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Accounting Policies of Ashok Leyland Ltd. Company

Mar 31, 2015

1. Accounting convention

1.1 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 the 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 except for certain categories of fixed assets that are carried at re-valued amounts.

1.2 All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the schedule III to the 2013 Act. 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 determined its operating cycle as twelve months for the purpose of current - non current classification of assets and liabilities.

1.3 Use of estimates

The preparation of the financial statements, in conformity with the generally accepted accounting principles, requires management to make estimates and assumptions that are considered in the reported amounts of assets including decline in carrying value of investments and liabilities on the date of the financial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt with in the period in which the results are known / materialize.

2. Tangible and Intangible Fixed assets and depreciation / amortisation

2.1 Cost of all civil works (including electrification and fittings) is capitalised with the exception of alterations and modifications of a capital nature to existing structures where the cost of such alteration or modification is Rs. 100,000 and below. Other fixed assets, including intangible assets and assets given on lease, where the cost exceeds Rs. 10,000 and the estimated useful life is two years or more, is capitalised. Cost of initial spares and tools is capitalised along with the respective assets. Cost of fixed assets is net of eligible credits under CENVAT / VAT Scheme. Expenditure directly related and incidental to construction / development and borrowing costs in para 3 below are capitalised upto the date the assets are ready for their intended use. Exchange differences are capitalised to the extent dealt with in para 6.2 below.

Certain categories of fixed assets were revalued and are carried at the revalued amounts less accumulated depreciation and impairment loss, if any. Increase in the net book value on such revaluation is credited to "Revaluation Reserve Account". Upon the sale, disposal, extinguishment of the revalued assets the amount of revaluation reserve against such assets is adjusted against their carrying values and the difference between the sale proceeds of such assets and the adjusted carrying value are recognised in the Statement of Profit and Loss.

2.2 Tangible fixed assets and Intangible assets, that are not yet ready for their intended use, are carried at costs, comprising direct cost, and other incidental / attributable expenses and reflected under Capital work in progress / Intangible assets under development, respectively.

2.3 Assets are depreciated / amortised on straight line basis over their estimated useful life as below:

a) Leasehold land over the period of lease;

b) Leasehold land and buildings as revalued, is calculated on the respective revalued amounts, over the balance useful life as determined by the valuers in the case of buildings and as per (a) above in the case of land;

c) Assets subject to impairment, on the asset''s revised carrying amount, over its remaining useful life.

d) All other tangible and intangible assets (including assets given on lease and assets in leased / customer premises) are depreciated / amortised over their estimated useful lives. Estimated useful life of assets are determined based on internal technical parameters / assessment and supported by external technical advice obtained periodically.

The aforesaid estimated useful life for computing depreciation / amortisation are different in certain cases from the life specified in the Schedule II to the 2013 Act and such differences are disclosed in Note 3.2.9 to the financial statements.

2.4 Depreciation / amortisation is provided on a pro-rata basis from the month the assets are put to use during the financial year. In respect of assets sold or disposed off during the year, depreciation / amortisation is provided upto the month of sale or disposal of the assets.

2.5 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 is recognised, if the carrying amount exceeds the recoverable amount.

3. Borrowing costs

Borrowing costs attributable to the acquisition, construction or production of qualifying assets, are added to the cost of those assets, upto the date when the assets are ready for their intended use. Expenditure incurred on issue of debentures is adjusted against Securities Premium Account. Expenditure incurred on raising loans is amortised over the period of such borrowings. Premium paid on prepayment of borrowing is amortised over the unexpired period thereof or six months, whichever is less. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.

4. Investments

Long term investments are carried individually at cost. However, provision for diminution is made to recognise a decline, if any, other than temporary, in the carrying value of the investment. Current investments are carried individually at lower of cost and fair value.

5. Inventories

5.1 Inventories are valued at lower of cost and net realisable value; cost being ascertained on the following basis:

- Stores, raw materials and components and work-in-progress: On monthly moving weighted average basis.

