1956, Accounting Standard 30, Financial Instruments:
Recognition and Measurement issued by the Institute of Chartered
Accountants of India to the extent it does not contradict any other
accounting standard referred to Section 211 (3C) of the Act, other
recognised accounting practices and policies and the relevant
provisions of the Companies Act, 1956.
2) REVENUE RECOGNITION
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer which takes place on dispatch of
goods from the factory / stockyard / storage area and port
respectively.
3) FIXED ASSETS
a) Fixed assets (except freehold land which is carried at cost) are
carried at cost of acquisition or construction or at manufacturing cost
(in case of own manufactured assets) in the year of capitalisation less
accumulated depreciation.
b) Assets acquired under finance lease are capitalized at the lower of
their fair value and the present value of minimum lease payments.
4 BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised till
the month in which each asset is put to use as part of the cost of that
asset.
5) DEPRECIATION / AMORTISATION
a) Fixed assets except leasehold assets viz land is depreciated on the
straight line method on a pro-rata basis from the month in which each
asset is put to use.
Depreciation has been provided at the rates prescribed in Schedule XIV
to the Companies Act, 1956 except for certain fixed assets where, based
on the management's estimate of the useful life of the assets, higher
depreciation has been provided on the straight line method over the
following useful lives:
Plant and Machinery 8 Ã 11 Years
Dies and Jigs 4 Years
Electronic Data Processing Equipments 3 Years
In respect of assets whose useful life has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful life of the assets.
b) Leasehold assets viz land is amortised over the period of lease.
c) All assets, the individual written down value of which at the
beginning of the year is Rs. 5,000 or less, are depreciated at the rate
of 100%. Assets purchased during the year costing Rs. 5,000 or less are
depreciated at the rate of 100%.
d) Lump sum royalty is amortized on a straight line basis over 4 years
from the start of production of the related model.
6) INVENTORIES
a) Inventories are valued at the lower of cost, determined on the
weighted average basis, and net realisable value.
b) Tools are written off over a period of three years except for tools
valued at Rs. 5,000 or less individually which are charged off to revenue
in the year of purchase.
c) Machinery spares (other than those supplied along with main plant
and machinery, which are capitalised and depreciated accordingly) are
charged to revenue on consumption except those valued at Rs. 5,000 or
less individually, which are charged off to revenue in the year of
purchase.
7) INVESTMENTS
Current investments are valued at the lower of cost and fair value.
Long-term investments are valued at cost except in the case of a
permanent diminution in their value, in which case the necessary
provision is made.
8) RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged off against
the profit of the year in which it is incurred. Capital expenditure on
research and development is shown as an addition to fixed assets and
depreciated accordingly.
9) FOREIGN CURRENCY TRANSLATIONS AND DERIVATIVE INSTRUMENTS
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transaction. Exchange differences arising
on settlement of transactions are recognised as income or expense in
the year in which they arise.
b) At the balance sheet date, all monetary assets and liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the balance sheet date by recognising the exchange
difference in profit and loss account. However, the exchange
difference arising on foreign currency monetary items that qualify and
are designated as hedge instruments in a cash flow hedge is initially
recognized in Ãhedge reserveà and subsequently transferred to profit &
loss account on occurrence of the underlying hedged transaction.
c) Effective April 1, 2008, the Company adopted Accounting Standard
-30, "Financial Instruments: Recognition and Measurement" issued by The
Institute of Chartered Accountants of India to the extent the adoption
does not contradict the accounting standards notified under Section
211(3C) of the Companies Act, 1956 and other regulatory requirements.
d) Derivative contracts (except for forward foreign exchange contracts
where underlying assets or liabilities exist) are fair valued at each
reporting date. The Company records the gain or loss on effective
hedges, if any, in a hedge reserve, until the transaction is complete.
On completion, the gain or loss is transferred to the profit and loss
account of that period. Changes in fair value relating to the
ineffective portion of the hedges and derivatives not qualifying or not
designated as hedge are recognised in the profit and loss account in
the accounting period in which they arise.
e) In case of forward foreign exchange contracts where an underlying
asset or liability exists at the balance sheet date, the difference
between the forward rate and the exchange rate at the inception of the
contract is recognised as income or expense over the life of the
contract. Profit or loss arising on cancellation or renewal of a
forward contract is recognised as income or expense in the year in
which such cancellation or renewal is made.
10) EMPLOYEE BENEFIT COSTS Short - Term Employee Benefits:
Recognised as an expense at the undiscounted amount in the profit and
loss account of the year in which the related service is rendered.
Post Employment and Other Long Term Employee Benefits :
(i) The Company has Defined Contribution Plans for post employment
benefits namely Provident Fund and Superannuation Fund which are
recognised by the income tax authorities. These Funds are administered
through Trusts and the CompanyÃs contributions thereto are charged to
revenue every year. The Company also maintains an insurance policy to
fund a post-employment medical assistance scheme, which is a Defined
Contribution Plan administered by The New India Insurance Company
Limited. The CompanyÃs contribution to State Plans namely EmployeesÃ
State Insurance Fund and Employeesà Pension Scheme are charged to
revenue every year.
