SENSEX NIFTY India | Accounting Policy > Auto - Cars & Jeeps > Accounting Policy followed by Mahindra and Mahindra - BSE: 500520, NSE: M&M

Mahindra and Mahindra

BSE: 500520|NSE: M&M|ISIN: INE101A01026|SECTOR: Auto - Cars & Jeeps
May 26, 16:00
14.7 (1.11%)
VOLUME 36,698
May 26, 15:54
13.35 (1.01%)
VOLUME 335,223
Mar 15
Accounting Policy Year : Mar '16
(A) Basis of Accounting :
 The financial statements of the Company have been prepared in
 accordance with the generally accepted accounting principles in India
 (Indian GAAP) and comply with the Accounting Standards prescribed under
 Section 133 of the Companies Act, 2013.
 (B) Tangible Assets :
 (a) (i) Tangible assets are carried at cost less depreciation except as
 stated in (ii) below. Cost includes financing cost relating to borrowed
 funds attributable to the construction or acquisition of qualifying
 tangible assets upto the date the assets are ready for use.  Where the
 acquisition of depreciable tangible assets are financed through long
 term foreign currency loans (having a term of 12 months or more at the
 time of their origination) the exchange differences on such loans are
 added to or subtracted from the cost of such depreciable tangible
 When an asset is scrapped or otherwise disposed off, the cost and
 related depreciation are removed from the books of account and
 resultant profit (including capital profit) or loss, if any, is
 reflected in the Statement of Profit and Loss.
 (ii) Land and Buildings, had been revalued as at 31st October, 1984 at
 depreciated replacement values on the basis of a valuation made by a
 firm of Chartered Surveyors and Valuers. The indices, if any, used are
 not stated in the valuation.
 (b) (i) Leasehold land is amortised over the period of the lease.
 (ii) Depreciation is calculated on Straight Line method over the
 estimated useful life of all assets. These lives are in accordance with
 Schedule II to the Companies Act, 2013, other than the following asset
 classes based on the Company''s expected usage pattern supported by
 technical assessment :
 (a) Certain items of Plant and Equipment - 2 years, 3 years, 5 years, 7
 years, 10 years, 20 years and 25 years as the case may be.
 (b) Buildings (Roads) - 15 years.
 (c) Vehicles - 5 years.
 (C) Intangible Assets :
 Intangible assets are carried at cost and amortised on a Straight Line
 Basis so as to reflect the pattern in which the asset''s economic
 benefits are consumed.
 (a) Technical Knowhow :
 The expenditure incurred is amortised over the estimated period of
 benefit, not exceeding six years commencing with the year of purchase
 of the technology.
 (b) Development Expenditure :
 The expenditure incurred on technical services and other
 project/product related expenses are amortised over the estimated
 period of benefit, not exceeding five years.
 (c) Software Expenditure :
 The expenditure incurred is amortised over three financial years
 equally commencing from the year in which the expenditure is incurred.
 (d) Others :
 The expenditure incurred is amortised over the estimated period of
 benefit, not exceeding ten years.
 (D) Impairment of Assets :
 The carrying value of assets/cash generating units at each balance
 sheet date are reviewed for impairment. If any indication of impairment
 exists, the recoverable amount of such assets is estimated and
 impairment is recognised, if the carrying amount of these assets
 exceeds their recoverable amount. The recoverable amount is the greater
 of the net selling price and their value in use. Value in use is
 arrived at by discounting the future cash flows expected to arise from
 the continuing use of an asset and from its disposal at the end of its
 useful life to their present value based on an appropriate discount
 factor. When there is indication that an impairment loss recognised for
 an asset in earlier accounting periods no longer exists or may have
 decreased, such reversal of impairment loss is recognised in the
 Statement of Profit and Loss, except in case of revalued assets.
 (E) Investments :
 Long term investments are valued at cost. However, provision for
 diminution in value is made to recognise a decline other than temporary
 in the value of investments. Current investments are valued at the
 lower of cost and fair value, determined by category of investment.