- spares, consumable tools : weighted average basis

In respect of works-made components, cost includes applicable production overheads.

- Finished / trading goods: under absorption costing method.

5.2 Cost includes taxes and duties and is net of eligible credits under CENVAT / VAT Schemes.

5.3 Cost of patterns and dies is amortised over a period of five years.

5.4 Surplus / obsolete / slow moving inventories are adequately provided for.

6. Foreign currency transactions and derivatives

The Company''s foreign operations (including foreign branches) are an integral part of the Company''s activities. The foreign currency transactions / foreign currency monetary and non-monetary items in such operations and others are recorded / translated as mentioned below:

6.1 Foreign currency transactions are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency are translated at closing rate. Exchange differences arising on settlement or translation of monetary items other than those mentioned in para 6.2 below are recognised as income or expense in the Statement of Profit and Loss in the period it arises.

6.2 Exchange differences on translation or settlement of long term foreign currency monetary items (i.e. whose term of settlement exceeds twelve months from date of its origination) at rates different from those at which they were initially recorded or reported in the previous financial statements, insofar as it relates to acquisition of depreciable assets are adjusted to the cost of the assets and depreciated over remaining useful life of such assets. In other cases, these are accumulated in "Foreign currency monetary item translation difference account" and amortised by recognition as income or expense in each period over the balance term of such items till settlement occurs but not beyond March 31, 2020.

6.3 The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to firm commitments and highly probable forecast transactions. The company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles set out in Accounting Standard - 30 "Financial Instruments

- Recognition and measurement" issued by ICAI. Gains and losses on these forward contracts designated as "effective Cash flow hedges" are recognised in the "Hedge Reserve Account" till the underlying forecasted transaction occurs. Any ineffective portion however, is recognised immediately in the Statement of Profit and Loss.

6.4 Gains and losses on all other derivatives (including forward contracts not designated as Cash flow hedge) are recognised in the Statement of Profit and Loss in the period it arises. Premium or discount on forward contracts is amortized over the life of the contract.

6.5 Non-monetary items of the Company''s integral foreign operations are carried at historical cost.

6.6 Investments in equity capital of companies registered outside India are carried in the Balance Sheet at the rates prevailing on the date of the transaction.

7. Segment Reporting

The Company''s primary segment is identified as business segment based on nature of product, risks, returns and the internal business reporting system and secondary segment is identified based on geographical location of the customers as per Accounting Standard - 17. The Company is principally engaged in a single business segment viz. Commercial vehicles and related components.

8. Revenue recognition

a) Sale of goods

Revenue from sale of products net of returns, is recognised on despatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty. Price escalation claims are recognised to the extent there is reasonable certainty of its realisation.

b) Sale of Services

Revenue from services is recognised in accordance with the specific terms of contract on performance.

c) Other operating revenues

Other operating revenues comprise of income from ancillary activities incidental to the operations of the Company and is recognised when the right to receive the income is established as per the terms of the contract.

d) Other Income

Interest income is accounted on accrual basis. Dividend income is accounted as and when the right to receive the dividend is established.

9. Leases

Where the company is a lessor

a) Leases in which the Company transfers substantially all the risks and rewards of ownership of the asset are classified as finance leases. Assets given under finance lease are recognised as a receivable at an amount equal to the net investment in the lease. After the initial recognition, the Company apportions lease rentals between principal repayment and interest income so as

to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognised in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc., are recognised immediately in the Statement of Profit and Loss.

b) Leases in which the company does not transfer substantially all the risks and rewards of ownership of the asset are classified

as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognised in the Statement of Profit and Loss on a straight line basis over the lease terms. Costs, including depreciation, are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs etc. are charged to the Statement of Profit and Loss in the period of incurrence.

