Mar 31, 2023
1. General Information
Hero MotoCorp Limited (the Company) is a public company domiciled and incorporated under the provisions of the Companies Act, 1956 on January 19, 1984. The Company''s registered office and principal place of business is The Grand Plaza, Plot No. 2, Nelson Mandela Road, Vasant Kunj - Phase II, New Delhi - 110070, India. The shares of the Company are listed on two stock exchanges in India i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is engaged in the manufacturing and selling of motorised two-wheelers, spare parts and related services. The Company is a leading two wheeler manufacturer and has a dominant presence in domestic market.
The standalone financial statements for the year ended March 31, 2023 were approved by the Board of Directors and authorised for issue on May 04, 2023.
2. Basis of preparation and presentation
The Standalone financial statements (âfinancial statements") have been prepared to comply in all material aspects with the Indian accounting standard (Ind AS) notified under section 133 of the Companies Act,2013, read with Companies (Indian Accounting standards) Rules 2015 issued thereunder and other relevant provisions of the Companies Act,2013 (the Act) as amended from time to time.
The standalone financial statements have been prepared on the historical cost basis except for certain financial instruments, net defined benefit asset/liability and liabilities for equity settled share based payment arrangements that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. These standalone financial statements are presented in Indian Rupee (INR), which is also the Company''s functional currency. All amounts have been rounded-off to the nearest crores, up to two decimals unless otherwise stated.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
Based on the nature of products/ activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as less than 12 months for the purpose of classification of its assets and liabilities as current and non-current.
3. Significant Accounting Policies
Revenue is recognised upon transfer of control of promised products or services to customers for an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue excludes taxes or duties collected on behalf of the government
H Revenue from sale of goods is recognised when control of goods has been transferred to the buyer and performance obligation has been achieved, as per the terms of the sales.
H Revenue from providing services is recognised in the accounting period in which services are rendered.
H Revenue from service is based on number of services provided to the end of reporting period as a proportion of the total number services to be provided.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
A liability is recognised where payments are received from customers before transferring control of the goods being sold or providing services to the customer.
The Company disaggregates revenue from contracts with customers by nature of goods and service.
Dividend income is recorded when the right to receive payment is established. Interest income is recognised using the effective interest method.
Royalty income is recognised on accrual basis in accordance with the substance of their relevant agreements.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the
economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a right-of-use asset (âROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortised cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Refer note 7A for other disclosures.
In preparing the standalone financial statements of the Company, transactions in currencies other than the Company''s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.
Exchange differences on monetary items are recognised in the Statement of profit and loss in the period in which they arise.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of profit and loss in the period in which they are incurred.
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
Government grants are recognised in the Statement of profit and loss on a systematic basis over the periods in which the Company recognises the related costs as expenses, if any, for which the grants are intended to compensate.
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Payments to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions.
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising
actuarial gains and losses and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of profit and loss. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
H service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements);
H net interest expense or income; and H re-measurement
The Company presents the first two components of defined benefit costs in the statement of profit and loss in the line item Employee benefit expense and third components is present in other comprehensive income.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plans.
Liabilities recognised in respect of wages and salaries and other short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service and are expensed as the related services are provided.
Liabilities recognised in respect of other long-term employee benefits such as long term service awards and compensated absences are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date based on the actuarial valuation using the projected unit credit method carried out at the year-end. Re measurement gain or losses are recognised in the statement of profit and loss in the period in which they arise.
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the
fair value of equity-settled share-based transactions are set out in note 40.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straightline basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Share option''s outstanding account.
3.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they are related to income taxes levied by the same tax authority.
Current and deferred tax are recognised in the Statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Property, plant and equipment (including furniture, fixtures, vehicles, etc.) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses. Freehold land is not depreciated.
Property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of property, plant and equipment and capitalised borrowing cost. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to statement of profit and loss during the reporting period in which they are incurred.
Depreciation of these assets, on the same basis as-other property assets, commences when the assets are ready for their intended use.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straightline method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method as per the useful lives prescribed in Schedule II to the Companies Act, 2013, other than moulds and dies which are depreciated over a period of 3-8 years grouped under property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and loss.
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.
I nternally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
H the technical feasibility of completing the intangible asset so that it will be available for use or sale H the intention to complete the intangible asset and use or sell it;
H the ability to use or sell the intangible asset;
H how the intangible asset will generate probable future economic benefits;
H the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and H the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure
incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in the Statement of profit and loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the Statement of profit and loss when the asset is derecognised.
Intangible assets such as expenditure on model fee etc. are amortised on a straight line method over a period of 5 years and computer software are amortised on a straight line method over a period of 6 years.
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).Recoverable amount is the higher of fair value less costs of disposal and value in use.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For impairment testing, assets that don''t generate independent cash flows are grouped together into cash generating units (CGU''s). Each CGU represents the smallest group of assets that generate cash inflows that are largely independent of the cash inflows of other assets or CGU''s.
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash- generating unit
to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of profit and loss. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated depreciation) had no impairment loss been recognised for the asset in prior years.
Inventories are stated at the lower of cost and net realisable value. Cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. Costs of inventories are determined on a moving weighted average. Finished goods and work-in-progress include appropriate proportion of overheads. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency,
average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise-being typically two to five years.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets except for trade receivables that do not have a significant financing component which are measured at transaction price and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through the Statement of profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through the Statement of profit and loss are recognised immediately in the Statement of profit and loss.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial recognition):
H the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
H the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (âFVTOCI") (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial recognition):
H the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
H the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in the Statement of profit and loss for FVTOCI debt instruments.
All other financial assets are subsequently measured at fair value.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
I ncome is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the Statement of profit and loss and is included in the âOther income" line item.
I nvestments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in the Statement of profit and loss. The net gain or loss recognised in the Statement of profit and loss incorporates any dividend or interest earned on the financial asset and is included in the ''Other income'' line item. Dividend on financial assets at FVTPL is recognised when the company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Investment in subsidiaries and associates are carried at cost in the standalone financial statements.
The Company applies the expected credit loss for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions.
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intents either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
Debt and equity instruments issued by Company are classified as either financial liabilities or as'' equity in accordance with the substance of the contractual
arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included under ''Finance costs''.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability.
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts, option contracts, etc.
Foreign currency derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the Statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Statement of profit and loss depends on the nature of the hedging relationship and the nature of the hedged item.
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
The following are the areas of estimation uncertainty and critical judgements that the management has made in the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognised in the standalone financial statements:-
(a) Recoverability of intangible asset
Capitalisation of cost in intangible assets under development is based on management''s judgement that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. Based on evaluations carried out, the Company''s management has determined that there are no factors which indicates that these assets have suffered any impairment loss.
(b) Defined benefit plans
The cost of the defined benefit plan and other postemployment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
(c) Provision and contingent liability
On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Contingent loss that are considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Contingent gain are not recognised until the
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash natu re and any deferrals or accruals of past or futu re cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year/period.
Diluted earnings per share is computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the standalone financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company''s accounting policies, which are described in note 3, the management of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
contingency has been resolved and amounts are received or receivable.
Management reviews the useful lives of depreciable assets at each reporting date. As at March 31, 2023 management assessed that the useful lives represent the expected utility of the assets to the Company. Further, there is no significant change in the useful lives as compared to previous year.
During the year, the Company assessed the investment in equity instrument of subsidiary and associate companies carried at cost for impairment testing. Some of these companies are start-ups or are at early stage of their operations and are expected to generate positive cash flows in the future years. Detailed analysis has been carried out on the future projections and the Company is confident that the investments do not require any impairment.
During the year, management has assessed the conditions attached to grants which have been met and has assessed whether the grants will be received or not and the period in which it will be received. Basis assessment, the Company has recognised the government grants in the Statement of profit and loss and accordingly classified as current and non-current assets.
The classification of compulsory convertible debentures, as equity or debt instrument, is based on management''s judgement and evaluation of applicable criteria.
Recent accounting pronouncements Ministry of Corporate Affairs (âMCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, as below:
I nd AS 1 - Presentation of Financial Statements - This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and the impact of the amendment is insignificant in the standalone financial statements.
I nd AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - This amendment has introduced a definition of ''accounting estimates'' and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there is no impact on its standalone financial statements.
Ind AS 12 - Income Taxes - This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there is no impact on its standalone financial statement
The Company will evaluate the impact of the above, where applicable, on the financial statements and give impact of the same in the relevant period
Mar 31, 2022
1. GENERAL INFORMATION
Hero MotoCorp Limited (the Company) is a public company domiciled and incorporated under the provisions of the Companies Act, 1956 on January 19, 1984. The Company''s registered office and principal place of
business is The Grand Plaza, Plot No. 2, Nelson Mandela Road, Vasant Kunj - Phase II, New Delhi - 110070,
India. The shares of the Company are listed on two stock exchanges in India i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is engaged in the manufacturing and selling of motorised two-wheelers, spare parts and related services. The Company is a leading two wheeler manufacturer and has a dominant presence in domestic market.
The standalone financial statements for the year ended March 31, 2022 were approved by the Board of Directors and authorised for issue on May 03, 2022.
2. BASIS OF PREPARATION AND PRESENTATION
The standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards)
Rules, 2015 notified under section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
The standalone financial statements have been prepared on the historical cost basis except for certain financial instruments, net defined benefit asset/liability and liabilities for equity settled share based payment arrangements that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. These standalone financial statements are presented in Indian Rupee (INR), which is also the Company''s functional currency. All amounts have been rounded-off to the nearest crores, up to two decimals unless otherwise stated.
Based on the nature of products/ activities of the Company and the normal time between acquisition of
assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as less than 12 months for the purpose of classification of its assets and liabilities as current and non-current.
3. SIGNIFICANT ACCOUNTING POLICIES
Revenue is recognised upon transfer of control of promised products or services to customers for an
amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue excludes taxes or duties collected on behalf of the government.
⢠Revenue from sale of goods is recognised when control of goods are transferred to the buyer which is generally on dispatch for domestic sales and on dispatch/ delivery on local port in India for export
sales, as per the terms of the sale.
⢠Revenue from providing services is recognized in the accounting period in which services are rendered.
⢠Revenue from service is based on number of services provided to the end of reporting period as a proportion
of the total number of services to be provided.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for volume discounts, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
A liability is recognised where payments are received from customers before transferring control of the goods
being sold or providing services to the customer.
