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ACCOUNTING STANDARD (AS) 1

DISCLOSURE OF ACCOUNTING POLICIES

(This Accounting Standard includes paragraphs 24-27 set in bold italictype and paragraphs 1-23 set in plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the Preface to the Statements of Accounting Standards1.)

The following is the text of the Accounting Standard (AS) 1 issued by the Accounting Standards Board, the Institute of Chartered Accountants of India on ‘Disclosure of Accounting Policies’. The Standard deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements.

In the initial years, this accounting standard will be recommendatory in character. During this period, this standard is recommended for use by companies listed on a recognised stock exchange and other large commercial, industrial and business enterprises in the public and private sectors.

INTRODUCTION

1. This statement deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements.

2. The view presented in the financial statements of an enterprise of its state of affairs and of the profit or loss can be significantly affected by the accounting policies followed in the preparation and presentation of the financial statements. The accounting policies followed vary from enterprise to enterprise. Disclosure of significant accounting policies followed is necessary if the view presented is to be properly appreciated.

3. The disclosure of some of the accounting policies followed in the preparation and presentation of the financial statements is required by law in some cases.

4. The Institute of Chartered Accountants of India has, in Statements issued by it, recommended the disclosure of certain accounting policies, e.g., translation policies in respect of foreign currency items.

5. In recent years, a few enterprises in India have adopted the practice of including in their annual reports to shareholders a separate statement of accounting policies followed in preparing and presenting the financial statements.

6. In general, however, accounting policies are not at present regularly and fully disclosed in all financial statements. Many enterprises include in the Notes on the Accounts, descriptions of some of the significant accounting policies. But the nature and degree of disclosure vary considerably between the corporate and the non-corporate sectors and between units in the same sector.

7. Even among the few enterprises that presently include in their annual reports a separate statement of accounting policies, considerable variation exists. The statement of accounting policies forms part of accounts in some cases while in others it is given as supplementary information.

8. The purpose of this Statement is to promote better understanding of financial statements by establishing through an accounting standard the disclosure of significant accounting policies and the manner in which accounting policies are disclosed in the financial statements. Such disclosure would also facilitate a more meaningful comparison between financial statements of different enterprises.

EXPLANATION FUNDAMENTAL ACCOUNTING ASSUMPTIONS:

Certain fundamental accounting assumptions underlie the preparation and presentation of financial statements. They are usually not specifically stated because their acceptance and use are assumed. Disclosure is necessary if they are not followed.

The following have been generally accepted as fundamental accounting assumptions:—

A. GOING CONCERN:

The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations.

When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern.

B. CONSISTENCY:

It is assumed that accounting policies are consistent from one period to another.

C. ACCRUAL:

An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting.

When the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria Revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate. (The considerations

affecting the process of matching costs with revenues under the accrual assumption are not dealt with in this Statement.)

NATURE OF ACCOUNTING POLICIES

1. The accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by the enterprise in the preparation and presentation of financial statements.

2. There is no single list of accounting policies which are applicable to all circumstances. The differing circumstances in which enterprises operate in a situation of diverse and complex economic activity make alternative accounting principles and methods of applying those principles acceptable. The choice of the appropriate accounting principles and the methods of applying those principles in the specific circumstances of each enterprise calls for considerable judgement by the management of the enterprise.

3. The various statements of the Institute of Chartered Accountants of India combined with the efforts of government and other regulatory agencies and progressive managements have reduced in recent years the number of acceptable alternatives particularly in the case of corporate enterprises. While continuing efforts in this regard in future are likely to reduce the number still further, the availability of alternative accounting principles and methods of applying those principles is not likely to be eliminated altogether in view of the differing circumstances faced by the enterprises.

AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED

The following are examples of the areas in which different accounting policies may be adopted by different enterprises.

• Methods of depreciation, depletion and amortisation

• Treatment of expenditure during construction

• Conversion or translation of foreign currency items

• Valuation of inventories

• Treatment of goodwill

• Valuation of investments

• Treatment of retirement benefits

• Recognition of profit on long-term contracts

• Valuation of fixed assets

• Treatment of contingent liabilities.