10. Government grants

Grants in the form of capital / investment subsidy are treated as Capital reserve. Export incentives and incentives in the nature of subsidies given by the Government are reckoned in revenue in the year of eligibility.

11. Research and Development Costs

Expenditure on the design and production of prototypes is charged to the Statement of Profit and Loss as and when incurred.

Product development costs, including know how developed / acquired, incurred on new vehicle / engine platforms, variants on existing platforms and aggregates are recognised as Intangible assets only when product''s technical feasibility is established and amortised over their estimated useful life.

12. Employee benefits

12.1 Employee benefit expenses include salary, wages, performance incentives, compensated absences, medical benefits and other perquisites. It also includes post-employment benefits such as provident fund, superannuation fund, gratuity, pensionary benefits etc.

12.2 Short term employee benefit obligations are estimated and provided for.

12.3 Post-employment benefits and other long term employee benefits

- Defined contribution plans:

Company''s contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and/ or statute and charged to the Statement of Profit and Loss in the period of incurrence when the services are rendered by the employees.

In respect of provident fund, contributions made to a trust administered by the Company, the interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Fund and Miscellaneous Provisions Act 1952 and shortfall, if any, shall be contributed by the Company and charged to the Statement of Profit and Loss.

- Defined benefit plans and compensated absences:

Company''s liability towards gratuity, other retirement benefits and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period of occurrence.

12.4 Termination benefits

Expenditure on termination benefits (including expenditure on Voluntary Retirement scheme) is recognised in the Statement of Profit and Loss in the period of incurrence.

13. Provisions and Contingencies

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 reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the financial statements.

Provision for product warranties is made for contractual obligations in accordance with the policy in force and is estimated for the unexpired period.

14. Income taxes

14.1 Income tax expenses comprise current and deferred taxes. Current tax is determined on income for the year chargeable to tax in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws and after considering credit for Minimum Alternate Tax (MAT) available under the said Act. MAT paid in accordance with the tax laws which gives future economic benefits in the form of adjustments to future tax liability, is considered as an asset if there is convincing evidence that the future economic benefit associated with it will flow to the Company resulting in payment of normal income tax.

14.2 Deferred tax is recognised on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date.

Deferred tax assets are recognised for timing differences other than unabsorbed depreciation and carry forward losses only to the extent that there is a reasonable certainty that there will be sufficient future taxable income to realise the assets. Deferred tax asset pertaining to unabsorbed depreciation and carry forward of losses are recognised only to the extent there is a virtual certainty of its realisation.

15. Cash Flow statement

Cash flow statements are reported using the indirect method, whereby profit / (loss) before extra-ordinary items / exceptional items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipt or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on available information including taxes paid relating to these activities.


Mar 31, 2014

1. Accounting convention

1.1 Financial statements are prepared in accordance with the Generally Accepted Accounting Principles in India to comply with the Accounting Standards notifi ed under Section 211 (3C) of the Companies Act 1956 ("the 1956 Act") [which continues to be applicable in respect of section 133 of the Companies Act''2013("the 2013 Act") in terms of general circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Aff airs] and the relevant provision of the 1956 Act/ 2013 Act as applicable. The fi nancial statements have been prepared on accrual basis under historical cost convention except for certain categories of fi xed assets that are carried at re-valued amounts.

1.2 All assets and liabilities have been classifi ed as current or non-current as per the Company''s normal 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 determined its operating cycle as twelve months for the purpose of current - non current classifi cation of assets and liabilities.

1.3 Use of estimates

The preparation of the fi nancial statements, in conformity with the generally accepted accounting principles, requires management to make estimates and assumptions that are considered in the reported amounts of assets and liabilities on the date of the fi nancial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such diff erences are dealt with in the period in which the results are known/ materialize.