The Company disaggregates revenue from contracts with customers by nature of goods and service.
Dividend income is recorded when the right to receive payment is established. Interest income is recognised using the effective interest method.
Royalty income is recognized on accrual basis in accordance with the substance of their relevant agreements.
3.2 Leasing
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company as a lessee
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses
whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
In preparing the standalone financial statements of the Company, transactions in currencies other than the Company''s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.
Exchange differences on monetary items are recognised in the Statement of profit and loss in the period in which they arise.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of profit and loss in the period in which they are incurred.
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
Government grants are recognised in the Statement of profit and loss on a systematic basis over the periods in which the Company recognises the related costs as expenses, if any, for which the grants are intended to compensate.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Payments to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions.
Defined benefit plans
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising
actuarial gains and losses and the return on plan assets
(excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of profit and loss. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
⢠service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements);
⢠net interest expense or income; and
⢠re-measurement
The Company presents the first two components of defined benefit costs in the statement of profit and loss in the line item Employee benefit expense and third components is present in other comprehensive income.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plans.
Short-term employee benefits
Liabilities recognised in respect of wages and salaries and other short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service and are expensed as the related services are provided.
Other long-term employee benefits
Liabilities recognised in respect of other long-term employee benefits such as long term service awards and compensated absences are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date based on the actuarial valuation using the projected unit credit method carried out at the year-end. Re measurement gain or losses are recognised in the statement of profit and loss in the period in which they arise.
3.7 Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 40.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Share option''s outstanding account.
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as
reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated
using tax rates that have been enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the
Hero MotoCorp Limited (the Company) is a public company domiciled and incorporated under the provisions of the Companies Act, 1956 on January 19, 1984. The Company''s registered office and principal place of
business is The Grand Plaza, Plot No. 2, Nelson Mandela Road, Vasant Kunj - Phase II, New Delhi - 110070,
India. The shares of the Company are listed on two stock exchanges in India i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is engaged in the manufacturing and selling of motorised two-wheelers, spare parts and related services. The Company is a leading two wheeler manufacturer and has a dominant presence in domestic market.
The standalone financial statements for the year ended March 31, 2022 were approved by the Board of Directors and authorised for issue on May 03, 2022.
2. BASIS OF PREPARATION AND PRESENTATION
The standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards)
Rules, 2015 notified under section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
The standalone financial statements have been prepared on the historical cost basis except for certain financial instruments, net defined benefit asset/liability and liabilities for equity settled share based payment arrangements that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. These standalone financial statements are presented in Indian Rupee (INR), which is also the Company''s functional currency. All amounts have been rounded-off to the nearest crores, up to two decimals unless otherwise stated.
Based on the nature of products/ activities of the Company and the normal time between acquisition of
assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as less than 12 months for the purpose of classification of its assets and liabilities as current and non-current.
3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Revenue Recognition
Revenue is recognised upon transfer of control of promised products or services to customers for an
amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue excludes taxes or duties collected on behalf of the government.
⢠Revenue from sale of goods is recognised when control of goods are transferred to the buyer which is generally on dispatch for domestic sales and on dispatch/ delivery on local port in India for export
sales, as per the terms of the sale.
⢠Revenue from providing services is recognized in the accounting period in which services are rendered.
⢠Revenue from service is based on number of services provided to the end of reporting period as a proportion
of the total number of services to be provided.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for volume discounts, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
A liability is recognised where payments are received from customers before transferring control of the goods
being sold or providing services to the customer.
The Company disaggregates revenue from contracts with customers by nature of goods and service.
Dividend income is recorded when the right to receive payment is established. Interest income is recognised using the effective interest method.
Royalty income is recognized on accrual basis in accordance with the substance of their relevant agreements.
3.2 Leasing
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company as a lessee
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses
whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
In preparing the standalone financial statements of the Company, transactions in currencies other than the Company''s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.
Exchange differences on monetary items are recognised in the Statement of profit and loss in the period in which they arise.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of profit and loss in the period in which they are incurred.
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
Government grants are recognised in the Statement of profit and loss on a systematic basis over the periods in which the Company recognises the related costs as expenses, if any, for which the grants are intended to compensate.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Payments to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions.
Defined benefit plans
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising
actuarial gains and losses and the return on plan assets
(excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of profit and loss. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
⢠service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements);
⢠net interest expense or income; and
⢠re-measurement
The Company presents the first two components of defined benefit costs in the statement of profit and loss in the line item Employee benefit expense and third components is present in other comprehensive income.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plans.
Short-term employee benefits
Liabilities recognised in respect of wages and salaries and other short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service and are expensed as the related services are provided.
Other long-term employee benefits
Liabilities recognised in respect of other long-term employee benefits such as long term service awards and compensated absences are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date based on the actuarial valuation using the projected unit credit method carried out at the year-end. Re measurement gain or losses are recognised in the statement of profit and loss in the period in which they arise.
3.7 Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 40.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Share option''s outstanding account.
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as
reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated
using tax rates that have been enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they are related to income taxes levied by the same tax authority.
Current and deferred tax are recognised in the Statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Property, plant and equipment (including furniture,
fixtures, vehicles, etc.) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses. Freehold land is not depreciated.
Property, plant and equipment in the course of
construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of property, plant and equipment and capitalised borrowing cost. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to statement of profit and loss during the reporting period in which they are incurred.
Depreciation of these assets, on the same basis as-other property assets, commences when the assets are ready for their intended use.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction)
less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method as per the useful lives prescribed in Schedule II to the Companies Act, 2013, other than moulds and dies which are depreciated over a period of 3-8 years grouped under property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and loss.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the
following have been demonstrated:
⢠the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
⢠the intention to complete the intangible asset and use or sell it;
⢠the ability to use or sell the intangible asset;
⢠how the intangible asset will generate probable future economic benefits;
⢠the availability of adequate technical, financial and
other resources to complete the development and to use or sell the intangible asset; and
⢠the ability to measure reliably the expenditure attributable to the intangible asset during
its development.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they are related to income taxes levied by the same tax authority.
Current and deferred tax are recognised in the Statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Property, plant and equipment (including furniture,
fixtures, vehicles, etc.) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses. Freehold land is not depreciated.
Property, plant and equipment in the course of
construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of property, plant and equipment and capitalised borrowing cost. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to statement of profit and loss during the reporting period in which they are incurred.
Depreciation of these assets, on the same basis as-other property assets, commences when the assets are ready for their intended use.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction)
less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method as per the useful lives prescribed in Schedule II to the Companies Act, 2013, other than moulds and dies which are depreciated over a period of 3-8 years grouped under property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and loss.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the
following have been demonstrated:
⢠the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
⢠the intention to complete the intangible asset and use or sell it;
⢠the ability to use or sell the intangible asset;
⢠how the intangible asset will generate probable future economic benefits;
⢠the availability of adequate technical, financial and
other resources to complete the development and to use or sell the intangible asset; and
⢠the ability to measure reliably the expenditure attributable to the intangible asset during
its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in the Statement of profit and loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the Statement of profit and loss when the asset is derecognised.
Useful lives of intangible assets
Intangible assets such as expenditure on model fee etc. are amortised on a straight line method over a period of 5
years and computer software are amortised on a straight line method over a period of 6 years.
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).Recoverable amount is the higher of fair value less costs of disposal and value in use.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For impairment testing, assets that don''t generate independent cash flows are grouped together into cash generating units (CGU''s). Each CGU represents the smallest group of assets that generate cash inflows that are largely independent of the cash inflows of other assets or CGU''s.
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash- generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of profit and loss. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount.
The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated depreciation) had no impairment loss been recognized for the asset in prior years.
Inventories are stated at the lower of cost and net realisable value. Cost of inventories includes expenditure incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing them to their present location and condition. Costs of inventories are determined on a moving weighted average. Finished goods and work-in-progress include appropriate proportion of overheads. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Warranties
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency, average cost of warranty claims and management
estimates regarding possible future incidence based on corrective actions on product failures. The timing
of outflows will vary as and when warranty claim will arise- being typically two to five years.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through the Statement of profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through the Statement of profit and loss are recognised immediately in the Statement of profit and loss.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the
financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial
recognition):
⢠the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (âFVTOCI") (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial recognition):
⢠the asset is held within a business model whose objective is achieved both by collecting contractual
cash flows and selling financial assets; and
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in the Statement of profit and loss for FVTOCI debt instruments.
All other financial assets are subsequently measured at fair value.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the Statement of profit and loss and is included in the âOther income" line item.
Financial assets at fair value through the Statement of profit and loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In
addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in the Statement of profit and loss. The net gain or loss recognised in the Statement of profit and loss incorporates any dividend or interest earned on the financial asset and is included in the ''Other income'' line item. Dividend on financial assets at FVTPL is recognised when the company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Investments in subsidiaries and associates
Investment in subsidiaries and associates are carried at cost in the standalone financial statements.
Impairment of financial assets
The Company applies the expected credit loss for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally
enforceable right to set off the amounts and it intents either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
3.16 Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability
and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Financial liabilities
Financial liabilities that are not held-for-trading and
are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included under ''Finance costs''.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability.
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
The Company enters into a variety of derivative financial
instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts, option contracts, etc.
Foreign currency derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the Statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Statement of profit and loss depends on the nature of the hedging relationship and the nature of the hedged item.
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company accounting policies,
which are described in note 3, the management of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
The following are the areas of estimation uncertainty and critical judgements that the management has made in
the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognised in the standalone financial statements:-
(a) Recoverability of intangible asset
Capitalisation of cost in intan
Mar 31, 2021
1. General Information
Hero MotoCorp Limited (the Company) is a public company domiciled and incorporated under the provisions of the Companies Act, 1956 on January 19, 1984. The Company''s registered office and principal place of business is The Grand Plaza, Plot No. 2, Nelson Mandela Road, Vasant Kunj - Phase II, New Delhi - 110070, India. The shares of the Company are listed on two stock exchanges in India i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is engaged in the manufacturing and selling of motorised two-wheelers, spare parts and related services. The Company is a leading two wheeler manufacturer and has a dominant presence in domestic market.
