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Bajaj Auto
BSE: 532977|NSE: BAJAJ-AUTO|ISIN: INE917I01010|SECTOR: Auto - 2 & 3 Wheelers
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« Mar 13
Accounting Policy Year : Mar '14
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
 date.
 
 2) Revenue recognition:
 
 a) Sales:
 
 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
 uncertainty.
 
 d) Investment income:
 
 (1) Interest income is accrued over the period of the loan/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
 date.
 
 3) Fixed assets and depreciation
 
 (A) Fixed assets
 
 i) Fixed assets except freehold land are carried at cost of
 acquisition, construction or at manufacturing cost, as the case may be,
 less accumulated depreciation and amortisation. Freehold land is
 carried at cost of acquisition.
 
 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 Fixed assets
 
 Depreciation is provided at the rates specified in Schedule XIV of the
 Companies Act, 1956 or at rates computed with reference to the economic
 life of the assets where the estimated economic life is shorter than
 the life inferred by the Schedule XIV rates such as aircraft which is
 written off over ten years i.e. depreciation rate of 9.5% vis a vis
 Schedule XIV rate of 5.6%.
 
 i.  Depreciation on additions is being provided on prorata basis from
 the month of such additions.
 
 ii.  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.
 
 4) Intangible assets
 
 a) Technical know-how acquired
 
 Expenditure on technical know-how acquired (including income-tax and
 R&D cess) is being amortised equally over a period of 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.
 
 5) Investments
 
 a) Fixed income securities remaining with the Company on vesting of the
 manufacturing undertaking of erstwhile Bajaj Auto Ltd., are carried at
 their fair market values as at 1 April 2007 where the carrying costs of
 such investments were higher on that date, less amortisation of
 premium/ discount thereafter, as the case may be.
 
 b) Other 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.
 
 c) 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.
 
 d) Investments with maturity of less than 3 months from the date of
 acquisition are classified as cash and cash equivalents.
 
 e) Investments made by the Company are, generally, of a long-term
 nature, hence diminutions in value of quoted and unquoted investments
 are not considered to be of a permanent nature. 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.
 
 f) 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.
 
 g) Investment property is carried at cost, less depreciation computed
 in the manner prescribed for Fixed assets.
 
 6) 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. 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. However, obsolete and slow moving items are
 valued at cost or estimated 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) Machinery spares and maintenance materials are charged out as
 expense 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.
 
 7) Foreign currency transactions
 
 a) 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.
 
 b) 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 37 to
 financial statements.
 
 c) 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.
 
 d) 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. Refer
 note 25 to financial statements for disclosure.
 
 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 37 to financial statements.
 
 8) Research & Development expenditure
 
 Research & 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 4 b) above.
 
 9) 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.
 
 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 actuarial liability 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 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.
 
 10) 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. 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 crystallise 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.
 
 11) 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.
Source : Dion Global Solutions Limited
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