2. Tangible and Intangible Fixed assets and depreciation / amortisation

2.1 Cost of all civil works (including electrifi cation and fittings) is capitalised with the exception of alterations and modifi cations of a capital nature to existing structures where the cost of such alteration or modifi cation isRs. 100,000 and below. Other fi xed assets, including intangible assets and assets given on lease, where the cost exceeds Rs. 10,000 and the estimated useful life is two years or more, is capitalised. Cost of initial spares and tools is capitalised along with the respective assets. Cost of fi xed assets is net of eligible credits under CENVAT / VAT Scheme. Expenditure directly related and incidental to construction / development and borrowing costs in para 3 below are capitalised upto the date the assets are ready for their intended use. Exchange diff erences are capitalised to the extent dealt with in para 6.2 below.

Certain categories of fi xed assets were revalued and are carried at the revalued amounts less accumulated depreciation and impairment loss, if any. Increase in the net book value on such revaluation is credited to "Revaluation Reserve Account". Upon the sale, disposal, extinguishment of the revalued assets the amount of revaluation reserve against such assets is adjusted against their carrying values and the diff erence between the sale proceeds of such assets and the adjusted carrying value are recognised in the Statement of Profi t and Loss.

2.2 Tangible fi xed assets and Intangible assets, that are not yet ready for their intended use, are carried at costs, comprising direct cost, and other incidental / attributable expenses and refl ected under Capital work-in-progress / Intangible assets under development, respectively.

2.2 Assets are depreciated / amortised, as below, on straight line basis:

a) Leasehold land over the period of lease;

b) Leasehold land and buildings, as revalued, is calculated on the respective revalued amounts, over the balance useful life as determined by the valuers in the case of buildings and as per (a) above in the case of land;

c) Buildings, plant and machinery (except assets subject to impairment) and other assets, including assets given on lease and assets in leased premises / customer premises, over their estimated useful lives or lives derived from the rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is lower;

d) Assets subject to impairment, on the asset''s revised carrying amount, over its remaining useful life.

e) Intangible assets are amortized over their estimated useful life.

2.3 Depreciation / amortisation is provided on a pro-rata basis from the month the assets are put to use during the fi nancial year. In respect of assets sold or disposed off during the year, depreciation / amortisation is provided upto the month of sale or disposal of the assets.

2.4 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 is recognised, if the carrying amount exceeds the recoverable amount.

3. Borrowing costs

Borrowing costs attributable to the acquisition, construction or production of qualifying assets, are added to the cost of those assets, upto the date when the assets are ready for their intended use. Expenditure incurred on issue of debentures is adjusted against Securities Premium Account. Expenditure incurred on raising loans is amortised over the period of such borrowings. Premium paid on prepayment of borrowing is amortised over the unexpired period thereof or six months, whichever is less. All other borrowing costs are recognised in the Statement of Profi t and Loss in the period in which they are incurred.

4. Investments

Long term investments are carried individually at cost, However, provision for diminution is made to recognise a decline, if any, other than temporary, in the carrying value of the investment. Current investments are carried individually at lower of cost and fair value.

5. Inventories

5.1 Inventories are valued at lower of cost and net realisable value; cost being ascertained on the following basis:

Stores, raw materials and components and work-in-progress: On monthly moving weighted average basis. Spares, consumable tools : weighted average basis In respect of works-made components, cost includes applicable production overheads. Finished / trading goods: under absorption costing method.

5.2 Cost includes taxes and duties and is net of eligible credits under CENVAT / VAT Schemes.

5.3 Cost of patterns and dies is amortised over a period of fi ve years.

5.4 Surplus / obsolete / slow moving inventories are adequately provided for.

6. Foreign currency transactions and derivatives

6.1 Foreign currency transactions are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency are translated at closing rate. Exchange diff erences arising on settlement or translation of monetary items other than those mentioned in para 6.2 below are recognised as income or expense in the Statement of Profi t and Loss in the period it arises.