The standalone financial statements for the year ended March 31, 2021 were approved by the Board of Directors and authorised for issue on May 06, 2021.
2. Basis of preparation and presentation
The standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
The standalone financial statements have been prepared on the historical cost basis except for certain financial instruments, net defined benefit asset/liability and liabilities for equity settled share based payment arrangements that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. These standalone financial statements are presented in Indian Rupee (INR), which is also the Company''s functional currency. All amounts have been rounded-off to the nearest crores, up to two decimals unless otherwise stated.
Based on the nature of products/ activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and noncurrent.
3. Significant Accounting Policies
Revenue is recognised upon transfer of control of promised products or services to customers for an amount that reflects
the consideration which the Company expects to receive in exchange for those products or services. Revenue excludes taxes or duties collected on behalf of the government
⢠Revenue from sale of goods is recognised when control of goods are transferred to the buyer which is generally on dispatch for domestic sales and on dispatch/ delivery on local port in India for export sales.
⢠Revenue from providing services is recognized in the accounting period in which services are rendered. Revenue from service is based on number of services provided to the end of reporting period as a proportion of the total number services to be provided.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
A liability is recognised where payments are received from customers before transferring control of the goods being sold or providing services to the customer.
The Company disaggregates revenue from contracts with customers by nature of goods and service.
Dividend income is recorded when the right to receive payment is established. Interest income is recognised using the effective interest method.
Royalty income is recognized on accrual basis in accordance with the substance of their relevant agreements.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use of asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee,
except for leases with a term of twelve months or less (shortterm leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use of assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use of assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right-of-use of assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right-of-use of assets if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Refer note 7A for other disclosures.
In preparing the standalone financial statements of the Company, transactions in currencies other than the Company''s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in the Statement of profit and loss in the period in which they arise.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of profit and loss in the period in which they are incurred.
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in the Statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs, if any, for which the grants are intended to compensate.
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Payments to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions.
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of profit and loss. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
⢠service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements);
⢠net interest expense or income; and
⢠re-measurement
The Company presents the first two components of defined benefit costs in the Statement of profit and loss in the line item Employee benefit expense.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plans.
Liabilities recognised in respect of wages and salaries and other short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service and are expensed as the related services are provided.
Liabilities recognised in respect of other long-term employee benefits such as long term service awards and compensated absences are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date based on the actuarial valuation using the projected unit credit method carried out at the year-end. Re measurement gain or losses are recognised in the statement of profit and loss in the period in which they arise.
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 40.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straightline basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Share option''s outstanding account.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported
in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they are related to income taxes levied by the same tax authority.
Current and deferred tax are recognised in the Statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
The Company elected to exercise the option permitted under Section 115BAA of the Income-tax Act, 1961 as introduced by the Taxation Laws (Amendment) Act, 2019. Accordingly, the Company has recognised Provision for Income tax for the year ended March 31, 2021 and March 31, 2020 and re-measured its deferred tax assets /liabilities basis the rate prescribed in the said section.
Property, plant and equipment (including furniture, fixtures, vehicles, etc.) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the
balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses. Freehold land is not depreciated.
Property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of property, plant and equipment and capitalised borrowing cost. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to statement of profit and loss during the reporting period in which they are incurred.
Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straightline method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method as per the useful lives prescribed in Schedule II to the Companies Act, 2013, other than moulds and dies which are depreciated over a period of 3-8 years grouped under property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and loss.
3.10 Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated
useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
⢠the technical feasibility of completing the intangible asset so that it will be available for use or sale;
⢠the intention to complete the intangible asset and use or sell it;
⢠the ability to use or sell the intangible asset;
⢠how the intangible asset will generate probable future economic benefits;
⢠the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
⢠the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in the Statement of profit and loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the Statement of profit and loss when the asset is derecognised.
Intangible assets such as expenditure on model fee etc. are amortised on a straight line method over a period of 5 years
and computer software are amortised on a straight line method over a period of 6 years.
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs of disposal and value in use.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For impairment testing, assets that don''t generate independent cash flows are grouped together into cash generating units (CGU''s). Each CGU represents the smallest group of assets that generate cash inflows that are largely independent of the cash inflows of other assets or CGU''s.
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash- generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of profit and loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the Statement of profit and loss.
Inventories are stated at the lower of cost and net realisable value. Cost of inventories includes expenditure incurred in
acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. Costs of inventories are determined on a moving weighted average. Finished goods and work-inprogress include appropriate proportion of overheads. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency, average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise- being typically two to five years.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through the Statement of profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through the Statement of profit and loss are recognised immediately in the Statement of profit and loss.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial recognition):
⢠the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income ("FVTOG") (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial recognition):
⢠the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
⢠the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in the Statement of profit and loss for FVTOCI debt instruments.
All other financial assets are subsequently measured at fair value.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the Statement of profit and loss and is included in the "Other income" line item.
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition
to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation
eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in the Statement of profit and loss. The net gain or loss recognised in the Statement of profit and loss incorporates any dividend or interest earned on the financial asset and is included in the ''Other income'' line item. Dividend on financial assets at FVTPL is recognised when the company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Investment in subsidiaries and associates are carried at cost in the standalone financial statements.
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights.
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intents either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
Debt and equity instruments issued by Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included under ''Finance costs''.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability.
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts, option contracts, etc.
Foreign currency derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the
end of each reporting period. The resulting gain or loss is recognised in the Statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Statement of profit and loss depends on the nature of the hedging relationship and the nature of the hedged item.
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year/period.
Diluted earnings per share is computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the standalone financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards. There is no such notification which would have been applicable from April 1,2021.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company accounting policies, which are described in note 3, the management of the Company are
required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
The following are the areas of estimation uncertainty and critical judgements that the management has made in the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognised in the standalone financial statements:-
Capitalisation of cost in intangible assets under development is based on management''s judgement that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. Based on evaluations carried out, the Company''s management has determined that here are no factors which indicates that these assets have suffered any impairment loss.
The cost of the defined benefit plan and other postemployment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in standalone financial statements. Contingent loss that are considered possible are not provided for but disclosed as Contingent liabilities in the standalone financial statements. Contingencies the likelihood of which is remote are not disclosed in the standalone financial statements. Contingent gain are not recognized until the contingency has been resolved and amounts are received or receivable.
Management reviews the useful lives of depreciable assets at each reporting date. As at March 31, 2021 management assessed that the useful lives represent the expected utility of the assets to the Company. Further, there is no significant change in the useful lives as compared to previous year.
During the year, the Company assessed the investment in equity instrument of subsidiary and associate companies carried at cost for impairment testing. Some of these companies are start-ups or are at early stage of their operations and are expected to generate positive cash flows in the future years. Detailed analysis has been carried out on the future projections and the Company is confident that the investments do not require any impairment.
During the year, management has assessed the conditions attached to grants which have been met and has assessed whether the grants will be received or not. Basis assessment, the Company has recognised the government grants in the Statement of profit and loss.
Mar 31, 2019
1.1 Revenue Recognition
Effective April 1, 2018, the Company has applied Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised. Ind AS 115 replaces Ind AS 18 Revenue. The Company has adopted Ind AS 115 using the cumulative effect method. The effect of initially applying this standard is recognised at the date of initial application (i.e. April 1, 2018). The standard is applied retrospectively only to contracts that are not completed as at the date of initial application and the comparative information in the statement of profit and loss is not restated - i.e. the comparative information continues to be reported under Ind AS 18. Refer note 3.1-Significant accounting policies - Revenue recognition in the Annual report of the Company for the year ended March 31, 2018, for the revenue recognition policy as per Ind AS 18. There were no adjustments required to the retained earnings as at April 01, 2018. Also the application of IND AS-115 did not have any significant impact on recognition and measurement of revenue and related items in the financials statement of the company.
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services
- Revenue from sale of goods is recognised when the goods are dispatched and tittles have passed
- Revenue from providing services is recognized in the accounting period in which services are rendered. Revenue from service is based on number of services provided to the end of reporting period as a proportion of the total number services to be provided.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
The Company disaggregates revenue from contracts with customers by nature of goods and service.
Dividend income is recorded when the right to receive payment is established. Interest income is recognised using the effective interest method.
1.2 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental expense from operating leases is generally recognised on a straight line basis over the term of relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increase, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
1.3 Foreign currencies
In preparing the financial statements of the Company, transactions in currencies other than the companyâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in the Statement of profit and loss in the period in which they arise.
1.4 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of profit and loss in the period in which they are incurred.
1.5 Government grants
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in the Statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs, if any, for which the grants are intended to compensate.
1.6 Employee benefits Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Payments to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions.
Defined benefit plans
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of profit and loss. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
- service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements);
- net interest expense or income; and
- re-measurement
The Company presents the first two components of defined benefit costs in the Statement of profit and loss in the line item Employee benefit expense.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plans.
Short-term employee benefits
Liabilities recognised in respect of wages and salaries and other short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service and are expensed as the related services are provided.
Other long-term employee benefits
Liabilities recognised in respect of other long-term employee benefits such as long term service awards and compensated absences are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date based on the actuarial valuation using the projected unit credit method carried out at the year-end. Re measurement gain or losses are recognised in the statement of profit and loss in the period in which they arise.
1.7 Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 40.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Share optionâs outstanding account.
1.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they related to income taxes levied by the same tax authority. Current and deferred tax for the year.
Current and deferred tax are recognised in the Statement of profit and loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
1.9 Property, plant and equipment
Property, plant and equipment (including furniture, fixtures, vehicles, etc.) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses. Freehold land is not depreciated.
Property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of property, plant and equipment and capitalised borrowing cost. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as-other property assets, commences when the assets are ready for their intended use.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method as per the useful lives prescribed in Schedule II to the Companies Act, 2013 other than assets covered under employee benefits schemes which are depreciated over a period of 5 years and moulds and dies which are depreciated over a period of 3-8 years grouped under property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and loss.
1.10 Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale
- the intention to complete the intangible asset and use or sell it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic benefits;
- the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised the Statement of profit and loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the Statement of profit and loss when the asset is derecognised.
Useful lives of intangible assets
Intangible assets, comprising of software, expenditure on model fee, etc. incurred are amortised on a straight line method over a period of 5 years.