 (F) Inventories :
 Inventories comprise all costs of purchase, conversion and other costs
 incurred in bringing the inventories to their present location and
 Raw materials and bought out components are valued at the lower of cost
 or net realisable value. Cost is determined on the basis of the
 weighted average method.
 Finished goods produced and purchased for sale, manufactured components
 and work-in-progress are carried at cost or net realisable value
 whichever is lower. Excise duty is included in the value of finished
 goods inventory.
 Stores, spares and tools other than obsolete and slow moving items are
 carried at cost. Obsolete and slow moving items are valued at cost or
 estimated net realisable value, whichever is lower.
 (G) Foreign Exchange Transactions :
 Transactions in foreign currencies (other than firm commitments and
 highly probable forecast transactions) are recorded at the exchange
 rates prevailing on the date of transaction. Monetary items are
 translated at the year-end rates. The exchange difference between the
 rate prevailing on the date of transaction and on the date of
 settlement as also on translation of monetary items at the end of the
 year (other than those relating to long term foreign currency monetary
 items) is recognised as income or expense, as the case may be.
 Exchange differences relating to long term foreign currency monetary
 items, to the extent they are used for financing the acquisition of
 depreciable assets are added to, or subtracted from, the cost of such
 depreciable assets and the balance accumulated in ''Foreign Currency
 Monetary Item Translation Difference Account'', under Reserves and
 Surplus, and amortised over the balance term of the long term monetary
 Any premium or discount arising at the inception of a forward exchange
 contract is recognised as income or expense over the life of the
 contract, except where the contract is designated as a cash flow hedge.
 (H) Derivative Instruments and Hedge Accounting :
 The Company uses foreign currency forward contracts and currency
 options to hedge its risks associated with foreign currency
 fluctuations relating to certain firm commitments and highly probable
 forecast transactions. The Company does not hold derivative financial
 instruments for speculative purposes. The Company has applied to such
 contracts the hedge accounting principles set out in Accounting
 Standard 30 ''Financial Instruments : Recognition and Measurement''(AS
 30) by marking them to market at each reporting date.
 Changes in the fair value of the contracts that are designated and
 effective as hedges of future cash flows are recognised directly in
 Hedging Reserve Account and the ineffective portion is recognised in
 the Statement of Profit and Loss.
 (I) Revenue Recognition :
 Sale of products and services including export benefits thereon are
 recognised when the products are shipped or services rendered.
 Excise duty recovered on sales is included in Revenue from
 Dividend from investments are recognised in the Statement of Profit and
 Loss when the right to receive payment is established.
 (J) Government Grants :
 The Company, directly or indirectly through a consortium of Mahindra
 Group Companies, is entitled to various incentives from government
 authorities in respect of manufacturing units located in developing
 regions. The Company accounts for its entitlement as income on accrual
 (K) Employee Benefits :
 In respect of Defined Contribution Plans/Defined Benefit Plans/Long
 term Compensated Absences :
 Company''s contributions paid/payable during the year to Superannuation
 Fund, ESIC and Labour Welfare Fund are recognised in the Statement of
 Profit and Loss.
 Contributions to Provident Fund are made to a Trust administered by the
 Company/Regional Provident Fund Commissioner and are charged to
 Statement of Profit and Loss as incurred. The Company is liable for the
 contribution and any shortfall in interest between the amount of
 interest realised by the investments and the interest payable to
 members at the rate declared by the Government of India in respect of
 the Trust administered by the Company.
 Company''s liability towards gratuity, long term compensated absences,
 post retirement medical benefit and post retirement housing allowance
 schemes are determined by independent actuaries, using the projected
 unit credit method. Past services are recognised on a straight line
 basis over the average period until the benefits become vested.
