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
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 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
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) 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
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
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
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.
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.
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.
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.
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.
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.