Bajaj Auto Ltd. (the Company) is a company limited by shares, incorporated and domiciled in India. The Company is engaged in the business of development, manufacturing and distribution of automobiles such as motorcycles, commercial vehicles etc. and parts thereof. The Company sells its products in India as well as various other global markets.
1. First time adoption and summary of significant accounting policies followed by the Company IA. Basis of preparation
These financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
The financial statements up to year ended 31 March 2016 were prepared in accordance with the Accounting Standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act.
These financial statements are the first financial statements of the Company under Ind AS. Refer note 1B for an explanation of how the transition from previous GAAP to Ind AS has affected the Company''''s financial position, financial performance and cash flows.
All assets and liabilities have been classified as current or non-current as per the Company''''s normal operating cycle and other criteria set out in the Schedule III (Division II) to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
IB.First-time adoption of Ind AS Transition to Ind AS
These are the Company''''s first standalone financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 1C have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS Balance Sheet at 1 April 2015 (the Company''''s date of transition). In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the Accounting Standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company''''s financial position, financial performance and cash flows is set out in the following tables and notes.
A. Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS, which are considered to be material or significant by the Company.
A.1 Ind AS optional exemptions A.1.1 Deemed cost for investment in subsidiaries
Ind AS 101 provides a onetime option to a first-time adopter either to measure its investment in subsidiaries as per previous GAAP carrying value or at fair value on the date of transition.
The Company has elected to measure its investment in subsidiaries as per previous GAAP carrying value.
Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.
The Company has elected to apply this exemption for such contracts/arrangements.
A.2 Ind AS mandatory exceptions A.2.1 Hedge accounting
Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in Ind AS 109, at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation cannot be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of 1 April 2015 are reflected as hedges in the Company''''s results under Ind AS.
The Company had designated various hedging relationships as cash flow hedges under the previous GAAP. On date of transition to Ind AS, the entity had assessed that all the designated hedging relationship qualifies for hedge accounting as per Ind AS 109. Consequently, the Company continues to apply hedge accounting on and after the date of transition to Ind AS.
An entity''''s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following item in accordance with Ind AS at the date of transition as this was not required under previous GAAP:
— Investment in fixed maturity plan and other mutual funds carried at Fair value through profit or loss
A.2.3 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
A.2.4 Fair valuation of Government grant/loan
Ind AS 101 requires that a first-time adopter shall classify all Government loans received as a financial liability or an equity instrument in accordance with Ind AS 32. Except as permitted by paragraph B11, a first-time adopter shall apply the requirements in Ind AS 109 and Ind AS 20, prospectively to Government loans existing at the date of transition to Ind AS and shall not recognize the corresponding benefit of the Government loan at a below-market rate of interest as a Government grant. Consequently, if a first-time adopter did not, under its previous GAAP, recognize and measure a Government loan at a below-market rate of interest on a basis consistent with Ind AS requirements, it shall use its previous GAAP carrying amount of the loan at the date of transition to Ind AS as the carrying amount of the loan in the opening Ind AS Balance Sheet.
In line with above mandatory exception, Company has continued previous GAAP value for sales tax deferral loan/incentive as at 31 March 2015 in the opening Ind AS Balance Sheet.
Note 1: Fair valuation of investments (fixed maturity plans and other mutual funds)
Under the previous GAAP, investments in fixed maturity plans and other mutual funds were classified as long-term investments or current investments based on the intended holding period and reliability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognized in retained earnings (net of related deferred taxes) as at the date of transition and subsequently in the Statement of Profit and Loss for the year ended 31 March 2016.
Note 2: Measurement change for some financial assets at amortized cost
Under previous GAAP, certain debt instruments were measured at cost including pre-acquisition interest. This had impacted amortization of premium/discount on those investments. Under Ind AS, these investments have been premeasured at cost excluding pre-acquisition interest and amortization has been accordingly reworked. The change in carrying cost of such investments at the date of transition has been recognized in retained earnings. Subsequent amortization changes have been recognized in the Statement of Profit and Loss.