The above list of examples is not intended to be exhaustive.

CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES

The primary consideration in the selection of accounting policies by an enterprise is that the financial statements prepared and presented on the basis of such accounting policies should represent a true and fair view of the state of affairs of the enterprise as at the balance sheet date and of the profit or loss for the period ended on that date.

For this purpose, the major considerations governing the selection and application of accounting policies are:—

a. PRUDENCE:

In view of the uncertainty attached to future events, profits are not anticipated but recognised only when realised though not necessarily in cash. Provision is made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information.

b. SUBSTANCE OVER FORM:

The accounting treatment and presentation in financial statements of transactions and events should be governed by their substance and not merely by the legal form.

c. MATERIALITY:

Financial statements should disclose all “material” items, i.e. items the knowledge of which might influence the decisions of the user of the financial statements.

DISCLOSURE OF ACCOUNTING POLICIES

1. To ensure proper understanding of financial statements, it is necessary that all significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed.

2. Such disclosure should form part of the financial statements.

3. It would be helpful to the reader of financial statements if they are all disclosed as such in one place instead of being scattered over several statements, schedules and notes.

4. Examples of matters in respect of which disclosure of accounting policies adopted will be required are contained in paragraph 14. This list of examples is not, however, intended to be exhaustive.

5. Any change in an accounting policy which has a material effect should be disclosed. The amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact should be indicated. If a change is made in the accounting policies which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted.

6. Disclosure of accounting policies or of changes therein cannot remedy a wrong or inappropriate treatment of the item in the accounts.

ACCOUNTING STANDARD

1 .All significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed.

2. The disclosure of the significant accounting policies as such should form part of the financial statements and the significant accounting policies should normally be disclosed in one place.

3. Any change in the accounting policies which has a material effect in the current period or which is reasonably expected to have a material effect in later periods should be disclosed. In the case of a change in accounting policies which has a material effect in the current period, the amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact should be indicated.

4. If the fundamental accounting assumptions, viz. Going Concern, Consistency and Accrual are followed in financial statements, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact should be disclosed.

CASE STUDY:

STATE BANK OF INDIA - Giving wings to an Aspirational India:

INTRODUCTION:

State Bank of India is an Indian multinational, Public Sector banking and financial services company. It is

a government-owned corporation with its headquarters in Mumbai, Maharashtra. As of December 2013, it had

assets of US$388 billion and 17,000 branches, including 190 foreign offices, making it the largest banking and

financial services company in India by assets.[4][5]

State Bank of India is one of the Big Four banks of India, along with Bank of Baroda, Punjab National

Bank and Bank of India.[6][7]

The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding, in 1806, of

the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into

the other two "presidency banks" in British India, Bank of Calcutta and Bank of Bombay, to form the Imperial Bank

of India, which in turn became the State Bank of India. [8] Government of India owned the Imperial Bank of India in

1955, with Reserve Bank of India (India's Central Bank) taking a 60% stake, and renamed it the State Bank of

India. In 2008, the government took over the stake held by the Reserve Bank of India.

State Bank of India is a regional banking behemoth and has 20% market share in deposits and loans among Indian

commercial banks.

History

Logo of State Bank of India

he roots of the State Bank of India lie in the first decade of the 19th century, when the Bank of Calcutta, later

renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency

banks, the other two being the Bank of Bombay (incorporated on 15 April 1840) and theBank of

Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies and

were the result of royal charters. These three banks received the exclusive right to issue paper currency till 1861

when, with the Paper Currency Act, the right was taken over by the Government of India. The Presidency banks

amalgamated on 27 January 1921, and the re-organised banking entity took as its name Imperial Bank of India.

The Imperial Bank of India remained a joint stock company but without Government participation.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India's central

bank, acquired a controlling interest in the Imperial Bank of India. On 1 July 1955, the Imperial Bank of India

became the State Bank of India. In 2008, the government of India acquired the Reserve Bank of India's stake in

SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

OperationsSBI provides a range of banking products through its network of branches in India and overseas, including products

aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal Offices that are located at important

cities throughout India.