1.11 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).Recoverable amount is the higher of fair value less costs of disposal and value in use.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For impairment testing, assets that donât generate independent cash flows are grouped together into cash generating units (CGUâs). Each CGU represents the smallest group of assets that generate cash inflows that are largely independent of the cash inflows of other assets or CGU â s.
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash- generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of profit and loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the Statement of profit and loss.
1.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. Costs of inventories are determined on a moving weighted average. Finished goods and work-in-progress include appropriate proportion of overheads. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
1.13 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Warranties
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise-being typically two to five years.
1.14 Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through the Statement of profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through the Statement of profit and loss are recognised immediately in the Statement of profit and loss.
1.15 Financial assets
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (âFVTOCIâ) (except for debt instruments that are designated as at fair value through the Statement of profit and loss on initial recognition):
- the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognised in the Statement of profit and loss for FVTOCI debt instruments.
All other financial assets are subsequently measured at fair value.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the Statement of profit and loss and is included in the âOther incomeâ line item.
Financial assets at fair value through the Statement of profit and loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in the Statement of profit and loss. The net gain or loss recognised in the Statement of profit and loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item. Dividend on financial assets at FVTPL is recognised when the companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Investments in subsidiaries and associates
Investment in subsidiaries and associates are carried at cost in the financial statements.
Impairment of financial assets
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intents either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
1.16 Financial liabilities and equity instruments Classification as debt or equity
Debt and equity instruments issued by Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Financial liabilities
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included under âFinance costsâ.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability.
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired.
1.17 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts, option contracts, etc.
Foreign currency derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the Statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Statement of profit and loss depends on the nature of the hedging relationship and the nature of the hedged item.
1.18 Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.19 Earnings per share
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year/period.
Diluted earnings per share is computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
1.20 Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs
1.21 Standards issued but not yet effective
A. Ind AS 116, Leases
Ind AS 116 Leases will replace the existing leases standard, Ind AS 17 Leases. It introduces a single, on-balance sheet lessee accounting model for lessees. A lessee recognises right-of-use (ROU) asset representing its right to use the underlying asset on lease and a lease liability representing its obligation to make lease payments. The standard is applicable from 1 April 2019.
The Company plans to apply Ind AS 116 initially on 1 April 2019, using the modified retrospective approach. On that date, the Company will recognise a lease liability measured at the present value of the remaining lease payments using the lesseeâs incremental borrowing rate as at 1 April 2019 and corresponding ROU asset is measured at an amount equivalent to lease liability. Therefore, there will be no effect of adopting Ind AS on retained earnings as at 1 April 2019, with no restatement of comparative information. In accordance with the standard, the Company will elect not to apply the requirements of Ind AS 116 to short-term leases and leases for which the underlying asset is of low value.
The Company has used the following practical expedients:
- Contracts where the remaining term was less than 12 months on transition date, the Company did not consider the same for computing its ROU asset and a corresponding lease liability.
- On initial application, IndAS 116 will only be applied to contracts that were previously classified as leases.
- The lease term has been determined with the use of hindsight where the contract contains options to extend the lease.
The nature of expenses presently presented under rent and lease rent under other expenses as per Ind AS 17 will now be presented as per Ind AS 116 in the form of:
- Amortization charge for the ROU asset
- Finance cost from interest accrued on lease liability
There will be consequent reclassification in the cash flow categories in the statement of cash flows.
Certain office premises and others, which are taken on operating lease will now be capitalised under Ind AS 116. However the impact of adoption of this new standard is not considered material.
B. Ind AS 12 Income taxes (amendments relating to income tax consequences of dividend and uncertainty over income tax treatments)
The amendment relating to income tax consequences of dividend clarify that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. The Company does not expect any impact from this pronouncement. It is relevant to note that the amendment does not amend situations where the entity pays a tax on dividend which is effectively a portion of dividends paid to taxation authorities on behalf of shareholders. Such amount paid or payable to taxation authorities continues to be charged to equity as part of dividend, in accordance with Ind AS 12.
The amendment to Appendix C of Ind AS 12 specifies that the amendment is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. It outlines the following: (1) the entity has to use judgement, to determine whether each tax treatment should be considered separately or whether some can be considered together. The decision should be based on the approach which provides better predictions of the resolution of the uncertainty (2) the entity is to assume that the taxation authority will have full knowledge of all relevant information while examining any amount (3) entity has to consider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates would depend upon the probability. The Company does not expect any significant impact of the amendment on its financial statements.
C. The following amended standards and interpretations are not expected to have a significant impact on the Companyâs financial statements:-
Amendments to Ind AS 19, Employee Benefits
Amendments to Ind AS 109, Financial Instruments
Amendments to Ind AS 23, Borrowing Costs
Amendments to Ind AS 28, Investments to Associates and Joint Ventures
Amendments to Ind AS 103, Business Combinations Amendments to Ind AS 111, Joint Arrangements
Mar 31, 2018
1. General Information
Hero Moto Corp Limited (the Company) is a public company domiciled & incorporated under the provisions of the Companies Act, 1956 on January 19, 1984. The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report. The shares of the Company are listed on two stock exchanges in India i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is engaged in the manufacturing and selling of motorized two-wheelers, spare parts and related services. The Company is a leading two wheeler manufacturer and has a dominant presence in domestic market.
The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorized for issue on May 02, 2018.
2. Basis of preparation and presentation
2.1 Statement of Compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
2.2 Basis of measurement
The financial statements have been prepared on the historical cost basis except for certain financial instruments, net defined benefit asset/liability and liabilities for equity settled share based payment arrangements that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
These financial statements are presented in Indian Rupee (INR), which is also the Company''s functional currency. All amounts have been rounded-off to the nearest crores, unless otherwise stated.
2.3 Operating Cycle
Based on the nature of products/ activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and noncurrent.
3. Significant Accounting Policies
3.1 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognized when the goods are dispatched and titles have passed, at which time all the following conditions are satisfied:
- the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
- the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction will flow to the Company; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. Servicing fees included in the price of products sold are recognized by reference to the proportion of the total cost of providing the servicing for the product sold; and
Dividend and interest income
Dividend income from investments is recognized when the shareholder''s right to receive payment has been established.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on, time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
3.2 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental expense from operating leases is generally recognized on a straight line basis over the term of relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increase, such increases are recognized in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
3.3 Foreign currencies
In preparing the financial statements of the Company, transactions in currencies other than the company''s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in the Statement of profit or loss in the period in which they arise.
3.4 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
3.5 Government grants
Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs, if any, for which the grants are intended to compensate.
3.6 Employee benefits Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Payments to defined contribution plans are recognized as an expense when employees have rendered service entitling them to the contributions.
Defined benefit plans
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognized in other comprehensive income in the period in which they occur. Re-measurement recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:
- service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements);
- net interest expense or income; and
- re-measurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item ''Employee benefit expense.
The retirement benefit obligation recognized in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plans.
Short-term employee benefits
Liabilities recognized in respect of wages and salaries and other short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service and are expensed as the related services are provided.
Other long-term employee benefits
Liabilities recognized in respect of other long-term employee benefits such as long term service awards and compensated absences are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date based on the actuarial valuation using the projected unit credit method carried out at the year-end. Remeasurement gain or losses are recognized in the statement of profit and loss in the period in which they arise.
3.7 Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 40.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Equity Share Option''s Outstanding account.
3.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they related to income taxes levied by the same tax authority.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.
3.9 Property, plant and equipment
Property, plant and equipment (including furniture, fixtures, vehicles, etc.) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses. Freehold land is not depreciated.
Property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of property, plant and equipment and capitalized borrowing cost. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as-other property assets, commences when the assets are ready for their intended use.
Depreciation is recognized on the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method as per the useful lives prescribed in Schedule II to the Companies Act, 2013 other than assets covered under employee benefits schemes which are depreciated over a period of 5 years and moulds and dies which are depreciated over a period of 3-8 years grouped under property, plant and equipment.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Statement of profit or loss.
3.10 Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the intention to complete the intangible asset and use or sell it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic benefits;
- the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal.
Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in profit or loss when the asset is derecognized.
Useful lives of intangible assets
Intangible assets, comprising of software, expenditure on model fee, etc. incurred are amortized on a straight line method over a period of 5 years.
3.11 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs of disposal and value in use.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For impairment testing, assets that don''t generate independent cash flows are grouped together into cash generating units (CGU''s). Each CGU represents the smallest group of assets that generate cash inflows that are largely independent of the cash inflows of other assets or CGU''s.
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash- generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
3.12 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. Costs of inventories are determined on a moving weighted average. Finished goods and work-in-progress include appropriate proportion of overheads. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
3.13 Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Warranties
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise- being typically two to five years.
3.14 Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
3.15 Financial assets
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortized cost (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income ("FVTOCIâ) (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognized in profit or loss for FVTOCI debt instruments.
All other financial assets are subsequently measured at fair value.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognized in profit or loss and is included in the "Other income" line item.
Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Debt instruments that do not meet the amortized cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments that meet the amortized cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortized cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ''Other income'' line item. Dividend on financial assets at FVTPL is recognized when the company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Investments in subsidiaries and associates
Investment in subsidiaries and associates are carried at cost in the financial statements.
Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on financial assets measured at amortized cost, debt instruments at FVTOCI, trade receivables,
other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intents either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
Derecognition of financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
3.16 Financial liabilities and equity instruments Classification as debt or equity
Debt and equity instruments issued by Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Financial liabilities
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included under ''Finance costs.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability.
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
3.17 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts, option contracts, etc.
Foreign currency derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item.
3.18 Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
3.19 Earnings per share
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year/period.
Diluted earnings per share is computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
3.20 Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs
3.21 Recent accounting pronouncements (standards notified but not yet effective) :-
Ind AS 115, Revenue from Contract with Customers:-
On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Ind AS 115, Revenue from Contract with Customers. Ind AS 115, establishes a comprehensive framework for determining whether, how much and when revenue should be recognized.
It replaces existing revenue recognition guidance, including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and Guidance Note on Accounting for Real Estate Transactions. Ind AS 115 is effective for annual periods beginning on or after 1 April 2018 and will be applied accordingly.
The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity''s contracts with customers.
The standard permits two possible methods of transition:
Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.
Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach)
The Company has completed its preliminary evaluation of the possible impact of Ind AS 115. The Company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The Company does not expect the impact of the adoption of the new standard to be material.
