1) System of accounting
i) The Company follows the mercantile system of accounting and
recognises income and expenditure on an accrual basis except in case of
ii) Financial statements are prepared under the historical cost
convention. These costs are not adjusted to reflect the impact of
changing value in the purchasing power of money.
iii) Estimates and assumptions used in the preparation of the financial
statements and disclosures are based upon Management''s evaluation of
the relevant facts and circumstances as of the date of the financial
statements, which may differ from the actual results at a subsequent
2) Revenue recognition
i) Domestic sales are accounted for on dispatch from the point of sale
i.e. when the risks are transferred to the buyer.
ii) Export sales are recognised on the date of the mate''s
receipt/shipped on board and initially recorded at the relevant
exchange rates prevailing on the date of the transaction.
b) Export incentives
Export incentives are accounted for on export of goods if the
entitlements can be estimated with reasonable accuracy and conditions
precedent to claim are fulfilled.
c) Other income
The Company recognises income (including rent etc.) on accrual basis.
However, where the ultimate collection of the same lacks reasonable
certainty, revenue recognition is postponed to the extent of
d) Investment income
(1) Interest income is accrued over the period of the investment and
net of amortisation of premium/discount with respect to fixed income
securities, thereby recognising the implicit yield to maturity, with
reference to coupon dates, where applicable. However, income is accrued
only where interest is serviced regularly and is not in arrears, as per
the guidelines framed by the Management.
(2) Dividend is accrued in the year in which it is declared whereby a
right to receive is established.
(3) Profit/loss on sale of investments is recognised on the contract
3) Fixed assets and depreciation
A. Tangible assets
i) Tangible assets except land are carried at cost of acquisition,
construction or at manufacturing cost, as the case may be, less
accumulated depreciation and amortisation. Land is carried at cost of
acquisition. Cost represents all expenses directly attributable to
bringing the asset to its working condition for its expected use.
ii) Land and buildings acquired/constructed, not intended to be used in
the operations of the Company are categorised as investment property
under Investments and not as Fixed assets.
B. Depreciation and amortisation
(a) Leasehold land
Premium on leasehold land is amortised over the period of lease.
(b) On other tangible assets
i. a. From the current year, depreciation is provided on a pro rata
basis on the straight line method over the useful lives
of the assets as against the past practice of computing depreciation at
rates with reference to the life of assets subject to the minimum of
rates provided by Schedule XIV of the Companies Act, 1956.
b. Useful life of assets are determined by the Management by internal
technical assessments except in case where such assessment suggests a
life significantly different from those prescribed by Schedule II- Part
''C'', where the useful life is as assessed and certified by a technical
ii. Assets which are depreciated over useful life/residual value
different than those indicated by Schedule II are as under:
iii. Depreciation on additions is being provided on pro rata basis from
the month of such additions.
iv. Depreciation on assets sold, discarded or demolished during the
year is being provided at their rates upto the month in which such
assets are sold, discarded or demolished.
C. Intangible assets
a) Technical know-how acquired
Technical know-how acquired is stated at acquisition cost (including
income-tax and R&D cess but net of accumulated amortisation). Technical
know-how is amortised equally over a period of estimated useful life
i.e. six years.
b) Technical know-how developed by the Company
i) Expenditure incurred on know-how developed by the Company, post
research stage, is recognised as an intangible asset, if and only if
the future economic benefits attributable are probable to flow to the
Company and the costs can be measured reliably.
ii) The cost of technical know-how developed is amortised equally over
its estimated life i.e. generally three years from the date of
D. Impairment of assets
An assessment is done at each Balance Sheet date as to whether there
are any indications that an asset may be impaired.
If any such indication exists, an estimate of the recoverable amount of
the asset/Cash Generating Unit (CGU) is made. Where the carrying value
of the asset/CGU exceeds the recoverable amount, the carrying value is
written down to the recoverable amount.
a) Fixed income securities are carried at cost, less amortisation of
premium/discount, as the case may be, and provision for diminution, if
any, as considered necessary.
b) Investments other than fixed income securities intended to be held
for a long-term are valued at cost of acquisition, less provision for
diminution as considered necessary.
c) Investments with maturity of less than 3 months from the date of
acquisition are classified as cash and cash equivalents.
d) Long-term investments are carried at cost. However, provision for
diminution is made to recognise a decline, other than temporary, in the
value of the investments. However, current investments, representing
fixed income securities with a maturity less than 1 year and investment
not intended to be held for a period more than 1 year, are stated at
lower of cost or fair value.
e) The Management has laid out guidelines for the purpose of assessing
likely impairments in investments and for making provisions based on
given criteria. Appropriate provisions are accordingly made, which in
the opinion of the Management are considered adequate.
f) Investment property representing immoveable property intended to be
leased out and not intended to be used by the Company are carried at
cost, less depreciation computed in the manner prescribed for Fixed
Cost of inventories have been computed to include all costs of
purchases, cost of conversion and other costs incurred in bringing the
inventories to their present location and condition.
a) Finished stocks of vehicles, auto spare parts and work-in-progress
are valued at cost or net realisable value whichever is lower. Cost of
finished stocks of vehicles lying in the factory premises, branches,
depots are valued inclusive of excise duty.
b) Stores, packing material and tools are valued at cost arrived at on
weighted average basis or net realisable value, whichever is lower.
c) Raw materials and components are valued at cost arrived at on
weighted average basis or lower of cost and net realisable value, as
circumstances demand. However, obsolete and slow moving items are
valued at cost or estimated realisable value whichever is lower.
d) Inventory of machinery spares and maintenance materials not being
material are expensed in the year of purchase.