Domestic presence

SBI has 14,816 branches in India, as on 31 March 2013, of which 9,851 (66%) were in Rural and Semi-urban

areas.[2] In the financial year 2012-13, its revenue was INR 200,560 Crores (US$36.9 billion), out of which domestic

operations contributed to 95.35% of revenue. Similarly, domestic operations contributed to 88.37% of total profits

for the same financial year.

Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by Government in August 2014, SBI

held 11,300 camps and opened over 30 lakhs accounts by September, which included 21.16 lakh accounts in rural

areas and 8.8 lakh accounts in urban areas.

International presence[edit]

The Israeli branch of the State Bank of India located in Ramat Gan.

As of 28 June 2013, the bank had 180 overseas offices spread over 34 countries. It has branches of the parent

in Moscow, Colombo, Dhaka, Frankfurt, Hong Kong, Tehran,Johannesburg, London, Los Angeles, Male in

the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas,

Bahrain, andSingapore, and representative offices in Bhutan and Cape Town.

The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in

the Toronto area and three in the Vancouver area.

SBI operates several foreign subsidiaries or affiliates. In 1990, it established an offshore bank: State Bank of India

(Mauritius). SBI (Mauritius) has 15 branches in major cities/towns of the country including Rodrigues.

SBI Sri Lanka now has three branches located in Colombo, Kandy and Jaffna. The Jaffna branch was opened on 9

September 2013. SBI Sri Lanka, the oldest bank in Sri Lanka, celebrated its 150th year in Sri Lanka on 1 July

2014.

State Bank of India (S.B.I.) Branch at Tsim Sha Tsui, Hong Kong

In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten branches – nine

branches in the state of California and one in Washington, D.C. The 10th branch was opened in Fremont, California

on 28 March 2011. The other eight branches in California are located in Los Angeles, Artesia, San Jose, Canoga

Park, Fresno, San Diego, Tustin and Bakersfield.

In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant Bank and

received permission in 2002 to commence retail banking. It now has five branches in Nigeria.

In Hindu States of Nepal (Hindu Rajya Nepal), SBI owns 49% of SBI Nepal (State Bank in Nepal) share with Nepal

Government owing the rest and SBI NEPAL has branches throughout the country in each and every city as banking

has become the major part of daily life for Nepalese people. In Moscow, SBI owns 60% of Commercial Bank of

India, with Canara Bank owning the rest. In Indonesia, it owns 76% of PT Bank Indo Monex.

The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.

In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8 million in October

2005.

Employees

SBI is one of the largest employers in the country having 222,033 employees as on 31 March 2014, out of which

there were 45,132 female employees (20%) and 2,610 (1%) employees with disabilities. On the same date, SBI

had 42,744 Schedule Caste (19%) and 17,243 Schedule Tribe (8%) employees. The percentage of Officers,

Assistants and Sub-staff was 36%, 46% and 18% respectively on the same date Hiring drive: 1,776 Assistants and

1,394 Officers joined the Bank in FY 2013-14, for expansion of the branch network and to mitigate staff shortage,

particularly at rural and semi-urban branches. Staff productivity: As per its Annual Report for FY 2013-14, each

employee contributed net profit of INR 4.85 lakhs.

Recent awards and recognitions

SBI was ranked 73rd largest bank in the world, according to 2014 SNL financial data.

SBI won the Best Bank award in the 'ASiAMONEY FX POLL OF POLLS 2014’ for best overall performance as

domestic provider of Forex services over the last 10 years.

SBI was ranked as the top bank in India based on tier 1 capital by The Banker magazine in a 2014 ranking.

SBI was ranked 298th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012.

SBI won "Best Public Sector Bank" award in the D&B India's study on 'India's Top Banks 2013'.

State Bank of India won three IDRBT Banking Technology Excellence Awards 2013 for “Electronic Payment

Systems”, “Best use of technology for Financial Inclusion”, and “Customer Management & Business

Intelligence” in the large bank category.