6.2 Exchange diff erences on translation or settlement of long term foreign currency monetary items (i.e. whose term of settlement exceeds twelve months from date of its origination) at rates diff erent from those at which they were initially recorded or reported in the previous fi nancial statements, insofar as it relates to acquisition of depreciable assets are adjusted to the cost of the assets and depreciated over remaining useful life of such assets.In other cases, these are accumulated in "Foreign currency monetary item translation diff erence account" and amortised by recognition as income or expense in each period over the balance term of such items till settlement occurs but not beyond March 31, 2020.

6.3 The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fl uctuations relating to fi rm commitments and highly probable forecast transactions. The Company designates such forward contracts in a cash fl ow hedging relationship by applying the hedge accounting principles set out in Accounting Standard- 30 "Financial Instruments-Recognition and measurement" issued by ICAI. Gains and losses on these forward contracts designated as "eff ective Cash fl ow hedges" are recognised in the "Hedge Reserve Account" till the underlying forecasted transaction occurs. Any ineff ective portion however, is recognised immediately in the Statement of profi t and loss.

6.4 Gains and losses on all other derivatives (including forward contracts not designated as Cash fl ow hedge) are recognised in the Statement of Profi t and Loss in the period it arises. Premium or discount on forward contracts is amortized over the life of the contract.

6.5 Investments in equity capital of companies registered outside India are carried in the Balance Sheet at the rates prevailing on the date of the transaction.

6.6 Income / expenditure of overseas branches are recognised at the average rate prevailing during the month in which transaction occurred.

7. Segment Reporting

The Company''s primary segment is identifi ed as business segment based on nature of product, risks, returns and the internal business reporting system and secondary segment is identifi ed based on geographical location of the customers as per Accounting Standard - 17. The Company is principally engaged in a single business segment viz. Commercial vehicles and related components.

8. Revenue recognition

a) Sale of goods

Revenue from sale of products net of returns, is recognised on despatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty. Price escalation claims are recognised to the extent there is reasonable certainty of its realisation.

b) Sale of Services

Revenue from services is recognised in accordance with the specifi c terms of contract on performance.

c) Other operating revenues

Other operating revenues comprise of income from ancillary activities incidental to the operations of the Company and is recognised when the right to receive the income is established as per the terms of the contract.

d) Other Income

Interest income is accounted on accrual basis. Dividend income is accounted as and when the right to receive the dividend is established.

9. Leases

Where the company is a lessor

a) Leases in which the company transfers substantially all the risks and rewards of ownership of the asset are classifi ed as finance leases. Assets given under fi nance lease are recognised as a receivable at an amount equal to the net investment in the lease. After the initial recognition, the company apportions lease rentals between principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the fi nance lease. The interest income is recognised in the Statement of Profi t and Loss. Initial direct costs such as legal costs, brokerage costs, etc., are recognised immediately in the Statement of Profi t and Loss.

b) Leases in which the company does not transfer substantially all the risks and rewards of ownership of the asset are classifi ed as operating leases. Assets subject to operating leases are included in fi xed assets. Lease income on an operating lease is recognised in the Statement of Profi t and Loss on a straight line basis over the lease terms. Costs, including depreciation, are recognised as an expense in the Statement of Profi t and Loss. Initial direct costs such as legal costs, brokerage costs etc. are charged to the Statement of Profi t and Loss in the period of incurrence.

10. Government grants

Grants in the form of capital/investment subsidy are treated as Capital reserve. Export incentives and incentives in the nature of subsidies given by the Government are reckoned in revenue in the year of eligibility.

11. Research and Development Costs

Expenditure on the design and production of prototypes is charged to the Statement of Profi t and Loss as and when incurred. Product development costs, including knowhow developed / acquired, incurred on new vehicle/ engine platforms, variants on existing platforms and aggregates are recognised as Intangible assets only when product''s technical feasibility is established and amortised over their estimated useful life.