Ind AS 21:- The effect of changes in foreign exchange rates:-
On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The appendix explains that the date of transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.
The amendment will come into force from April 1, 2018. The Company has preliminary evaluated the effect of this on the financial statements and the impact is not material.
4. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Company accounting policies, which are described in note 3, the management of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.
The following are the areas of estimation uncertainty and critical judgments that the management has made in the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognized in the financial statements:-
Recoverability of intangible asset
Capitalization of cost in intangible assets under development is based on management''s judgments that technological and economic feasibility is confirmed and asset under development will generate economic benefits in future. Based on evaluations carried out, the Company''s management has determined that there are no factors which indicates that these assets have suffered any impairment loss.
Defined benefit plans
The cost of the defined benefit plan and other postemployment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Provision and contingent liability
On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Contingent loss that are considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Contingent gain are not recognized until the contingency has been resolved and amounts are received or receivable.
Useful lives of depreciable assets
Management reviews the useful lives of depreciable assets at each reporting. As at March 31, 2018 management assessed that the useful lives represent the expected utility of the assets to the Company. Further, there is no significant change in the useful lives as compared to previous year.
Impairment of investment in equity instruments of subsidiary and associate companies
During the year, the Company assessed the investment in equity instrument of subsidiary and associate companies carried at cost for impairment testing. Some of these companies are start-ups or are at early stage of their operations and are expected to generate positive cash flows in the future years. Detailed analysis has been carried out on the future projections and the Company is confident that the investments do not require any impairment.
The Company makes annual contribution to Life Insurance Contribution (LIC). As LIC does not disclose the composition of its portfolio investments, break-down of plan investments by investment type is not available to disclose.
Significant actuarial assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analysis below have been determined based on reasonable possible changes of the respective assumptions occurring at the end of the year, while holding all other assumptions constant.
- If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by Rs,7.33 crore (increase by Rs, 7.82 crore) ( as at March 31, 2017: Decrease by Rs, 7.27 crores (increase by Rs, 7.78crores).
- If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by Rs,7.12 crores (decrease by Rs, 7.56 crores) ( as at March 31, 2017: increase by Rs, 7.89 crores (decrease by Rs, 7.44 crores)).
Sensitivities due to change in mortality rate and change in withdrawal rate are not material and hence impact of such change is not calculated.
Sensitivity Analysis
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of reporting year, which is same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
Asset-Liability Matching Study
There is no (deficit)/Surplus of liability and funds, hence asset liability matching study not performed.
The Company expects to make a contribution of Rs, 14.27 crore (as at March 31, 2017 Rs, 23.15 crore ) to the defined benefit plans during the next financial year.
Mar 31, 2017
1. GENERAL INFORMATION
Hero MotoCorp Limited (the Company) is a public company domiciled & incorporated under the provisions of the Companies Act, 1956 on January 19, 1984. The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report. The shares of the Company are listed on two stock exchanges in India i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is engaged in the manufacturing and selling of motorized two-wheelers, spare parts and related services. The Company is a leading two wheeler manufacturer and has a dominant presence in domestic market.
The financial statements for the year ended March 31, 2017 were approved by the Board of Directors and authorized for issue on May 10, 2017.
2. BASIS OF PREPARATION AND PRESENTATION
2.1 Statement of Compliance
The financial statements have been prepared in accordance with Ind ASs notified under the Companies (Indian Accounting Standards) Rules, 2015.
Up to the year ended March 31, 2016, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. These are Company''s first Ind AS financial statements. The date of transition to Ind AS is April 1, 2015. Refer Note 46 for the details of first-time adoption exemptions availed by the Company.
2.2 Accounting convention
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
2.3 Operating Cycle
Based on the nature of products/ activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognized when the goods are dispatched and titles have passed, at which time all the following conditions are satisfied:
the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; i t is probable that the economic benefits associated with the transaction will flow to the Company; and t he costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. Servicing fees included in the price of products sold are recognized by reference to the proportion of the total cost of providing the servicing for the product sold.
Dividend and interest income
Dividend income from investments is recognized when the shareholder''s right to receive payment has been established.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on, time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
3.2 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental expense from operating leases is generally recognized on a straight line basis over the term of relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increase, such increases are recognized in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
3.3 Foreign currencies
In preparing the financial statements of the Company, transactions in currencies other than the company''s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.
Foreign currency derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item.
3.4 Borrowing costs
Borrowing costs directly attributable to the'' acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
3.5 Government grants
Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.
3.6 Employee benefits Retirement benefit
Payments to defined contribution plans are recognized as an expense when employees have rendered service entitling them to the contributions.
For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognized in other comprehensive income in the period in which they occur. Re-measurement recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
service cost (including current service cost, past service cost, as well as gains and losses or curtailments and settlements);
net interest expense or income; and
-re-measurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item ''Employee benefits expense''.
The retirement benefit obligation recognized in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plans.
Short-term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognized in respect of other long-term employee benefits such as annual leave and sick leave are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
3.7 Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 40.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
3.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.
3.9 Property, plant and equipment
Property, plant and equipment (including furniture, fixtures, vehicles, etc.) held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses. Freehold land is not depreciated.
Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of property, plant and equipment, and, for qualifying assets, borrowing costs capitalized in accordance with the Company''s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as-other property assets, commences when the assets are ready for their intended use.
Property, plant and equipment, fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses.
Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method over estimated economic useful lives of its property, plant and equipment generally in accordance with that provided in the Schedule II to the Act other than assets covered under employee benefits schemes which are depreciated over a period of 5 years and moulds and dies which are depreciated over a period of 3-8 years.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
3.10 Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future
economic benefits;
t he availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
Useful lives of intangible assets
Intangible assets, comprising of software, expenditure on Model fee, etc. incurred are amortized on a straight line method over a period of 5 years.
3.11 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs of disposal and value in use.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
3.12 Inventories
Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined on a moving weighted average. Finished goods and work-in-progress include appropriate proportion of overheads and where applicable, excise duty. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
3.13 Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Warranties
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise- being typically two to five years.
3.14 Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
3.15 Financial assets
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortized cost (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (âFVTOCI")(except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognized in profit or loss for FVTOCI debt instruments.
All other financial assets are subsequently measured at fair value.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognized in profit or loss and is included in the âOther income" line item.
Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Debt instruments that do not meet the amortized cost criteria or FVTOCI criteria are measured at FVTPL. In addition, debt instruments that meet the amortized cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortized cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ''Other income'' line item. Dividend on financial assets at FVTPL is recognized when the company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on financial assets measured at amortized cost, debt instruments at FVTOCI, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights.
Derecognition of financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
3.16 Financial liabilities and equity instruments Classification as debt or equity
Debt and equity instruments issued by Company are classified as either financial liabilities or as'' equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Financial liabilities
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the ''Finance costs'' Line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability.
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired.
3.17 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts, option contracts, etc.
Embedded derivatives
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of. Ind AS 109 are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
3.18 Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) after tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
3.19 Earnings per share
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year/period.
Diluted earnings per share is computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
3.20 Recent accounting pronouncements
I n March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS - 7, ''Statement of Cash Flows''. These amendments are in accordance with the recent amendments made by the International Accounting Standards Board (IASB) to IAS - 7, ''Statement of Cash Flows''. The amendments are applicable to the Company from April 1, 2017.
Amendment to Ind - AS 7:
The amendment to Ind AS - 7, requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on financial statements is being evaluated.
3.21 First-time adoption - mandatory exceptions, optional exemptions Overall principle
The Company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to an optional exemptions availed by the Company as detailed below:
Investments in subsidiaries and associates
The Company has elected to continue with the carrying value of its investments in subsidiary companies and associate companies as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Mar 31, 2016
I. Accounting convention
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and relevant provisions of the
Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956
Act"), as applicable. The financial statements have been prepared on
accrual basis under the historical cost convention.
ii. Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
iii. Operating Cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
iv. Fixed / Intangible assets and depreciation / amortization
Fixed assets are stated at cost less accumulated depreciation. Cost of
acquisition is inclusive of freight, duties, taxes and other incidental
expenses. Depreciation is charged on a pro-rata basis at the straight
line method rates prescribed in Schedule II to the Companies Act, 2013
other than assets covered under employee benefit schemes which are
depreciated over a period of five years. Leasehold land has been
amortised over the period of lease.
Intangible assets, comprising of expenditure on model fee etc.,
incurred are amortised on a straight line method over a period of five
years. Licenses for Technical know-how / export licenses have been
amortised on a straight line basis upto June 30, 2014 i.e. forty two
months (refer note 11).
Exchange differences arising on restatement / settlement of long- term
foreign currency borrowings relating to acquisition of depreciable
fixed assets, intangible assets are adjusted to the cost of the
respective assets and depreciated/amortised over the remaining useful
life of such assets.
The carrying values 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 charge if any is recognised in the statement of profit and
loss. In case of any reversal/ reduction of such an impairment, the
same is recognised through the profit and loss.
v. Preoperative expenses pending allocation
Expenses directly related to construction activity or incidental
thereto, are allocated to fixed assets at the time of completion of the
project
vi. Intangible assets under development
Expenditure on Research and development eligible for capitalisation are
carried as Intangible assets under development where such assets are
not yet ready for their intended use.
vii. Investments
Current investments are stated at lower of cost and fair value computed
categorywise. Long term investments are stated at cost less provision
for diminution other than temporary, if any. Premium paid on purchase
of debt securities is amortised over the period of maturity.
viii. Inventories
Raw materials and components, stores and spares, loose tools, finished
goods and work in progress are valued at cost or net realisable value,
whichever is lower.
ix. Employee benefits
Defined contribution plan
Provident fund, Superannuation fund and Employees'' State Insurance
Corporation (ESIC) are the defined contribution schemes offered by the
Company. The contributions to these schemes are charged to the
statement of profit and loss of the year in which contribution to such
schemes becomes due.
Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the
basis of an actuarial valuation made at the end of each financial year
as per projected unit credit method. Actuarial gains or loss arising
from such valuation are charged to revenue in the year in which they
arise.
x. Employee share based payments
The Company has formulated Employee Stock Option Schemes (ESOS) in
accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines. The Schemes provide for grant of
options to employees of the Company to acquire equity shares of the
Company that vest in a graded manner and that are to be exercised
within a specified period. In accordance with the SEBI Guidelines; the
ESOS are accounted for under the fair value method stated in the
guidance note on ''Employee Share Based Payments'' issued by the
Institute of Chartered Accountants of India.
xi. Foreign currency transactions
Exchange differences are dealt with as follows:-
a. Transactions in foreign currency are recorded at the exchange rate
prevailing at the time of the transaction. All loss or gain on
translation is charged to revenue in the year in which it is incurred.
b. Monetary assets and liabilities denominated in foreign currency are
restated at the rate prevailing at the year end and resultant gain or
loss is recognised.
c. The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalised as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement / over the maturity period of such items in line with
Notification No. GSR 378(E) dated May 11, 2011 issued by The Ministry
of Corporate Affairs, Government of India.
d. In respect of forward contracts, the forward premium or discount is
recognised as income or expense over the life of contract in the
Statement of Profit and Loss and the exchange difference between the
exchange rate prevailing at the year end and the date of the inception
of the forward exchange contract is recognised as income or expense in
the statement of profit and loss.
xii. Sales
Sale of goods is recognised on transfer of significant risk and reward
of ownership to the buyer, which generally coincides with point of
dispatch of finished goods to the customers. Gross sales are inclusive
of applicable excise duty and freight but are exclusive of sales tax.
Sale of services is recognized on rendering of services as per
contractual terms.
Scrap is accounted for on sale basis.
xiii. Government grants, subsidies and export incentives Government
grants and subsidies are recognised when there is reasonable assurance
that the Company will comply with the conditions attached to them and
the grants / subsidies will be received.
xiv. Warranty claims
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise - being typically two
to five years.
The Company accounts for the post-contract support / provision for
warranty on the basis of the information available with the Management
duly taking into account the current and past technical estimates.
xv. Leases
Arrangements where the risks and rewards incidental to ownership of an
asset substantially vest with the lessor are recognised as operating
leases. Lease rentals under operating leases are recognised in the
Statement of Profit and Loss.
xvi. Research and development expenses
Research and development expenditure of a revenue nature is expensed
out under the respective heads of account in the year in which it is
incurred.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
xvii. Earnings per share
Basic earnings per share is computed by dividing the profit after tax
by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the profit
after tax as adjusted for dividend, interest and other charges to
expense or relating to the dilutive potential equity shares, by the
weighted average number of equity shares considered for deriving basic
earnings per share and the weighted average number of equity shares
which could have been issued on the conversion of all dilutive
potential equity shares.
xviii. Taxation
The provision for taxation is ascertained on the basis of assessable
profits computed in accordance with the provisions of the Income-tax
Act, 1961.
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. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised, subject to the 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.
xix. Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current best
estimates. Contingent liabilities are disclosed in the Notes.
xx. Derivatives
Foreign currency derivatives are used to hedge risk associated with
foreign currency transactions. All open positions as at the close of
the year are valued by marking them to the market and provision is made
for losses, if any.
Mar 31, 2015
I ) Accounting convention
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and relevant provisions of the
Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956
Act"), as applicable. The financial statements have been prepared on
accrual basis under the historical cost convention.
ii) Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
iii) Operating Cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
iv) Fixed / Intangible assets and depreciation / amortisation
Fixed assets are stated at cost less accumulated depreciation. Cost of
acquisition is inclusive of freight, duties, taxes and other incidental
expenses. Exchange differences arising on restatement / settlement of
long-term foreign currency borrowings relating to acquisition of
depreciable fixed assets are adjusted to the cost of the respective
assets and depreciated over the remaining useful life of such assets.
Depreciation is charged on a pro- rata basis at the straight line
method rates prescribed in Schedule II to the Companies Act, 2013.
Assets covered under employee benefit schemes are amortised over a
period of five years.
Intangible assets, comprising of expenditure on model fee etc, incurred
are amortised on a straight line method over a period of five years.
Licenses for Technical know-how / export licenses have been amortised
on a straight line basis upto June 30, 2014 i.e forty two months (refer
note 11).
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment.
Leasehold land has been amortised over the period of lease.
v) Preoperative expenses pending allocation
Expenses directly related to construction activity or incidental
thereto, are allocated to fixed assets at the time of completion of the
project.
vi) Investments
Current investments are stated at lower of cost and fair value computed
categorywise. Long term investments are stated at cost less provision
for diminution other than temporary, if any. Premium paid on purchase
of debt securities is amortised over the period of maturity.
vii) Inventories
Raw materials and components, stores and spares, loose tools, finished
goods and work in progress are valued at cost or net realisable value,
whichever is lower.
The basis of determining cost for various categories of inventories are
as follows:-
Stores and - Weighted average
spares, loose cost
tools, raw
materials and
components
Materials in transit - Actual cost
Work in progress and finished goods - Material cost plus appropriate
share of labour, manufacturing
overheads and excise duty
viii) Employee benefits
a) Defined contribution plan
Provident fund, Superannuation fund and Employee's State Insurance
Corporation (ESIC) are the defined contribution schemes offered by the
Company. The contributions to these schemes are charged to the
statement of profit and loss of the year in which contribution to such
schemes becomes due.
b) Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the
basis of an actuarial valuation made at the end of each financial year
as per projected unit credit method. Actuarial gains or loss arising
from such valuation are charged to revenue in the year in which they
arise.
ix) Employee share based payments
The Company has formulated Employee Stock Option Schemes (ESOS) in
accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999. The Schemes provide for grant
of options to employees of the Company to acquire equity shares of the
Company that vest in a graded manner and that are to be exercised
within a specified period. In accordance with the SEBI Guidelines; the
excess, if any, of the closing market price on the day prior to the
grant of the options under ESOS over the exercise price is amortised on
a straight-line basis over the vesting period.
x) Foreign currency transactions
Exchange differences are dealt with as follows:-
Transactions in foreign currency are recorded at the exchange rate
prevailing at the time of the transaction. All loss or gain on
translation is charged to revenue in the year in which it is incurred.
Monetary assets and liabilities denominated in foreign currency are
restated at the rate prevailing at the year end and resultant gain or
loss is recognised.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalised as part of the
depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement / over the maturity period of such items in line with
Notification No. GSR 378(E) dated May 11, 2011 issued by The Ministry of
Corporate Affairs, Government of India.
In respect of forward contracts, the forward premium or discount is
recognised as income or expense over the life of contract in the
Statement of Profit and Loss and the exchange difference between the
exchange rate prevailing at the year end and the date of the inception
of the forward exchange contract is recognised as income or expense in
the statement of profit and loss.
xi) Sales
Sale of goods is recognised on transfer of significant risk and reward
of ownership to the buyer, which generally coincides with point of
despatch of finished goods to the customers. Gross sales are inclusive
of applicable excise duty and freight but are exclusive of sales tax.
Sale of services is recognized on rendering ofservices as per
contractual terms.
Scrap is accounted for on sale basis.
xii) Warranty claims
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of
outflows will vary as and when warranty claim will arise - being
typically two to five years.
The Company accounts for the post-contract support / provision for
warranty on the basis of the information available with the Management
duly taking into account the current and past technical estimates.
xiii) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss.
xiv) Research and development expenses
Research and development expenditure of a revenue nature is expensed
out under the respective heads of account in the year in which it is
incurred.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
xv) Earnings per share
Earnings per share are computed by dividing the profit / (loss) after
tax by the weighted average number of equity shares outstanding during
the year.
xvi) Taxation
The provision for taxation is ascertained on the basis of assessable
profits computed in accordance with the provisions of the Income-tax
Act, 1961.
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. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised, subject to the 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.
xvii) Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the Balance Sheet date.
These are reviewed at each Balance Sheet date and adjusted to reflect
the current best estimates. Contingent liabilities are disclosed in the
Notes.
xviii) Derivatives
Foreign currency derivatives are used to hedge risk associated with
foreign currency transactions. All open positions as at the close of
the year are valued by marking them to the market and provision is made
for losses, if any.
Mar 31, 2014
I) Accounting convention
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
Section 211 (3C) of the Companies Act, 1956 ("the 1956 Act") ( which
continue to be applicable in respect of Section 133 of the Companies
Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated
13 September, 2013 of the Ministry of Corporate Affairs) and relevant
provisions of the 1956 Act/ 2013 Act, as applicable. The financial
statements have been prepared on accrual basis under the historical
cost convention.
ii) Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Managementto make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
iii) Operating Cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non- current.
iv) Fixed / Intangible assets and depreciation / amortisation
Fixed assets are stated at cost less accumulated depreciation. Cost of
acquisition is inclusive of freight, duties, taxes and other incidental
expenses. Exchange differences arising on restatement / settlement of
long-term foreign currency borrowings relating to acquisition of
depreciable fixed assets are adjusted to the cost of the respective
assets and depreciated over the remaining useful life of such assets.
Depreciation is charged on a pro-rata basis at the straight line method
rates prescribed in Schedule XIV to the Companies Act, 1956. Assets
covered under employee benefit schemes are amortised over a period of
five years. Assets costing upto Rs. 5,000 each are fully depreciated in
the year of purchase.
Intangible assets, comprising of expenditure on model fee etc, incurred
are amortised on a straight line method over a period of five years.
Licenses forTechnical know-how/export licenses have been amortised on a
straight line basis upto June 30,2014 i.e forty two months (refer note
11).
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment.
Leasehold land has been amortised over the period of lease.
v) Preoperative expenses pending allocation
Expenses directly related to construction activity or incidental
thereto, are allocated to fixed assets at the time of completion of the
project.
vi) Investments
Current investments are stated at lower of cost and fair value computed
categorywise. Long term investments are stated at cost less provision
for diminution other than temporary, if any. Premium paid on purchase
of debt securities is amortised over the period of maturity.
vii) Inventories
Raw materials and components, stores and spares, loose tools, finished
goods and work in progress are valued at cost or net realisable value,
whichever is lower.