Note 3: Investment property
Under the previous GAAP, investment properties were presented as part of non-current investments. Under Ind AS, investment properties are required to be separately presented on the face of the Balance Sheet. There is no impact on the total equity or profit as a result of this adjustment.
Note 4: Hedge accounting
Under the previous GAAP, the Company had adopted the hedge accounting principles of AS 30 Financial Instruments:
Recognition and Measurement to account for derivatives used for hedging foreign exchange risk related to highly probable forecast sales transactions. In accordance with AS 30, the Company separated the intrinsic value and time value of an option contract and designated as hedging instrument only the change in intrinsic value of an option. The changes in the time value of the option contracts were recognized as expenses. Under Ind AS, these costs (i.e. time value related changes of the option contract) are also accumulated within equity and are adjusted against the carrying value of the hedged item. Consequently, the time value changes (net of tax) have been reclassified within equity from retained earnings to hedge reserve. All subsequent changes in time value have been recognized in other comprehensive income and have been accumulated in separate component of equity.
Note 5: Proposed dividend and tax thereon
Under the previous GAAP, dividends proposed by the Board of Directors after the Balance Sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend and tax thereon, included under provisions has been reversed with corresponding adjustment to retained earnings.
Note 6: Fair valuation of financial liability (sales tax deferral)
Under previous GAAP, the sales tax deferral incentive, which is sales tax collected and repayable after a fixed tenure as prescribed by Package Scheme of Incentives was recognized at cost. Under Ind AS, the financial liability of sales tax deferral is to be measured at fair value and the difference between deferral amount and fair value is to be recognized as Government grant. The Company has availed mandatory exception under Ind AS 101 and accordingly, there is no change in accounting treatment on the amount carried forward on the date of transition.
After transition date, the difference between sales tax deferral amount and fair value has been recognized as Government grant in Balance Sheet. The Government grant has been recognized in the Statement of Profit and Loss on a straight line basis over the period of grant and unwinding of interest on fair value of sales tax deferral liability has been recognized as finance cost.
Note 7: Excise duty
Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the Statement of Profit and Loss as part of expenses. There is no impact on the total equity and profit.
Note 8: Discount and incentives directly relatable to revenue
Under previous GAAP, the discounts and incentives on sales were shown as other expenses. Under Ind AS, these are required to be netted off against revenue. There is no impact on the total equity and profit.
Note 9: Remeasurements of post-employment benefit obligations
Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss.
Under the previous GAAP, these remeasurements were forming part of the Statement of Profit and Loss for the year. There is no impact on the total equity.
Note 10: Other comprehensive income
Under Ind AS, all items of income and expense recognized in a period should be included in the Statement of Profit and Loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the Statement of Profit and Loss as ''''other comprehensive income'''' includes remeasurements of defined benefit plans, effective portion of gains and losses on cash flow hedging instruments etc. The concept of other comprehensive income did not exist under previous GAAP.
1C. Summary of significant accounting policies followed by the Company
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
1 System of accounting
i) The Company follows the mercantile system of accounting and recognizes income and expenditure on an accrual basis except in case of significant uncertainties.
ii) Financial statements are prepared under the historical cost convention, except for certain financial assets and liabilities (including derivative instruments) that are measured at fair value. These costs are not adjusted to reflect the impact of changing value in the purchasing power of money.
iii) Estimates and assumptions used in the preparation of these financial statements and disclosures made therein are based upon Management''''s evaluation of the relevant facts and circumstances as of the date of the financial statements, which may differ from the actual results at a subsequent date. The following are items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about basis of calculation for each affected line item in the financial statement
a) Estimation of fair value of derivative instruments
b) Provision for warranty claims and vehicle service charges
c) Valuation of employee benefits
d) Estimation of fair value of contingent liabilities and judgment on their probability of devolving on the Company
e) Provision for tax expenses
2 Revenue recognition
i) Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of value added taxes, returns, discounts, rebates and incentives. The Company recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Company.
ii) Domestic sales are accounted for on dispatch from the point of sale corresponding to transfer of significant risks and rewards of ownership to the buyer.
iii) Export sales are recognized on the date of the mate''''s receipt/shipped on board signifying transfer of risks and rewards of ownership to the buyer as per terms of sale and initially recorded at the relevant exchange rates prevailing on the date of the transaction.
b) Export incentives
Export incentives are accounted for on export of goods if the entitlements can be estimated with reasonable accuracy and conditions precedent to claim are reasonably expected to be fulfilled.
c) Other income
The Company recognizes income (including rent etc.) on accrual basis. However, where the ultimate collection of the same lacks reasonable certainty, revenue recognition is postponed to the extent of uncertainty.