SBI won National Award for its performance in the implementation of Prime Minister’s Employment Generation

Programme (PMEGP) scheme for the year 2012.

Best Online Banking Award, Best Customer Initiative Award & Best Risk Management Award (Runner Up) by

IBA Banking Technology Awards 2010

SKOCH Award 2010 for Virtual corporation Category for its e-payment solution

SBI was the only bank featured in the "top 10 brands of India" list in an annual survey conducted by Brand

Finance and The Economic Times in 2010.

The Bank of the year 2009, India (won the second year in a row) by The Banker Magazine

Best Bank – Large and Most Socially Responsible Bank by the Business Bank Awards 2009

Best Bank 2009 by Business India

The Most Trusted Brand 2009 by The Economic Times.

SBI was named the 29th most reputed company in the world according to Forbes 2009 rankings

Most Preferred Bank & Most preferred Home loan provider by CNBC

Visionaries of Financial Inclusion By FINO

Technology Bank of the Year by IBA Banking Technology Awards

SBI was 50th Most Trusted brand in India as per the Brand Trust Report 2013

INTRODUCTION OF IAS:

DEFINITIONS

Indian Accounting Standards (Ind ASs) are Standards prescribed under Section 211(3C) of the Companies Act, 1956.

Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.

The components of other comprehensive income include:

(a) changes in revaluation surplus (see Ind AS 16 Property, Plant and Equipmentand Ind AS 38) Intangible Assets);

(b)actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 92 and 129A of Ind AS 19 Employee Benefits;

(c)gains and losses arising from translating the financial statements of a foreign operation (see Ind AS 21 The Effects of Changes in Foreign Exchange Rates);

(d)gains and losses on remeasuring available-for-sale financial assets (see Ind AS 39 Financial Instruments: Recognition and Measurement);

(e)the effective portion of gains and losses on hedging instruments in a cash flow hedge (see Ind AS 39).

BASIC DISCLOSURE:

An entity shall clearly identify each financial statement and the notes. In addition, an entity shall display the following information prominently, and repeat it when necessary for the information presented to be understandable:

(a)the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period;

(b)whether the financial statements are of an individual entity or a group of entities;

(c)the date of the end of the reporting period or the period covered by the set of financial statements or notes;

(d)the presentation currency, as defined in Ind AS 21; and

(e)the level of rounding used in presenting amounts in the financial statements.

BALANCE SHEET

Information to be presented in the balance sheet

As a minimum, the balance sheet shall include line items that present the following amounts:

(a)property, plant and equipment;

(b)investment property;

(c)intangible assets;

(d)financial assets (excluding amounts shown under (e), (h) and (i));

(e)investments accounted for using the equity method;

(f)biological assets;

(g)inventories;

(h)trade and other receivables;

(i)cash and cash equivalents;

(j)the total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations;

(k)trade and other payables;

(l)provisions;

(m)financial liabilities (excluding amounts shown under (k) and (l));

(n)liabilities and assets for current tax, as defined in Ind AS 12 Income Taxes;

(o)deferred tax liabilities and deferred tax assets, as defined in Ind AS 12;

(p)liabilities included in disposal groups classified as held for sale in accordance with Ind AS 105;

(q)non-controlling interests, presented within equity; and

(r)issued capital and reserves attributable to owners of the parent.

2. An entity shall present additional line items, headings and subtotals in the balance sheet when such presentation is relevant to an understanding of the entity’s financial position.

3. When an entity presents current and non-current assets, and current andnon-current liabilities, as separate classifications in its balance sheet, it shall not classify deferred tax assets (liabilities) as current assets (liabilities).

Current/non-current distinction

4. An entity shall present current and non-current assets, and current andnon-current liabilities, as separate classifications in its balance sheet in accordance with paragraphs 66–76 except when a presentation based on liquidity provides information that is reliable and more relevant. When that exception applies, an entity shall present all assets and liabilities in order of liquidity.