The basis of determining cost for various categories of inventories are
as follows:-
Stores and spares, loose -Weighted average cost tools, raw materials
and components
Materials in transit -Actual cost
Work in progress and - Material cost plus appropriate finished goods
share of labour, manufacturing overheads and excise duty
viii) Employee benefits
a) Defined contribution plan
Provident fund. Superannuation fund and Employee'' State Insurance
Corporation (ESIC) are the defined contribution schemes offered by the
Company. The contributions to these schemes are charged to the
statement of profit and loss of the year in which contribution to such
schemes becomes due.
b) Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the
basis of an actuarial valuation made at the end of each financial year
as per projected unit credit method. Actuarial gains or loss arising
from such valuation are charged to revenue in the year in which they
arise.
ix) Foreign currency transactions
Exchange differences are dealt with as follows:-
Transactions in foreign currency are recorded at the exchange rate
prevailing at the time of the transaction. All loss or gain on
translation is charged to revenue in the year in which it is incurred.
Monetary assets and liabilities denominated in foreign currency are
restated at the rate prevailing at the year end and resultant gain or
loss is recognised.
The exchange differences arising on restatement/settlement of long-term
foreign currency monetary items are capitalised as part of the
depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement / over the maturity period of such items in line with
Notification No. GSR 378(E) dated May 11, 2011 issued by The Ministry
of Corporate Affairs, Government of India.
In respect of forward contracts, the forward premium or discount is
recognised as income or expense over the life of contract in the
statement of profit and loss and the exchange difference between the
exchange rate prevailing at the year end and the date of the inception
of the forward exchange contract is recognised as income or expense in
the statement of profit and loss.
x) Sales
Sale of goods is recognised on transfer of significant risk and reward
of ownership to the buyer, which generally coincides with point of
despatch of finished goods to the customers. Gross sales are inclusive
of applicable excise duty and freight but are exclusive of sales tax.
Services income is recognized when the services are rendered.
- Scrap is accounted for on sale basis.
xi) Warranty claims
The estimated liability for product warranties is recorded when
products are sold.These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise - being typically two
to five years.
The Company accounts for the post-contract support / provision for
warranty on the basis of the information available with the Management
duly taking into account the current and past technical estimates.
xii) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss.
xiii) Research and development expenses
Research and development expenditure of a revenue nature is expensed
out under the respective heads of account in the year in which it is
incurred.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated forTangible Fixed
Assets and Intangible Assets.
xiv) Earnings per share
Earnings per share are computed by dividing the profit/(loss) after tax
by the weighted average number of equity shares outstanding during the
year.
xv) Taxation
The provision for taxation is ascertained on the basis of assessable
profits computed in accordance with the provisions of the Income-tax
Act, 1961.
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. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised, subject to the 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.
xvi) Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation atthe Balance Sheet date.These are reviewed at
each Balance Sheet date and adjusted to reflect the current best
estimates. Contingent liabilities are disclosed in the Notes.
xvii) Derivatives
Foreign currency derivatives are used to hedge riskassociated with
foreign currency transactions. All open positions as at the close of
the year are valued by marking them to the market and provision is made
for losses, if any.
Mar 31, 2013
I) Accounting convention
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention.
ii) Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
iii) operating Cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
iv) Fixed / Intangible assets and depreciation / amorti- sation
Fixed assets are stated at cost less accumulated depreciation. Cost of
acquisition is inclusive of freight, duties, taxes and other incidental
expenses. Exchange differences arising on restatement / settlement of
long-term foreign currency borrowings relating to acquisition of
depreciable fixed assets are adjusted to the cost of the respective
assets and depreciated over the remaining useful life of such assets.
Depreciation is charged on a pro-rata basis at the straight line method
rates prescribed in schedule XIV to the Companies Act, 1956. Assets
covered under employee benefit schemes are amortised over a period of
five years. Assets costing upto Rs. 5000 each are fully depreciated in
the year of purchase.
Intangible assets, comprising of expenditure on model fee etc, incurred
are amortised on a straight line method over a period of five years.
Licenses for Technical know-how / export licenses have been amortised
on a straight line basis upto June 30, 2014 i.e forty two months (refer
note 11).
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment.
Leasehold land has been amortised over the period of lease.
v) Investments
Current investments are stated at lower of cost and fair value computed
categorywise. Long term investments are stated at cost less provision
for permanent diminution, if any. Premium paid on purchase of debt
securities is amortised over the period of maturity.
vi) Inventories
Stores and spares and loose tools are stated at cost or under.
Raw materials and components, finished goods and work in progress are
valued at cost or net realisable value, whichever is lower.
The basis of determining cost for various categories of inventories are
as follows:-
Stores and spares, loose - Weighted average tools, raw materials and
cost components
Materials in transit - Actual cost Work in progress and - Material cost
finished goods plus appropriate share of labour, manufacturing
overheads and excise duty
vii) Employee benefits
a) Defined contribution plan
Provident fund, Superannuation fund and Employee'' State Insurance
Corporation (ESIC) are the defined contribution schemes offered by the
Company. The contributions to these schemes are charged to the profit
and loss account of the year in which contribution to such schemes
becomes due.
b) Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the
basis of an actuarial valuation made at the end of each financial year
as per projected unit credit method. Actuarial gains or loss arising
from such valuation are charged to revenue in the year in which they
arise.
viii) Foreign currency transactions
Exchange differences are dealt with as follows:- Transactions in
foreign currency are recorded at the exchange rate prevailing at the
time of the transaction. All loss or gain on translation is charged to
revenue in the year in which it is incurred.
Monetary assets and liabilities denominated in foreign currency are
restated at the rate prevailing at the year end and resultant gain or
loss is recognised.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalised as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement / over the maturity period of such items in line with
Notification No. GSR 378(E) dated May 11, 2011 issued by The Ministry
of Corporate Affairs, Government of India.
In respect of forward contracts, the forward premium or discount is
recognised as income or expense over the life of contract in the profit
and loss account and the exchange difference between the exchange rate
prevailing at the year end and the date of the inception of the forward
exchange contract is recognised as income or expense in the profit and
loss account.
ix) Sales
Sale of goods is recognised at the point of dispatch of finished goods
to the customers. Gross sales are inclusive of applicable excise duty
and freight but are exclusive of sales tax. Services income is
recognised when the services are rendered.
- Scrap is accounted for on sale basis.
x) Warranty claims
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise
- being typically two to three years.
The Company accounts for the post-contract support / provision for
warranty on the basis of the information available with the Management
duly taking into account the current and past technical estimates.
xi) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss.
xii) Research and development expenses
Research and development expenditure of a revenue nature is expensed
out under the respective heads of account in the year in which it is
incurred.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
xiii) Earnings per share
Earnings per share are computed by dividing the profit / (loss) after
tax by the weighted average number of equity shares outstanding during
the year.
xiv) Taxation
The provision for taxation is ascertained on the basis of assessable
profits computed in accordance with the provisions of the Income-tax
Act, 1961.
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. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised, subject to the 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.
xv) provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current best
estimates. Contingent liabilities are disclosed in the Notes.
xvi) Derivatives
Foreign currency derivatives are used to hedge risk associated with
foreign currency transactions. All open positions as at the close of
the year are valued by marking them to the market and provision is made
for losses, if any.
Mar 31, 2012
Hero Moto Corp Limited (the Company) is a public company domiciled in
India and incorporated under the provisions of the Companies Act, 1956
on January 19, 1984. The name of the Company has been changed from Hero
Honda Motors Limited to Hero Moto Corp Limited on July 29, 2011. The
shares of the Company are listed on two stock exchanges in India i.e.
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The
Company is engaged in the manufacturing and selling of motorized
two-wheelers, spare parts and related services. The Company is a
leading two wheeler manufacturer and has a dominant presence in
domestic market.
i ) Accounting convention
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention.
ii) Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognized in the periods in which
the results are known / materialize.
iii) Fixed / Intangible assets and depreciation / amortization
Fixed assets are stated at cost less accumulated depreciation. Cost of
acquisition is inclusive of freight, duties, taxes and other incidental
expenses. Exchange differences arising on restatement / settlement of
long- term foreign currency borrowings relating to acquisition of
depreciable fixed assets are adjusted to the cost of the respective
assets and depreciated over the remaining useful life of such assets.
Depreciation is charged on a pro-rata basis at the straight line method
rates prescribed in schedule XIV to the Companies Act, 1956. Assets
covered under employee benefit schemes are amortized over a period of
five years. Assets costing up to Rs. 5,000 each are fully depreciated in
the year of purchase.
Intangible assets, comprising of expenditure on model fee etc, incurred
are amortized on a straight line method over a period of five years.
Licenses for Technical Know-how / export licenses have been amortized
on a straight line basis up to June 30, 2014 i.e forty two months (refer
note 11).
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment.
Leasehold land has been mortised over the period of lease.
iv) Investments
Current investments are stated at lower of cost and fair value computed
category wise. Long term investments are stated at cost less provision
for permanent diminution, if any. Premium paid on purchase of debt
securities is mortised over the period of maturity.
v) Inventories
Stores and spares and loose tools are stated at cost or under.
Raw materials and components, finished goods and work in progress are
valued at cost or net realizable value, whichever is lower.
The basis of determining cost for various categories of inventories are
as follows:-
Stores and spares, - Weighted average cost loose tools, raw materials
and components
Materials in transit - Actual cost
Work in progress - Material cost plus appropriate and finished goods
share of lab our, manufacturing overheads and excise duty
vi) Employee benefits
a) Defined contribution plan
Provident fund, Superannuation fund and Employee' State Insurance
Corporation (ESIC) are the defined contribution schemes offered by the
Company. The contributions to these schemes are charged to the profit
and loss account of the year in which contribution to such schemes
becomes due.
b) Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the
basis of an actuarial valuation made at the end of each financial year
as per projected unit credit method. Actuarial gains or loss arising
from such valuation are charged to revenue in the year in which they
arise.
vii) Foreign currency transactions
Exchange differences are dealt with as follows:-
Transactions in foreign currency are recorded at the exchange rate
prevailing at the time of the transaction. All loss or gain on
translation is charged to revenue in the year in which it is incurred.
Monetary assets and liabilities denominated in foreign currency are
restated at the rate prevailing at the year end and resultant gain or
loss is recognized.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalized as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or mortised
on settlement / over the maturity period of such items in line with
Notification No. GSR 378(E) dated May 11, 2011 issued by The Ministry
of Corporate Affairs, Government of India.
