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. These financial statements have been
prepared to comply in all material aspects with the accounting
standards notified under Section 211(3C) [Companies (Accounting
Standards) Rules, 2006, as amended] and the other 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 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) 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.
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.
The Company recognises income on accrual basis. However where the
ultimate collection of the same lacks reasonable certainty, revenue
recognition is postponed to the extent of uncertainty.
(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. 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) Fixed Assets
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.
(B) Depreciation and amortisation
(a) Leasehold land
Premium on leasehold land is amortised over the period of lease.
(b) On Pressure Die Casting (PDC) Dies
Depreciation on certain PDC Dies is provided over the estimated
economic life of the dies or at the rates specified in Schedule XIV to
the Companies Act, 1956, whichever is higher, proportionate from the
month they are put to use.
(c) On other Fixed Assets
Depreciation on all assets is provided on ''Straight Line basis'' in
accordance with the provisions of Section 205(2)(b) of the Companies
Act 1956, in the manner and at the rates specified in Schedule XIV to
the said Act.
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 technical 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.
a) Fixed income securities remaining with the company on vesting of the
manufacturing undertaking of erstwhile
Bajaj Auto Limited, 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 necessary.
d) 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.
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.
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
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 38 to
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
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.
iii) Refer note 26 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.
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 of the Life Insurance Corporation of India (LIC)
and Bajaj Allianz Life Insurance Company Limited (BALIC). However, any
deficit in Plan Assets managed by LIC and BALIC as compared to the
actuarial liability is recognised as a liability immediately.
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.
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.
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. 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.
b. Further, of the above:-
101,183,510 equity shares were allotted as fully paid up pursuant to
the scheme of arrangement for demerger of erstwhile Bajaj Auto Limited
(now Bajaj Holdings & Investment Limited) by the Company on 3 April
1,805,071 equity shares thereof 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 169,088 (220,134)
c. Terms/rights attached to equity shares
The company has only one class of equity shares having a par value of Rs.
10 per share. Each holder of equity shares is entitled to one vote per
share. The dividend proposed by the Board of Directors and approved by
the shareholders in the Annual General Meeting is paid in Indian
rupees. In the event of liquidation of the Company, the holders of
equity shares will be entitled to receive remaining assets of the
Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.