Ashok Leyland

1.1 Financial statements are prepared in accordance with the generally
 accepted accounting principles including accounting standards in India
 under historical cost convention except so far as they relate to
 revaluation of certain land and buildings.
 
 1.2 Use of estimates
 
 The preparation of the financial statements in conformity with the
 generally accepted accounting principles requires the management to
 make estimates and assumptions that affect the reported amounts of
 assets and liabilities on the date of the financial statements,
 disclosure of contingent liabilities and reported amounts of revenues
 and expenses for the year. Estimates are based on historical
 experience, where applicable, and other assumptions that the management
 believes are reasonable under the circumstances. Actual results could
 vary from these estimates and any such differences are dealt with in
 the period in which the results are known/ materialise.
 
 2.  Fixed assets and depreciation / amortisation
 
 2.1 Cost of all civil works (including electrification and fittings) is
 capitalised with the exception of alterations and modifications of a
 capital nature to existing structures where the cost of such alteration
 or modification is Rs 100,000 and below. Other fixed assets, including
 intangible assets and assets given on lease, where the cost exceeds Rs.
 10,000 and the estimated useful life is two years or more, is
 capitalised. Cost of initial spares and tools is capitalised along with
 the respective assets. Cost of fixed assets is net of credits under
 Cenvat / Vat Scheme. Expenditure directly related and incidental to
 construction are capitalised upto the date of attainment of commercial
 production. Interest and other related costs, including amortised cost
 of borrowings attributable only to major projects are capitalised as
 part of the cost of the respective assets. Exchange differences are
 captialised to the extent dealt with in para 5.2 below.
 
 2.2 Assets are depreciated / amortised, as below, on straight line
 basis:
 
 a) Leasehold land, over 40 years or the period of the lease, whichever
 is less;
 
 b) Leasehold land and buildings subject to revaluation, is calculated
 on the respective revalued amounts, over the balance useful life as
 determined by the valuers in the case of buildings and as per (a) above
 in the case of land;
 
 c) Buildings, plant and machinery (except assets subject matter of
 impairment) and other assets, including intangible assets and assets
 given on lease, over their estimated useful lives or lives derived from
 the rates specified in Schedule XIV to the Companies Act, 1956,
 whichever is lower;
 
 d) Assets subject to impairment, on the assets revised carrying
 amount, over its remaining useful life.
 
 2.3 Depreciation/amortisation is charged for the full year on the
 additions made during the first half of the year and for six months on
 the additions made during the second half of the year. No depreciation
 is provided for in respect of assets disposed off during the year.
 
 3.  Investments
 
 Long term investments are stated at cost less provision for diminution
 other than temporary, if any. Current investments are valued at lower
 of cost and fair value.
 
 4.  Inventories
 
 4.1 Inventories are valued at lower of cost and net realisable value;
 cost being ascertained on the following basis:
 
 - Stores, spares, consumable tools, raw materials and components: on
 monthly moving weighted average basis. In respect of works-made
 components, cost includes applicable production overheads.
 
 - Work-in-progress, finished / trading goods: under absorption costing
 method.
 
 4.2 Cost includes taxes and duties and is net of credits under Cenvat /
 Vat Scheme.
 
 4.3 Cost of patterns and dies is amortised equally over five years.
 
 4.4 Surplus / obsolete / slow moving inventories are adequately
 provided for.
 
 5.  Foreign currency transactions and derivatives
 
 5.1 Foreign currency transactions are recorded at the rates prevailing
 on the date of the transaction. Monetary assets and liabilities in
 foreign currency are translated at closing rate. Exchange differences
 arising on settlement or translation of monetary items other than those
 mentioned in para 5.2 below are recognized as income or expense in the
 Profit and Loss Account.
 
 5.2 Exchange differences on translation or settlement of long term
 foreign currency monetary items (i.e. whose term of settlement exceeds
 twelve months from date of its origination) at rates different from
 those at which they were initially recorded or reported in the previous
 financial statements, insofar as it relates to acquisition of
 depreciable assets are adjusted to the cost of the assets. In other
 cases, these are accumulated in Foreign currency monetary item
 translation difference account and amortised by recognition as income
 or expense in each period over the balance term of such items till
 settlement occurs but not beyond March 31, 2011.
 