12. Employee benefi ts

12.1 Employee benefi t expenses include salary, wages, performance incentives, compensated absences, medical benefi ts, and other perquisites. It also includes post employment benefi ts such as provident fund, superannuation fund, gratuity, pensionary benefi ts etc.

12.2 Short term employee benefi t obligations are estimated and provided for.

12.3 Post-employment benefi ts and other long term employee benefi ts

Defi ned contribution plans:

Company''s contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and / or statute and charged to the Statement of Profi t and Loss in the period of incurrence when the services are rendered by the employees.

In respect of provident fund contributions made to a trust administered by the Company, the interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be contributed by the Company and charged to the Statement of Profi t and Loss.

Defi ned benefi t plans and compensated absences:

Company''s liability towards gratuity, other retirement benefi ts and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profi t and Loss in the period of occurrence.

12.4 Termination benefi ts

Expenditure on termination benefi ts (including expenditure on Voluntary Retirement scheme) is recognised in the Statement of Profi t and Loss in the period of incurrence.

13. Provisions and Contingencies

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 reviewed at each balance sheet date and adjusted to refl ect the current best estimates. Contingent liabilities are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the fi nancial statements. Provision for product warranties is made for contractual obligations in accordance with the policy in force and is estimated for the unexpired period.

14. Income taxes

14.1 Income tax expenses comprise current and deferred taxes. Current tax is determined on income for the year chargeable to tax in accordance with the Income Tax Act, 1961 and after considering credit for Minimum Alternate Tax (MAT) available under the said Act. MAT paid in accordance with the tax laws which gives future economic benefi ts in the form of adjustments to future tax liability, is considered as an asset if there is convincing evidence that the future economic benefi t associated with it will fl ow to the company resulting in payment of normal income tax.

14.2 Deferred tax is recognised on timing diff erences, being the diff erence between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods. Deferred tax assets are recognised for timing diff erences other than unabsorbed depreciation and carry forward losses only to the extent that there is a reasonable certainty that there will be suffi cient future taxable income to realise the assets. Deferred tax asset pertaining to unabsorbed depreciation and carry forward of losses are recognised only to the extent there is a virtual certainty of its realisation.

15. Cash Flow Statement

Cash Flow statements are reported using the indirect method, whereby profi t/(loss) before extra-ordinary items/exceptional items and tax is adjusted for the eff ects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipt or payments. The cash fl ows from operating, investing and fi nancing activities of the Company are segregated based on available information including taxes paid relating to these activities.


Mar 31, 2013

1. Accounting convention

1.1 Financial statements are prepared in accordance with the generally accepted accounting principles in India including accounting standards referred to in Section 211 (3C) of the Companies Act 1956, under historical cost convention except so far as they relate to revaluation of certain land and buildings.

1.2 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 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 determined its operating cycle as twelve months for the purpose of current - non current classification of assets and liabilities.

1.3 Use of estimates

The preparation of the financial statements, in conformity with the generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt with in the period in which the results are known / materialize.

2. Tangible and intangible fixed assets and depreciation / amortisation

2.1 Cost of all civil works (including electrification and fittings) is capitalised with the exception of alterations and modifications of a capital nature to existing structures where the cost of such alteration or modification is Rs. 100,000 and below. Other fixed assets, including intangible assets and assets given on lease, where the cost exceeds Rs. 10,000 and the estimated useful life is two years or more, is capitalised. Cost of initial spares and tools is capitalised along with the respective assets. Cost of fixed assets is net of eligible credits under CENVAT / VAT Scheme. Expenditure directly related and incidental to construction / development and borrowing costs in para 3 below are capitalised upto the date the assets are ready for their intended use. Exchange differences are capitalised to the extent dealt with in para 6.2 below.