(ii) The Company has Defined Benefit Plans namely Gratuity, Interest on
Provident Fund and Retirement Allowance for employees and Other Long
Term Employee Benefits i.e. Leave Encashment / Compensated Absences,
the liability for which is determined on the basis of an actuarial
valuation at the end of the year based on Projected Unit Credit Method.
The Gratuity Fund is recognised by the income tax authorities and is
administered through a Trust.
Termination benefits are recognised as an expense immediately.
Gains and losses arising out of actuarial valuations are recognised
immediately in the Profit and Loss Account as income or expense.
11) CUSTOMS DUTY
Custom duty available as drawback is initially recognised as purchase
cost and is credited to consumption on export of vehicles.
12) GOVERNMENT GRANTS
Government grants are recognised in the profit and loss account in
accordance with the related scheme and in the period in which these are
accrued.
13) TAXES
Tax expense for the year, comprising current tax and deferred tax, is
included in determining the net profit/ (loss) for the year.
Current tax is recognised based on assessable profit computed in
accordance with the Income Tax Act and at the prevailing tax rate.
Deferred tax is recognised for all timing differences. Deferred tax
assets are carried forward to the extent it is reasonably / virtually
certain that future taxable profit will be available against which such
deferred tax assets can be realised. Deferred tax assets are reviewed
at each balance sheet date and written down/ written up to reflect the
amount that is reasonably/ virtually certain (as the case may be) to be
realized.
Deferred tax assets and liabilities are measured at the tax rates that
have been enacted or substantively enacted at the balance sheet date.
14) DIVIDEND INCOME
Dividend from investments is recognized when the right to receive the
payment is established and when no significant uncertainty as to
measurability or collectability exits.
15) INTEREST INCOME
Interest income is recognised on the time basis determined by the
amount outstanding and the rate applicable and where no significant
uncertainty as to measurability or collectability exists.
16) IMPAIRMENT OF ASSETS
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the profit and loss account to the extent the carrying
amount exceeds the recoverable amount.
17) ROYALTY
a) The company pays / accrues for royalty expense in accordance with
the relevant agreements with Suzuki Motor Corporation.
b) The lump sum royalty incurred towards obtaining technical assistance
/ technical know how to manufacture a new model/ car, ownership of
which rests with the technical know how provider, is recognised as an
intangible asset in accordance with the requirements of Accounting
Standard-26 ÃIntangible AssetsÃ. Royalty payable on sale of products
i.e. running royalty is charged to profit and loss account as and when
incurred.
18) PROVISIONS AND CONTINGENCIES
The Company creates a provision when there is a present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure of contingent liability is made when there is a possible
obligation or a present obligation that will probably not require
outflow of resources or where a reliable estimate of the obligation
cannot be made.
Mar 31, 2010
1) BASIS FOR PREPARATION OF ACCOUNTS
These financial statements have been prepared to comply in all material
respects with all the applicable accounting principles in India, the
applicable accounting standards notified under section 211(30 of the
Companies Act, 1956 and the relevant provisions of the Companies Act,
1956.
2) REVENUE RECOGNITION
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer which takes place on dispatch of
goods from the factory/stockyard/storage area and port respectively.
3) FIXEDASSETS
a) Fixed assets (except freehold land which is carried at cost) are
carried at cost of acquisition or construction or at manufacturing cost
(in case of own manufactured assets) in the year of capitalisation less
accumulated depreciation.
b) Assets acquired under finance lease a re capitalized at the lower of
their fair value and the present value of minimum lease payments.
c) The lump sum royalty incurred towards obtaining technical
assistance/technical know how, ownership of which rests with the
technical know how provider, to manufacture any new car, model is
recognized as an intangible asset in accordance with the requirements
of Accounting Standard-26 "Intangible Assets". Royalty payable on sale
of products i.e. running royalty is charged to profit and loss account
as and when incurred.
4) BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised till
the month in which each asset is put to use as part of the cost of that
asset.
5) DEPRECIATION
a) Fixed assets except leasehold assets viz land and vehicles are
depreciated on the straight line method on a pro-rata basis from the
month in which each asset is put to use.
Depreciation has been provided at the rates prescribed in Schedule XIV
to the Companies Act, 1956 except for certain fixed assets where, based
on the managements estimate of the useful life of the assets, higher
depreciation has been provided on the straight line method over the
following useful lives:
Plantand Machinery 8-11 Years
DiesandJigs 4Years
Electronic Data Processing Equipments 3 Years
In respect of assets whose useful life has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful life of the assets.
b) Leasehold assets viz land & vehicles are amortised over the period
of lease,
c) All assets, the individual written down value of which at the
beginning of the year is Rs. 5,000 or less, are depreciated at the rate
of 100%. Assets purchased during the year costing Rs. 5,000 or less are
depreciated at the rate of 100%.
d) Lump Sum royalty is amortised on a straight line basis over4 years
from the start of production of the related mode.