However, machinery spares forming key components specific to a
machinery and held as insurance spares are capitalised alongwith the
cost of the asset.
e) Goods in transit are stated at actual cost incurred upto the date of
6) Foreign currency transactions
a) On initial recognition, all foreign currency transactions are
recorded at foreign exchange rate on the date of transaction.
b) Monetary items of current assets and liabilities in foreign currency
outstanding at the close of financial year are revalorised at the
appropriate exchange rates prevailing at the close of the year.
c) The gain or loss on decrease/increase in reporting currency due to
fluctuations in foreign exchange rates, in case of monetary current
assets and liabilities in foreign currency, are recognised in the
Statement of Profit and Loss in the manner detailed in note 38 to
d) Fixed assets purchased at liaison offices in foreign exchange are
recorded at their historical cost computed with reference to the
average rate of foreign exchange remitted to the liaison office.
e) Foreign exchange contracts/derivatives:
i) Cash flow hedges -
Changes in the fair value of a derivative hedging instrument that
qualify for hedge accounting as per the principles of hedge accounting
and designated as a cash flow hedge are recognised as Hedge reserve and
presented within Reserves and surplus, to the extent that the hedge is
effective. To the extent that the hedge is ineffective, changes in fair
value are recognised in the Statement of Profit and Loss. If the
hedging instrument no longer meets the criteria for hedge accounting,
expires or is sold, terminated or exercised, then hedge accounting is
The cumulative gain or loss previously recognised in Hedge reserve,
remains there until the forecast transaction occurs.
When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time is recognised in the Statement of
Profit and Loss. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in Hedge reserve
is immediately transferred to the Statement of Profit and Loss.
ii) Profits and losses arising from either cancellation or utilisation
of contracts are recognised in the Statement of Profit and Loss as
detailed in note 38 to financial statements.
7) Research and Development expenditure
Research and Development expenditure is charged to revenue under the
natural heads of account in the year in which it is incurred. Payments
for R&D work by contracted agency are being expensed out upto the stage
However, expenditure incurred at development phase, where it is
reasonably certain that outcome of research will be commercially
exploited to yield economic benefits to the Company, is considered as
an Intangible asset and accounted in the manner specified in clause 3 C
8) Employee benefits
a) Privilege leave entitlements
Privilege leave entitlements are recognised as a liability, in the
calendar year of rendering of service, as per the rules of the Company.
As accumulated leave can be availed and/or encashed at any time during
the tenure of employment the liability is recognised at the actuarially
determined value by an appointed actuary.
Payment for present liability of future payment of gratuity is being
made to approved gratuity fund, which fully covers the same under Cash
Accumulation Policy and Debt fund of the Life Insurance Corporation of
India (LIC) and Bajaj Allianz Life Insurance Company Ltd. (BALIC).
However, any deficit in plan assets managed by LIC and BALIC as
compared to the actuarial liability is recognised as a liability.
Defined contribution to superannuation fund is being made as per the
scheme of the Company.
d) Provident fund contributions are made to Company''s Provident Fund
Trust. Deficits, if any, of the fund as compared to actuarial liability
is to be additionally contributed by the Company and hence recognised
as a liability.
e) Defined contribution to Employees Pension Scheme 1995 is made to
Government Provident Fund Authority.
a) Provision for tax is made for the current accounting period
(reporting period) on the basis of the taxable profits computed
in accordance with the Income Tax Act, 1961. Excess/short provisions
and interest thereon are recognised only on completion of assessment or
where adjustments made by the Assessing Officer are disputed, on
receiving the ''Order Giving Effect'' to the tax determined by the CIT
(Appeals) and thereafter on final settlement of further disputes.
b) Deferred tax resulting from timing difference between book profits
and taxable profits are accounted for to the extent deferred tax assets
and liabilities are expected to crystalise with reasonable certainty.
However, in case of deferred tax assets, representing unabsorbed
depreciation or carried forward losses, are recognised, if and only if
there is virtual certainty that there would be adequate future taxable
income against which such deferred tax assets can be realised. Deferred
tax is recognised on adjustments to revenue reserves to the extent the
adjustments are allowable as deductions in determination of taxable
income and they would reverse out in future periods.
10) Provisions and contingent liabilities
The Company creates a provision when there is 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
such as product warranty costs. A disclosure for a contingent liability
is made when there is a possible obligation or a present obligation
that may, but probably will not, require an outflow of resources. When
there is a possible obligation or a present obligation in respect of
which the likelihood of outflow of resources is remote, no provision or
disclosure is made.
11) Operating 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.
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. Initial direct costs are recognised as an expense
in the Statement of Profit and Loss in the period in which they are
12) Earnings per share
Basic earnings per share is 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. Earnings
considered in ascertaining the Company''s earnings per share is the net
profit for the period. The weighted average number of equity shares
outstanding during the period and all periods presented is adjusted for
events, such as bonus shares, 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 share outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
a. Of the above
i. 144,683,510 equity shares were allotted as fully paid bonus shares
by capitalisation of General reserve by the Company on 13 September
ii. 101,183,510 equity shares were allotted as fully paid up pursuant
to the scheme of arrangement for demerger of erstwhile Bajaj Auto Ltd.
(now Bajaj Holdings & Investment Ltd.) by the Company on 3 April 2008.
iii. 1,805,071 equity shares thereof (excluding 1,805,071 equity shares
allotted as bonus shares thereon) are deemed to be issued by way of
Euro Equity Issue represented by Global Depository Receipts (GDR)
evidencing Global Depository Shares outstanding on the record date.
Outstanding GDRs at the close of the year were 60,044 (60,044)