In respect of forward contracts, the forward premium or discount is
recognized as income or expense over the life of contract in the profit
and loss account and the exchange difference between the exchange rate
prevailing at the year end and the date of the inception of the forward
exchange contract is recognized as income or expense in the profit and
loss account.
viii) Sales
Sale of goods is recognized at the point of dispatch of finished goods
to the customers. Gross sales are inclusive of applicable excise duty
and freight but are exclusive of sales tax. Services income is
recognized when the services are rendered.
- Scrap is accounted for on sale basis.
ix) Warranty claims
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise - being typically two
to three years.
The Company accounts for the post-contract support / provision for
warranty on the basis of the information available with the Management
duly taking into account the current and past technical estimates.
x) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the less or are recognized as
operating leases. Lease rentals under operating leases are recognized
in the Statement of Profit and Loss.
xi) Research and development expenses
Research and development expenditure of a revenue nature is expensed
out under the respective heads of account in the year in which it is
incurred.
Fixed assets utilized for research and development are capitalized and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
xii) Earnings per share
Earnings per share are computed by dividing the profit / (loss) after
tax by the weighted average number of equity shares outstanding during
the year.
xiii) Taxation
The provision for taxation is ascertained on the basis of assessable
profits computed in accordance with the provisions of the Income-tax
Act, 1961.
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. Accordingly, MAT
is recognized as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognized, subject to the 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.
xiv) Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current best
estimates. Contingent liabilities are disclosed in the Notes.
xv) Derivatives
Foreign currency derivatives are used to hedge risk associated with
foreign currency transactions. All open positions as at the close of
the year are valued by marking them to the market and provision is made
for losses, if any.
(i) In the previous year, the Company has entered into a Memorandum of
Understanding (MOU) with Honda Motor Company Limited Japan (Honda)
dated December 16, 2010, which was effective from January 1, 2011, and
in accordance therewith has entered into New License Agreements
pursuant to the Share Transfer agreement, wherein Honda has given, to
the Company, right and license to manufacture, assemble, sell and
distribute certain products/parts and export license for certain
products and their service parts under the intellectual property
rights.
Liability payable up to March 31, 2013 has been included under other
current liabilities and the balance has been disclosed as Deferred
payment credits. Further, joint venture has ceased on March 22, 2011
pursuant to transfer of shares held by Honda Motor Company to the
Indian joint venture partners.
(ii) For current maturities of deferred payment credits, refer item (a)
in Note 9, Other current liabilities
Mar 31, 2011
I) Accounting convention
The financial statements are prepared under the historical cost
convention on accrual basis, in accordance with applicable accounting
standards and relevant presentational requirements of the Companies
Act, 1956.
ii) Use of estimates
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balance of assets and liabilities, revenues and expenses and
disclosures relating to the contingent liabilities. The management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ from
these estimates. Any revision to accounting estimates is recognised
prospectively in the current and future periods.
iii) Fixed / Intangible assets and depreciation /amortisation
Fixed assets are stated at cost less accumulated depreciation. Cost of
acquisition is inclusive of freight, duties, taxes and other incidental
expenses. Exchange gain/loss on reinstatement of foreign currency
liabilities arising on acquisition of fixed assets are capitalised as
part of the acquisition cost and is amortised over the life of the
respective asset.
Depreciation is charged on a pro-rata basis at the straight line method
rates prescribed in schedule XIV to the Companies Act, 1956. Assets
covered under employee benefit schemes are amortised over a period of
five years. Assets costing upto Rs. 5000 each are fully depreciated in
the year of purchase.
Intangible assets, comprising of expenditure on model fee etc, incurred
are amortised on a straight line method over a period of five years.
Licenses for Technical know-how/export licenses have been amortised on
a straight line basis upto June 30,2014 i.e forty two months (refer
note 15).
Leasehold land has been amortised over the period of lease.
iv) Investments
Current investments are stated at lower of cost and fair value computed
categorywise. Long term investments are stated at cost less provision
for permanent diminution, if any. Premium paid on purchase of debt
securities is amortised over the period of maturity.
v) Inventories
Stores and spares and loose tools are stated at cost or under.
Raw materials and components, finished goods and work in progress are
valued at cost or net realisable value, whichever is lower.
The basis of determining cost for various categories of inventories are
as follows:-
Stores and spares, loose tools, raw materials - Weighted average cost
and components
Materials in transit - Actual cost
Work in progress and finished goods - Material cost plus appropriate
share of labour,
manufacturing overheads and excise duty
vi) Employee benefits
a) Defined contribution plan
Provident fund. Superannuation fund and Employee' State Insurance
Corporation (ESIC) are the defined contribution schemes offered by the
Company. The contributions to these schemes are charged to the profit
and loss account of the year in which contribution to such schemes
becomes due.
b) Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the
basis of an actuarial valuation made at the end of each financial year
as per projected unit credit method. Actuarial gains or loss arising
from such valuation are charged to revenue in the year in which they
arise.
vii) Foreign currency transactions
Exchange differences are dealt with as follows:-
Transactions in foreign currency are recorded at the exchange rate
prevailing at the time of the transaction. All loss or gain on
translation is charged to revenue in the year in which it is incurred.
Monetary assets and liabilities denominated in foreign currency are
restated at the rate prevailing at the year end and resultant gain or
loss is recognised.
In respect of forward contracts, the forward premium or discount is
recognised as income or expense over the life of contract in the profit
and loss account and the exchange difference between the exchange rate
prevailing at the year end and the date of the inception of the forward
exchange contract is recognised as income or expense in the profit and
loss account.
viii) Sales
Sale of goods is recognised at the point of despatch of finished goods
to the customers. Gross sales are inclusive of applicable excise duty
and freight but are exclusive of sales tax. Services income is
recognised when the services are rendered.
- Scrap is accounted for on sale basis.
ix) Warranty claims
Warranty costs are provided on accrual basis on the total sales of two
wheelers during the year, which are based on past experience of claims.
x) Research and development expenses
Research and development expenditure of a revenue nature is expensed
out under the respective heads of account in the year in which it is
incurred.
xi) Taxation
The provision for taxation is ascertained on the basis of assessable
profits computed in accordance with the provisions of the Income-tax
Act, 1961.
Deferred tax is recognised, subject to the 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.
xii) Provisions and contingent liabilities
Provision involving substantial degree of estimation in measurement are
recognised when there is a present obligation as a result of past
events and it is probable that there will be an out flow of resources.
Contingent liabilities are not recognised but are disclosed in the
notes.
xiii) Derivatives
Foreign currency derivatives are used to hedge risk associated with
foreign currency transactions. All open positions as at the close of
the year are valued by marking them to the market and provision is made
for losses, if any.
Mar 31, 2010
I) Accounting convention
The financial statements are prepared under the historical cost
convention, in accordance with applicable accounting standards and
relevant presentational requirements of the Companies Act, 1956.
ii) Use of estimates
The preparation of financial statements requires the management of
theCompany to make estimates and assumptions that affect the reported
balance of assets and liabilities, revenues and expenses and
disclosures relating to the contingent liabilities. The management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ from
these estimates. Any revision to accounting estimates is recognised
prospectively in the current and future periods.
iii) Fixed /Intangible assets and depreciation /amortisation
Fixed assets are stated at cost less accumulated depreciation. Cost of
acquisition is inclusive of freight, duties, taxes and other incidental
expenses.
Depreciation is charged on a pro-rata basis at the straight line method
rates prescribed in schedule XIV to the Companies Act, 1956. Assets
covered under employee benefit schemes are amortised over a period of
five years. Assets costing uptoRs. 5000 each are fully depreciated in
the yearof purchase.
Intangible assets, comprising of expenditure on model fee etc, incurred
are amortised on a straight line method over a period of five years.
Leasehold land has been amortised overthe period of lease.
iv) Investments
Current investments are stated at lower of cost and fair value computed
categorywise. Long term investments are stated at cost less provision
for permanent diminution, if any.
v) Inventories
Stores and spares and loose tools are stated at cost or under.
Raw materials and components, finished goods and work in progress are
valued at cost or net realisable value, whichever is lower.
The basis of determining cost for various categories of inventories are
as follows:-
Stores and spares, loose tools, raw materials and components - Weighted
average cost
Materials in transit - Actual cost
Workinprogressandfinished goods - Material cost plus appropriate share
of labour, manufacturing overheads and excise duty
vi) Employee benefits
a) Defined contribution plan
Provident fund, Superannuation fund and Employee State Insurance
Corporation (ESIC) are the defined contribution schemes offered by the
Company. The contributions to these schemes are charged to the profit
and loss account of the year in which contribution to such schemes
becomes due.
b) Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the
basis of an actuarial valuation made at the end of each financial year
as per projected unit credit method. Actuarial gains or loss arising
from such valuation are charged to revenue in the year in which they
arise. vii) Foreign currency transactions
Exchange differences are dealt with as follows:-
Transactions in foreign currency are recorded at the exchange rate
prevailing at the time of the transaction. All loss or gain on
translation is charged to revenue in the year in which it is incurred.
Monetary assets and liabilities denominated inforeign currency are
restated at the rate prevailing attheyearend and resultant gain or loss
is recognised.
In respect of forward contracts, the forward premium or discount is
recognised as income or expense over the life of contract in the profit
and loss account and the exchange difference between the exchange rate
prevailing at the year end and the date of the inception of the forward
exchange contract is recognised as income or expense in the profit and
loss account.
viii) Sales
Sale of goods is recognised at the point of despatch of finished goods
to the customers. Gross sales are inclusive of applicable excise duty
and freight but are exclusive of sales tax. Services income is
recognized when the services are rendered.
Scrap is accounted for on sale basis.
ix) Warranty claims
Warranty costs are provided on accrual basis on the total sales of two
wheelers during the year, which are based on past experience of claims.
x) Research and development expenses
Research and development expenditure of a revenue nature is expensed
out under the respective heads of account in the yearin which
itisincurred.
xi) Taxation
The provision for taxation is ascertained on the basis of assessable
profits computed in accordance with the provisions of the Income-tax
Act, 1961.
Deferred tax is recognised, subject to the 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.
xii) Provisions and contingent liabilities
Provision involving substantial degree of estimation in measurement are
recognized when there is a present obligation as a result of past
events and it is probable that there will be an out flow of resources.
Contingent liabilities are not recognized but are disclosed in the
notes.
xiii) Derivatives
Foreign currency derivatives are used to hedge risk associated with
foreign currency transactions. All open positions as at the close of
the year are valued by marking them to the market and provision is made
for losses, if any.