6) INVENTORIES
a) Inventories are valued at the lower of cost, determined on the
weighted average basis, and net realisable value.
b) Tools are written off over a period of three years except for tools
valued at Rs, 5,000 oi less individually which are charged off to
revenue in the year of purchase.
c) Machinery spares (other than those supplied along with main plant
and machinery which are capitalized and depreciated accordingly) are
charged to revenue on consumption except those valued at Rs. 5,000 or
less individually, which are charged off to revenue in the year of
purchase.
7) INVESTMENTS
Current investments are valued at the lower of cost and fair value.
Long-term investments are valued at cost except in the case of a
permanent diminution in their value, in which case the necessary
provision is made.
8) RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged off against
the profit of the year in which it is incurred. Capital expenditure on
research and development is shown as an addition to fixed assets and
depreciated accordingly.
9) FOREIGN CURRENCYTRANSLATIONS AND DERIVATIVE INSTRUMENTS
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transaction. Exchange differences arising
on settlement of transactions are recognised as income or expense in
the year in which they arise.
b) At the balance sheet date, all monetary assets and liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the balance sheet date by recognizing the exchange
difference in profit and loss account. However, the exchange difference
arising on foreign currency monetary items that qualify and are
designated as hedge instrument in a cash flow hedge is initially
recognized in hedge reserve and subsequently transferred to profit &
loss account on occurrence of the underlying hedged transaction.
c) Effective April 1, 2008, the Company adopted Accounting Standard-30,
"Financial Instruments: Recognition and Measurement" issued by The
Institute of Chartered Accountants of India to the extent the adoption
does not contradict with the accounting standards notified under
Section 211(3C)ofthe Companies Act, 1956 and other regulatory
requirements.
d) Derivative contracts are fair valued at each reporting date. The
Company records the gain or loss on effective hedges, if any, in a
hedge reserve, until the transaction is complete. On completion, the
gain or loss is transferred to the profit and loss account of that
period. Change in fair value relating to the ineffective portion of the
hedges and derivatives not qualifying or not designated as hedge is
recognized in the profit and loss account in the accounting period in
which it arises.
e) In case of forward foreign exchange contracts where an underlying
asset or liability exists at the balance sheet date, the difference
between the forward rate and the exchange rate at the inception of the
contract is recognised as income or expense over the life of the
contract. Profit or loss arising on cancellation or renewal of a
forward contract is recognised as income or expense in the year in
which such cancellation or renewal is made.
10) EMPLOYEE BENEFIT COSTS
The Company has Defined Contribution Plans for post employment benefits
namely Provident Fund and Superannuation Fund which are recognised by
the income tax authorities. These Funds are administered through Trusts
and the Companys contributions thereto are charged to revenue every
year. The Company also maintains an insurance policy to fund a
post-employment medical assistance scheme, which is a Defined
Contribution plan administered by The New India Insurance Company
Limited. The Companys contribution to State Plans namely Employees
State Insurance Fund and Employees Pension Scheme are charged to
revenue every year.
The Company has Defined Benefit Plans namely Leave Encashment/
Compensated Absence, Gratuity, Interest on Provident Fund and
Retirement Allowance for employees, the liability for which is
determined on the basis of an actuarial valuation at the end of the
year. The Gratuity Fund is recognised by the income tax authorities and
is administered through a Trust.
Termination benefits are recognised as an expense immediately.
Gains and losses arising out of actuarial valuations are recognised
immediately in the Profit and Loss Account as income or expense.
1 CUSTOMS DUTY
Custom duty available as drawback is initially recognized as purchase
cost and is credited to consumption on export of vehicles.
12) GOVERNMENTGRANTS
Government grants are recognised in the profit and loss account in
accordance with the related scheme and in the period in which these are
accrued.
13) TAXES
Tax expense for the period, comprising current tax, fringe benefit tax
and deferred tax, is included in determining the net profit/ (loss) for
theyear.
Current tax is recognised based on assessable profit computed in
accordance with the IncomeTax Act and at the prevailing tax rate.
Deferred tax is recognized for all timing differences. Deferred tax
assets are carried forward to the extent it is reasonably/virtually
certain that future taxable profit will be available against which such
deferred tax assets can be realized. Deferred tax assets are reviewed
at each balance sheet date and written down/written up to
reflecttheamount that is reasonably/virtually certain (as the case may
be) to be realized.
Deferred taxassets and liabilities are measured at the tax rates that
have been enacted or substantively enacted at the balance sheet date.
14) DIVIDEND INCOME
Dividend from investments is recognized when the right to receive the
payment is established and when no significant uncertainty as to
measurability or coilectability exits.
15) INTEREST INCOME
Interest income is recognized on the time basis determined by the
amount outstanding and the rate applicable and where no significant
uncertainty as to measurability or coilectability exists.
16) IMPAIRMENTOF ASSETS
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the profit and loss account to the extent the carrying
amount exceeds the recoverable amount.
17) PROVISIONS AND CONTINGENCIES
The Company creates a provision when there is a present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure of contingent liability is made when there is a possible
obligation or a present obligation that will probably not require
outflow of resources or where a reliable estimate of the obligation
cannot be made.