 Actuarial gains and losses are recognised immediately in the Statement
 of Profit and Loss as income or expense. Obligation is measured at the
 present value of estimated future cash flows using a discounted rate
 that is determined by reference to the market yields at the Balance
 Sheet date on Government Bonds where the currency and terms of the
 Government Bonds are consistent with the currency and estimated terms
 of the defined benefit obligation.
 In respect of Employee Stock Option Scheme :
 The compensation cost of stock options granted to employees is measured
 by the Intrinsic Value Method. The intrinsic value, which is the excess
 of the market price of the underlying equity shares as of the date of
 the grant over the exercise price of the option, is recognised and
 amortised on straight line basis over the vesting period.
 (L) Borrowing Costs :
 All borrowing costs are charged to the Statement of Profit and Loss
 except :
 (i) Borrowing costs that are attributable to the acquisition or
 construction of qualifying tangible and intangible assets that
 necessarily take a substantial period of time to get ready for their
 intended use, which are capitalised as part of the cost of such assets.
 (ii) Expenses incurred on raising long term borrowings are amortised
 over the period of borrowings. On early buyback, conversion or
 repayment of borrowings, any unamortised expenditure is fully written
 off in that year.
 (M) Product Warranty :
 In respect of warranties given by the Company on sale of certain
 products, the estimated costs of these warranties are accrued at the
 time of sale. The estimates for accounting of warranties are reviewed
 and revisions are made as required.
 (N) Leases :
 The Company''s significant leasing arrangements are in respect of
 operating leases for premises (residential, office, stores, godowns,
 computer hardware etc.). The leasing arrangements, which are not
 non-cancellable, range between eleven months and five years generally,
 and are usually renewable by mutual consent on agreed terms. The
 aggregate lease rentals payable are charged as rent.
 (0) Taxes on Income :
 Current tax is determined as the amount of tax payable in respect of
 taxable income for the year. Deferred tax is recognised, subject to
 consideration of prudence, on timing differences, being the difference
 between taxable income and accounting income that originate in one
 period and are capable of reversal in one or more subsequent periods.
 Deferred tax assets arising on account of unabsorbed depreciation or
 carry forward of tax losses are recognised only to the extent that
 there is virtual certainty supported by convincing evidence that
 sufficient future tax income will be available against which such
 deferred tax assets can be realised.
 Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
 gives future economic benefits in the form of adjustment to future
 income tax liability, is considered as an asset if there is convincing
 evidence that the Company will pay normal income tax against which the
 MAT paid will be adjusted.
 (P) Segment Reporting :
 Segments are identified having regard to the dominant source and nature
 of risks and returns and internal organisation and management
 Revenues and expenses have been identified to the segment based on
 their relationship to the business activity of the segment.
 Income/Expenses relating to the enterprise as a whole and not allocable
 on a reasonable basis to business segments are reflected as unallocated
 corporate income/expenses. Inter-segment transfers are at prices which
 are generally market led.
 (K) The Guidance Note on Accounting for Employee Share-based Payments
 issued by The Institute of Chartered Accountants of India requires that
 shares allotted to a Trust but not transferred to employees be reduced
 from Share Capital and Reserves and Surplus.  Accordingly, the Company
 has reduced the Share Capital by Rs. 13.73 crores (2015 : Rs. 14.04
 crores) and Securities Premium Account by Rs.  256.78 crores (2015 :
 Rs. 258.30 crores) for the 2,74,61,619 shares of Rs. 5 each (2015 :
 2,80,82,384 shares of Rs. 5 each) held by the Trust pending transfer to
 the eligible employees.
 The Share Capital of the Company has also been reduced and the General
 Reserve increased by Rs. 0.50 crores (2015 : Rs. 0.81 crores) for the
 9,96,958 bonus shares of Rs. 5 each (2015 : 16,17,722 bonus shares of
 Rs. 5 each) issued by the Company in September, 2005 to the Trust but
 not yet transferred by the Trust to the employees.
Source :
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