 5.3 Gains and losses on certain forward contracts designated as
 effective Cash flow hedges as per Accounting Standard 30 - Financial
 Instruments are recognised in the Hedge Reserve Account till the
 underlying forecasted transaction occurs.
 
 5.4 Gains and losses on all other derivatives (including forward
 contracts not designated as Cash flow hedge) are recognised in the
 Profit and Loss account. Premium or discount on forward contracts is
 amortized over the life of the contract.
 
 5.5 Investments in equity capital of companies registered outside India
 are carried in the Balance Sheet at the rates prevailing on the date of
 the transaction.
 
 5.6 Income / expenditure of overseas branches are recognized at the
 average rate prevailing during the month in which transaction occurred.
 
 6.  Amortisation of deferred expenditure
 
 Expenditure incurred on issue of debentures / raising loans is
 amortised over the period of such borrowings. Premium paid on
 prepayment of any borrowing is amortised over the unexpired period
 thereof or sixty months, whichever is less.
 
 7.  Revenue recognition
 
 Revenue from sale of products is recognised on despatch or
 appropriation of goods in accordance with the terms of sale and is
 inclusive of excise duty and export incentives, but net of incentive on
 sales including commission, rebates and discounts. Revenue arising due
 to price escalation claim is recognised in the period when such claim
 is made in accordance with terms of sale.
 
 Revenue from services is recognised in accordance with the specific
 terms of contract on performance.
 
 8.  Government grants
 
 Grants in the form of capital/investment subsidy are treated as Capital
 reserve. Export incentives and incentives in the nature of subsidies
 given by the Government are reckoned in revenue in the year of
 eligibility.
 
 9.  Research and Development costs
 
 Expenditure on the design and production of prototypes is charged to
 revenue as incurred. Product development costs, including knowhow
 developed / acquired, incurred on new vehicle/ engine platforms,
 variants on existing platforms and aggregates are recognised as
 Intangible assets and amortised.
 
 10.  Employee benefits
 
 10.1 Short term employee benefit obligations are estimated and provided
 for.
 
 10.2 Post employment benefits and other long term employee benefits
 
 Defined contribution plans:
 
 The Companys contribution to provident fund, superannuation fund,
 employee state insurance and other funds are determined under the
 relevant schemes and / or statute and charged to revenue.
 
 Defined benefit plans and compensated absences:
 
 The Companys liability towards gratuity, other retirement benefits and
 compensated absences are actuarially determined at each balance sheet
 date using the projected unit credit method. Actuarial gains and losses
 are recognised in revenue.
 
 10.3 Termination benefits
 
 Compensation under voluntary retirement scheme is amortised over lesser
 of thirty six months and the period from incurrence of expenditure to
 March 31, 2010.
 
 11.  Product warranties
 
 Provision for product warranties is made for contractual obligations in
 accordance with the policy in force and is estimated for the unexpired
 period.
 
 12.  Deferred tax
 
 Deferred tax is recognised on timing differences, being the difference
 between taxable income and accounting income that originate in one
 period and are capable of reversing in one or more subsequent periods.
 
 Deferred tax assets on unabsorbed depreciation and carry forward of
 losses are recognised only to the extent there is a virtual certainty
 of its realisation.
 
 13 The information required to be disclosed under the Micro, Small and
 Medium Enterprises Development Act, 2006 has been determined to the
 extent such parties have been identified on the basis of information
 available with the Company. There are no over dues to parties on
 account of principal amount and / or interest and accordingly no
 additional disclosures have been made.
 
 14 There is no current tax expense for the year as the Minimum
 Alternate Tax of Rs.2,223.66 lakhs is subject to credit under section
 115JAA(1A) of the Income Tax Act, 1961 and hence is recognised as an
 asset as advances in schedule 1.10 to the Accounts.
 
 15 Figures for the previous year have been regrouped / amended wherever
 necessary.