5. Whichever method of presentation is adopted, an entity shall disclose the amount expected to be recovered or settled after more than twelve months for each asset and liability line item that combines amounts expected to be recovered or settled:(a)no more than twelve months after the reporting period, and

(b)more than twelve months after the reporting period.Current assets

6. An entity shall classify an asset as current when:

(a)it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;

(b)it holds the asset primarily for the purpose of trading;

(c)it expects to realise the asset within twelve months after the reporting period; or

(d)the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

An entity shall classify all other assets as non-current.

Current liabilities

69An entity shall classify a liability as current when:

(a)it expects to settle the liability in its normal operating cycle;

(b)it holds the liability primarily for the purpose of trading;

(c)the liability is due to be settled within twelve months after the reporting period; or

(d)it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period (see paragraph 73). Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

An entity shall classify all other liabilities as non-current.

(A)items of property, plant and equipment are disaggregated into classes in accordance with Ind AS 16;

(b)receivables are disaggregated into amounts receivable from trade customers, receivables from related parties, prepayments and other amounts;

(c)inventories are disaggregated, in accordance with Ind AS 2 Inventories, into classifications such as merchandise, production supplies, materials, work in progress and finished goods;

(d)provisions are disaggregated into provisions for employee benefits and other items; and

(e)equity capital and reserves are disaggregated into various classes, such aspaid-in capital, share premium and reserves.

Ind AS 8 requires retrospective adjustments to effect changes in accounting policies, to the extent practicable, except when the transition provisions in another Ind AS require otherwise. Ind AS 8 also requires restatements to correct errors to be made retrospectively, to the extent practicable.

Disclosure of accounting policies

117An entity shall disclose in the summary of significant accounting policies:

(a)the measurement basis (or bases) used in preparing the financial statements, and

(b)the other accounting policies used that are relevant to an understanding of the financial statements.

Ind AS 40 Investment Property requires disclosure of the criteria developed by the entity to distinguish investment property from owner- occupied property and from property held for sale in the ordinary course of business, when classification of the property is difficult.

Disclosure of acconting policy of maruti Suzuki:1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.1 General Information

The Company is primarily in the business of manufacturing, purchase and sale of motor vehicles, components and spare parts (“automobiles”). The other activities of the Company comprise facilitation of Pre-Owned Car sales, Fleet Management and Car Financing. The Company is a public company listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

1.2 Basis for Preparation of Financial Statements

These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on an accrual basis. These financial statements have been prepared to comply in all material respects with the applicable accounting principles in India, the applicable accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006 as amended] of the Companies Act, 1956, issued pursuant to the Companies (Accounting Standards) Rules, 2006 as per Section 211(3C) of the Companies Act, 1956 read with the General Circular 15/2013 dated

13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013, Accounting Standard 30, Financial Instruments: Recognition and Measurement issued by the Institute of Chartered Accountants of India to the extent it does not contradict with any other accounting standard referred to in Section 211 (3C) [Companies (Accounting Standards) Rules, 2006 as amended] of the Act, other recognised accounting practices and policies and the relevant provisions of the Companies Act, 1956.

All assets and liabilities have been classified as current or non- current as per the Company’s operating cycle and other criteria set out in the Revised Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current – non current classification of assets and liabilities.

1.3 Revenue Recognition

Domestic and export sales are recognised on transfer of significant risks and rewards to the customer which takes place on dispatch of goods from the factory and port respectively.

The Company recognises income from services on rendering of services.

1.4 Fixed Assets

Tangible Assets

a) Fixed assets (except freehold land which is carried at cost) are carried at cost of acquisition or construction or at manufacturing cost (in case of own manufactured assets) in the year of capitalisation less accumulated depreciation.

b) Assets acquired under finance leases are capitalised at the lower of their fair value and the present value of minimum lease payments.

Intangible Assets

Lumpsum royalty is stated at cost incurred as per the relevant licence agreements with the technical know-how provider less accumulated amortisation.

1.5 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised till the month in which each asset is put to use as part of the cost of that asset.

1.6 Depreciation / Amortisation

a) Tangible fixed assets except leasehold land are depreciated on the straight line method on a pro-rata basis

from the month in which each asset is put to use.