3 Property, plant and equipment and depreciation/amortization
A. Property, plant and equipment
i) Property, plant and equipment except land are carried at historical cost of acquisition, construction or manufacturing cost, as the case may be, less accumulated depreciation and amortization. Freehold land is carried at cost of acquisition.
Cost represents all expenses directly attributable to bringing the asset to its working condition capable of operating in the manner intended.
ii) Costs incurred to manufacture property, plant and equipment and intangible are reduced from the total expense under the head ''''Expenses, included in above items, capitalized'''' in the Statement of Profit and Loss.
iii) Subsequent costs are included in the asset''''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.
iv) Land and buildings acquired/constructed, not intended to be used in the operations of the Company are categorized as investment property.
B. Transition to Ind AS
On Transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as at 1 April 2015 measured as per previous GAAP which in case of the Company, corresponds with carrying costs measured in accordance with Ind AS 16 Property, plant and equipment.
C. Depreciation and amortization methods, estimated useful lives and residual value
(a) Leasehold land
Premium on leasehold land is amortized over the period of lease.
(b) On other tangible assets
i. a. Depreciation is provided on a pro rata basis on the straight line method to allocate the cost, net of residual value over the estimated useful lives of the assets.
b. Where a significant component (in terms of cost) of an asset has an estimated economic useful life shorter than that of its corresponding asset, the component is depreciated over its shorter life.
c. Useful life of assets are determined by the Management by internal technical assessments except in case where such assessment suggests a life significantly different from those prescribed by Schedule II- Part ''''C'''', the useful life is as assessed and certified by a technical expert.
Asset class having residual value at H 1
Computers and IT Equipment
Dies and jigs
iii. Depreciation on additions is being provided on pro rata basis from the month of such additions.
iv. Depreciation on assets sold, discarded or demolished during the year is being provided up to the month in which such assets are sold, discarded or demolished.
D. Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset''''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''''s fair value less cost of disposal and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
4 Intangible assets
A. Technical know-how acquired
Technical know-how acquired is stated at acquisition cost (including income-tax and R&D cess) less accumulated amortization and impairment losses, if any. Technical know-how is amortized equally over a period of estimated useful life i.e. six years.
B. Technical know-how developed by the Company
i) Expenditure incurred by the Company on development of know-how researched, is recognized as an intangible asset, if and only if the future economic benefits attributable to the use of such know-how are probable to flow to the Company and the costs/expenditure can be measured reliably.
ii) The cost of technical know-how developed is amortized equally over its estimated useful life i.e. generally three years from the date of commencement of commercial production.
C. Transition to Ind AS
On Transition to Ind AS, the Company has elected to continue with the carrying value of all of intangible assets recognized as at 1 April 2015 measured as per previous GAAP which in case of the Company, corresponds with carrying costs measured in accordance with Ind AS 38 Intangible assets.
5 Investment property
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs. Subsequent expenditure is capitalized to the asset''''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
Depreciation on investment property is provided on a pro rata basis on straight line method over the estimated useful lives.
Useful life of assets, as assessed by the Management, corresponds to those prescribed by Schedule II- Part ''''C''''.
Transition to Ind AS
On Transition to Ind AS, the Company has elected to continue with the carrying value of investment property recognized as at 1 April 2015 which in case of the Company, corresponds with carrying costs measured in accordance with Ind AS 40 Investment Properties.
6 Investments and financial assets
A. Investment in subsidiaries
Interest in subsidiaries are recognized at cost and not adjusted to fair value at the end of each reporting period.
Cost represents amount paid for acquisition of the said investments.
