SENSEX NIFTY India | Accounting Policy > Auto - 2 & 3 Wheelers > Accounting Policy followed by Bajaj Auto - BSE: 532977, NSE: BAJAJ-AUTO

Bajaj Auto

BSE: 532977|NSE: BAJAJ-AUTO|ISIN: INE917I01010|SECTOR: Auto - 2 & 3 Wheelers
Jun 23, 15:40
-20.75 (-0.73%)
VOLUME 18,093
Jun 23, 15:44
-21.4 (-0.75%)
VOLUME 154,967
Mar 15
Accounting Policy Year : Mar '16
Basis of preparation
 These financial statements have been prepared in accordance with the
 generally accepted accounting principles in India under the historical
 cost convention on accrual basis. Pursuant to section 133 of the
 Companies Act, 2013 read with rule 7 of Companies (Accounts) Rules,
 2014, till the standards of accounting or any addendum thereto are
 prescribed by Central Government in consultation and recommendation of
 the National Financial Reporting Authority, the existing Accounting
 Standards notified under the Companies Act, 1956 shall continue to
 apply. Consequently, these financial statements have been prepared to
 comply in all material aspects with the Accounting Standards notified
 under section 211(3C) of the Companies Act, 1956 [Companies (Accounting
 Standards) Rules, 2006, as amended] and other relevant provisions of
 the Companies Act, 2013.
 The Ministry of Corporate Affairs (MCA) has notified the Companies
 (Accounting Standards) Amendment Rules, 2016 vide its notification
 dated 30 March 2016. The said notification is applicable to accounting
 period commencing on or after the date of notification i.e. 1 April
 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 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 or non-current classification of
 assets and liabilities.
 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
 significant uncertainties.
 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
 a) Sales
 i) Domestic sales are accounted for on dispatch from the point of sale
 i.e. when the significant risks and rewards of ownership 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 debt
 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.  Depreciation is provided on a pro rata basis on the straight
 line method over the useful lives of the assets.
 b.  Where a significant component (in terms of cost) of an asset has an
 economic useful life shorter than that of it''s corresponding asset, the
 component is depreciated over it''s shorter life.
 c.  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
 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 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
 commercial production.
 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.
 4) Investments
 a) Debt 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 debt securities intended to be held for a
 long-term are valued at cost of acquisition, less provision for
 diminution as considered necessary. Other long-term investments
 maturing within 12 months from the close of the year (current
 maturities) are reclassified as current investments.
 c) Investments intended to be held for a period shorter than 12 months
 and investments having a maturity of less than 12 months from the date
 of acquisition are considered as current investments. 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
 debt 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 immovable 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
 5) Inventories
 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 along with the cost of the asset.
 e) Goods in transit are stated at actual cost incurred upto the date of
 Balance Sheet.
 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
 financial statements.
 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
 discontinued prospectively.  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
 of completion.  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 b) above.
 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 on the basis of an
 independent actuarial valuation.
 b) Gratuity
 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 liability on the basis of an independent actuarial
 valuation is recognised as a liability.
 c) Superannuation
 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 liability on the
 basis of an independent actuarial valuation 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.
 9) Taxation
 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 and the Income Computation and
 Disclosure Standards prescribed therein.  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.
Source :
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