Depreciation has been provided at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain fixed assets where, based on the management’s estimate of the useful lives of the assets, higher depreciation has been provided on the straight line method over the following useful lives:

Plant and Machinery 8 – 11 Dies and Jigs 4 Electronic Data Processing 3

In respect of assets whose useful life has been revised, the unamortised depreciable amount is charged over the revised remaining useful lives of the assets.

b) Leasehold land is amortised over the period of lease.

c) All assets, the individual written down value of which at the beginning of the year is ` 5,000 or less, are depreciated at the rate of 100%. Assets purchased during the year costing` 5,000 or less are depreciated at the rate of 100%.

d) Lump sum royalty is amortised on a straight line basis over 4 years from the start of production of the related model.

1.7 Inventories

a) Inventories are valued at the lower of cost, determined on the weighted average basis and net realisable value.a) The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs

and related production overheads. Net realisable value is the selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

1.2a) Tools are written off over a period of three years except for tools valued at ` 5,000 or less individually

which are charged to revenue in the year of purchase.b) Machinery spares (other than those supplied along with main plant and machinery, which are

capitalised and depreciated accordingly) are charged to revenue on consumption except those valued at ` 5,000 or less individually, which are charged to revenue in the year of purchase.

1.8. InvestmentsCurrent investments are valued at the lower of cost and fair value. Long-term investments are valued at cost except in the case of other than temporary decline in value, in which case the necessary provision is made.

1.9 Research And Development

Revenue expenditure on research and development is charged against the profit for the year in which it is incurred. Capital expenditure on research and development is shown as an addition to fixed assets and depreciated accordingly.

1.3 Foreign Currency Translations And Derivative Instruments

a) Foreign currency transactions are recorded at the exchange rates prevailing at the date of the transactions. Exchange differences arising on settlement of transactions are recognised as income or

expense in the year in which they arise.

b) At the balance sheet date, all monetary assets and liabilities denominated in foreign currency are reported at the exchange rates prevailing at the balance sheet date by recognising the exchange difference in the statement of profit and loss. However, the exchange difference arising on foreign currency monetary items that qualify and are designated as hedge instruments in a cash flow hedge is initially recognised in ‘hedge reserve’ and subsequently transferred to the statement of profit and loss on occurrence of the underlying hedged transaction.

Effective 1st April 2008, the Company adopted Accounting Standard - 30, “Financial Instruments: Recognition and Measurement” issued by The Institute of Chartered Accountants of India to the extent the adoption does not contradict with the accounting standards notified under Section 211(3C) of the Companies Act, 1956 and other regulatory requirements. All derivative contracts (except for forward foreign exchange contracts where underlying assets or liabilities exist) are fair valued at each reporting date. For derivative contracts designated in a hedging relationship, the Company records the gain or loss on effective hedges, if any, in a hedge reserve, until the transaction is complete. On completion, the gain or loss is transferred to the statement of profit and loss of that period. Changes in fair value relating to the ineffective portion of the hedges and derivatives not qualifying or not designated as hedges are recognised in the statement of profit and loss in the accounting period in which they arise.

b) In the case of forward foreign exchange contracts where an underlying asset or liability exists, the difference between the forward rate and the exchange rate at the inception of the contract is recognised as income or expense over the life of the contract. Profi or loss arising on cancellation or renewal of a forward contract is recognised as income or expense in the year in which such cancellation or renewal is made.

1.8 Employee Benefit Costs

Short - Term Employee Benefits:

Recognised as an expense at the undiscounted amount in the statement of profit and loss for the year in which the related service is rendered.

Post Employment and Other Long Term Employee Benefits:

(i) The Company has Defined Contribution Plans for post employment benefit namely the Superannuation Fund which is recognised by the income tax authorities. This Fund is administered through a Trust set up by the Company and the Company’s contribution thereto is charged to the statement of profit and loss every year. The Company also maintains an insurance policy to fund a post-employment medical assistance scheme, which is a Defined Contribution Plan administered by The New India Insurance Company Limited. The Company’s contribution to State Plans namely Employees’ State Insurance Fund and Employees’ Pension Scheme are charged to the statement of profit and loss every year.