The Company assesses at the end of each reporting period, if there are any indications that the said investments may be impaired. If so, the Company estimates the recoverable value/amount of the investment and provides for impairment, if any i.e. the deficit in the recoverable value over cost.
B. Other investments and financial assets
The Company classifies its financial assets in the following measurement categories:
S those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
S those measured at amortized cost.
The classification is done depending upon the Company''''s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income, as elected. For investments in debt instruments, this will depend on the business model in which the investment is held.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
At initial recognition, the Company measures a financial asset at its fair value including, in the case of ''''a financial asset not at fair value through profit or loss'''', transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at ''''fair value through profit or loss'''' are expensed in profit or loss.
Subsequent measurement of debt instruments depends on the Company''''s business model for managing the asset and the cash flow characteristics of the asset. There are two measurement categories into which the Company classifies its debt instruments:
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost e.g. Debentures, Bonds etc. A gain or loss on a debt investment that is subsequently measured at amortized cost is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in investment income using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortized cost, are measured at fair value through profit or loss e.g. investments in mutual funds. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognized in profit or loss and presented net in the Statement of Profit and Loss within other gains/(losses) in the period in which it arises.
iii) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk and if so, assess the need to provide for the same in the Statement of Profit and Loss.
iv) Derecognition of financial assets
A financial asset is derecognized only when Company has transferred the rights to receive cash flows from the financial asset. Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized.
v) Income recognition Interest income
Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
Dividends are recognized in the Statement of Profit and Loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
7 Derivative and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The Company documents its risk management objectives and strategy for undertaking various hedge transactions.
In terms thereof, the Company designates their derivatives as hedges of foreign exchange risks associated with the cash flow of highly probable forecast transactions (viz. export sales).
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than or equal to 12 months.
Cash flow hedges that qualify for hedge accounting -
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in the Statement of Profit and Loss, within other gains/(losses).
When forward contracts are used to hedge forecast transactions, the Company designates them in entirety as the hedging instrument. Gains or losses relating to effective portion of fair value of option and forward contracts are recognized in the cash flow hedging reserve within equity.
Where option contracts are used to hedge forecast transactions, the Company designates intrinsic value of the option contract as hedging instrument.
Gains or losses relating to the effective portion of the change in intrinsic value of the option contract are recognized in the cash flow hedging reserve within equity. The changes in time value of the option contracts that relate to the hedge items are recognized through other comprehensive income in ''''Costs of hedging reserve'''' within equity.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place).
When a hedging instrument expires, or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time is recognized in the Statement of Profit and Loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Statement of Profit and Loss.
If the hedge ratio for risk management is no longer optimal, but risk management objectives remain unchanged and hedge continues to qualify for hedge accounting, the hedge relationships are re-balanced so that the hedge ratio aligns.
Consequently, hedge ineffectiveness is computed and accounted for in the Statement of Profit and Loss immediately.
8 Foreign currency transactions
i) Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates (''''the functional currency''''). The financial statements are presented in Indian rupee (INR), which is Company''''s functional and presentation currency.
ii) On initial recognition, all foreign currency transactions are recorded at foreign exchange rate on the date of transaction.
iii) Monetary items of current assets and liabilities in foreign currency outstanding at the close of financial year are revalorized at the appropriate exchange rates prevailing at the close of the year.
iv) The gain or loss on decrease/increase in reporting currency due to fluctuations in foreign exchange rates, in case of monetary current assets and liabilities in foreign currency, are recognized in the Statement of Profit and Loss in the manner detailed in note 39 to financial statements.
v) Fixed assets purchased at liaison offices in foreign exchange are recorded at their historical cost computed with reference to the average rate of foreign exchange remitted to the liaison office.
Cost of inventories have been computed to include all costs of purchases (including materials), cost of conversion and other costs incurred, as the case may be, in bringing the inventories to their present location and condition.
i) Finished stocks of vehicles and auto spare parts and stocks of work-in-progress are valued at cost of manufacturing or net realizable value whichever is lower. Cost is calculated on a weighted average basis. Cost of finished stocks of vehicles lying in the factory premises, branches, depots are valued inclusive of excise duty.
ii) Stores, packing material and tools are valued at cost arrived at on weighted average basis or net realizable value, whichever is lower.
iii) Raw materials and components are valued at cost arrived at on weighted average basis or net realizable value, whichever is lower, as circumstances demand. However, obsolete and slow moving items are valued at cost or estimated realizable value whichever is lower.
iv) Inventory of machinery spares and maintenance materials not being material are expensed in the year of purchase.