(ii) The Company has Defined Benefit Plans namely Gratuity, Provident Fund & Retirement Allowance for employees and Other Long Term Employee Benefits i.e. Leave Encashment/ Compensated Absences, the liability for which is determined on the basis of an actuarial valuation at the end of the year based on the Projected Unit Credit Method and any shortfall in the size of the fund maintained by the Trust is additionally provided for in the statement of profit and loss. The Gratuity Fund and Provident Fund are recognised by the income tax authorities and are administered through Trusts set up by the Company.

Termination benefits are immediately recognised as an expense.

Gains and losses arising out of actuarial valuations are recognised immediately in the statement of profit and loss as income or expense.

1.9 Customs Duty

Custom duty available as drawback is initially recognised as purchase cost and is credited to consumption of materials on exported vehicles.

1.1 Government Grants

Government grants are recognised in the statement of profit and loss in accordance with the related schemes and in the period in which these accrue.

1.2 Taxes

Tax expense for the year, comprising current tax and deferred tax, is included in determining the net profit/ (loss) for the year.

Current tax is recognised based on assessable profit computed in accordance with the Income Tax Act and at the prevailing tax rate.

Deferred tax is recognised for all timing differences. Deferred tax assets are carried forward to the extent it is reasonably / virtually certain (as the case may be) that future taxable profit will be available against which such deferred tax assets can be realised. Such assets are reviewed at each balance sheet date and written down to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised.

Minimum Alternative Tax credit is recognised as an asset only to the extent and when there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each balance sheet date and the carrying amount is written down to the extent there is no longer convincing evidence to the effect that the Company will pay normal tax during the specified period.

Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted at the balance sheet date.

1.3 Dividend Income

Dividend from investments is recognised when the right to receive the payment is established and when no significant uncertainty as to measurability or collectability exits.

1.4 Interest Income

Interest income is recognised on the time basis determined by the amount outstanding and the rate applicable and where no significant uncertainty as to measurability or collectability exists.

1.5 Impairment of Assets

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised in the statement of profit and loss to the extent the carrying amount exceeds the recoverable amount.

1.6 Royalty

a) The Company pays / accrues for royalty in accordance with the relevant licence agreements with the technical know- how provider.

b) The lump sum royalty incurred towards obtaining technical assistance / technical know-how to manufacture a new model/ car, ownership of which rests with the technical know how provider, is recognised as an intangible asset in accordance with the requirements of Accounting Standard-26 “Intangible Assets”. Royalty payable on sale of products i.e. running royalty is charged to the statement of profit and loss as and when incurred.

1.7 Provisions and Contingencies

Provisions: Provisions are recognised when there is a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the balance sheet date and are not discounted to their present value.

Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

1.8 Leases

As a lessee

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the statement of profit and loss on a straight-line basis over the period of the lease or the terms of underlying agreement/s, as the case may be.

As a lessor The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the statement of profit and loss on a straight line basis over the lease term which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished.

1.9 Cash And Cash Equivalents

In the cash flow statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

Blanace sheet:

As at 31st March 2014

Schedule No.

As on 31.03.2014 (Current Year)`

As on 31.03.2013 (Previous Year)`

CAPITAL AND LIABILITIESCapital 1 746,57,31 684,03,40Reserves & Surplus 2 117535,67,65 98199,65,14 Deposits 3 1394408,50,48 1202739,57,43Borrowings 4 183130,88,26 169182,71,36Other Liabilities and Provisions 5 96412,96,19 95405,30,05

TOTAL 1792234,59,89 1566211,27,38Schedule No.

As on 31.03.2014 (Current Year)`

As on 31.03.2013 (Previous Year)`

ASSETSCash and Balances with Reserve Bank of India

6 84955,66,05 65830,41,04

Balances with Banks and money at call and short notice

7 47593,97,22 48989,75,41

Investments 8 398308,18,98 350877,50,51Advances 9 1209828,71,92 1045616,55,3Fixed Assets 10 8002,15,51 7005,02,22

Other Assets 11 43545,90,21 47892,02,89TOTAL 1792234,59,89 1566211,27,38