However, machinery spares forming key components specific to a machinery and held as insurance spares are capitalized along with the cost of the asset.
v) Goods in transit are stated at actual cost incurred up to the date of Balance Sheet.
10 Research & Development expenditure
Research & Development expenditure is charged to revenue under the natural heads of account in the year in which it is incurred. Payments for R&D work by contracted agency are being expensed out up to the stage of completion. However, expenditure incurred at development phase, where it is reasonably certain that outcome of research will be commercially exploited to yield economic benefits to the Company, is considered as an Intangible asset and accounted in the manner specified in clause 4 above.
11 Employee benefits
a) Privilege leave entitlements
Privilege leave entitlements are recognized as a liability, in the calendar year of rendering of service, as per the rules of the Company. As accumulated leave can be availed and/or encased at any time during the tenure of employment, subject to terms and conditions of the scheme, the liability is recognized on the basis of an independent actuarial valuation.
They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
Payment for present liability of future payment of gratuity is being made to approved gratuity fund, which fully covers the same under Cash Accumulation Policy and Debt fund of the Life Insurance Corporation of India (LIC) and Bajaj Allianz Life Insurance Company Ltd. (BALIC). However, any deficit in plan assets managed by LIC and BALIC as compared to the liability on the basis of an independent actuarial valuation is recognized as a liability.
The liability or asset recognized in the Balance Sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method in conformity with the principles and manner of computation specified in Ind AS 19.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Statement of Profit and Loss.
Defined contribution to superannuation fund is being made as per the scheme of the Company.
d) Provident fund contributions are made to Company''''s Provident Fund Trust. The contributions are accounted for as defined benefit plans and the contributions are recognized as employee benefit expense when they are due.
Deficits, if any, of the fund as compared to liability on the basis of an independent actuarial valuation is to be additionally contributed by the Company and hence recognized as a liability.
e) Defined contribution to Employees Pension Scheme 1995 is made to Government Provident Fund Authority.
a) Provision for tax is made for the current accounting period (reporting period) on the basis of the taxable profits computed in accordance with the Income-tax Act, 1961 and the Income Computation and Disclosure Standards prescribed therein. Excess/short provisions and interest thereon are recognized only on completion of assessment and where adjustments made by the Assessing Officer are disputed, on receiving the ''''Order Giving Effect'''' to the tax determined by the CIT (Appeals) and thereafter on final settlement of further disputes.
b) Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
Deferred taxes are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
13 Provisions and contingent liabilities
The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation such as product warranty costs. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
14 Operating leases including on investment properties As a lessee
Leases in which a significant portion of the risks and rewards of ownership are retained by the less or 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 in a manner which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished.
As a less or
The Company has leased out certain 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 recognized in the Statement of Profit and Loss on a straight line basis over the lease term in a manner which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognized as an expense in the Statement of Profit and Loss in the period in which they are incurred.
15 Government grant
Grants from the Government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to income are deferred and recognized in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
17 Cash and cash equivalents
For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash on hand, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
18 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company''''s earnings per share is the net profit for the period. The weighted average number of equity shares outstanding during the period and all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of share outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
19 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Core Management Committee which includes the Managing Director who is the Chief Operating Decision Maker. The Core Management Committee examines performance both from product and a geographical perspective and has identified two operative reportable segments from which significant risks and rewards are derived viz. Automotive business and Investments.
The best evidence of fair value is current prices in an active market for similar properties. Since investment properties leased out by the Company are cancellable and non-cancellable leases, the market rate for sale/purchase of such premises are representative of fair values. Company''''s investment properties are at a location where active market is available for similar kind of properties. Hence fair value is ascertained on the basis of market rates prevailing for similar properties in those location determined by an independent registered valuer and consequently classified as a level 2 valuation.