2.2 Assets are depreciated / amortised, as below, on straight line basis:

a) Leasehold land over the period of lease;

b) Leasehold land and buildings subject to revaluation, is calculated on the respective revalued amounts, over the balance useful life as determined by the valuers in the case of buildings and as per (a) above in the case of land;

c) Buildings, plant and machinery (except assets subject to impairment) and other assets, including assets given on lease and assets in leased premises / customer premises, over their estimated useful lives or lives derived from the rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is lower;

d) Assets subject to impairment, on the asset''s revised carrying amount, over its remaining useful life.

e) Intangible assets are amortized over their estimated useful life.

2.3 Depreciation / amortisation is provided on a pro-rata basis from the month the assets are put to use during the financial year. In respect of assets sold or disposed off during the year, depreciation / amortisation is provided upto the month of sale or disposal of the assets.

3. Borrowing costs

Borrowing costs attributable to the acquisition, construction or production of qualifying assets, are added to the cost of those assets, upto the date when the assets are ready for their intended use. Expenditure incurred on issue of debentures is adjusted against Securities Premium Account. Expenditure incurred on raising loans is amortised over the period of such borrowings. Premium paid on prepayment of borrowing is amortised over the unexpired period thereof or six months, whichever is less. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.

4. Investments

Long term investments are stated at cost. However, provision for diminution is made to recognise a decline, if any, other than temporary, in the carrying value of the investment. Current investments are valued at lower of cost and fair value.

5. Inventories

5.1 Inventories are valued at lower of cost and net realisable value; cost being ascertained on the following basis:

- Stores, spares, consumable tools, raw materials and components and work-in-progress: On monthly moving weighted average basis.

In respect of works-made components, cost includes applicable production overheads.

- Finished / trading goods: under absorption costing method.

5.2 Cost includes taxes and duties and is net of eligible credits under CENVAT / VAT Schemes.

5.3 Cost of patterns and dies is amortised over a period of five years.

5.4 Surplus / obsolete / slow moving inventories are adequately provided for.

6. Foreign currency transactions and derivatives

6.1 Foreign currency transactions are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency are translated at closing rate. Exchange differences arising on settlement or translation of monetary items other than those mentioned in para 6.2 below are recognised as income or expense in the Statement of Profit and Loss in the period it arises.

6.2 Exchange differences on translation or settlement of long term foreign currency monetary items (i.e. whose term of settlement exceeds twelve months from date of its origination) at rates different from those at which they were initially recorded or reported in the previous financial statements, insofar as it relates to acquisition of depreciable assets are adjusted to the cost of the assets. In other cases, these are accumulated in "Foreign currency monetary item translation difference account" and amortised by recognition as income or expense in each period over the balance term of such items till settlement occurs but not beyond March 31, 2020.

6.3 Gains and losses on certain forward contracts designated as "effective Cash Flow Hedges" are recognised in the "Hedge Reserve Account" till the underlying forecasted transaction occurs.

6.4 Gains and losses on all other derivatives (including forward contracts not designated as Cash Flow hedge) are recognised in the Statement of Profit and Loss in the period it arises. Premium or discount on forward contracts is amortised over the life of the contract.

6.5 Investments in equity capital of companies registered outside India are carried in the Balance Sheet at the rates prevailing on the date of the transaction.

6.6 Income / expenditure of overseas branches are recognised at the average rate prevailing during the month in which transaction occurred.

7. Segment Reporting

The Company''s primary segment is identified as business segment based on nature of product, risks, returns and the internal business reporting system and secondary segment is identified based on geographical location of the customers as per Accounting Standard - 17. The Company is principally engaged in a single business segment viz. commercial vehicles and related components.

8. Revenue recognition

a) Sale of goods

Revenue from sale of products is recognised on despatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty. Price escalation claims are recognised to the extent there is reasonable certainty of its realisation.

b) Sale of Services

Revenue from services is recognised in accordance with the specific terms of contract on performance.

c) Other operating revenues

Other operating revenues comprise of income from ancillary activities incidental to the operations of the Company and is recognised when the right to receive the income is established as per the terms of the contract.

9. Leases

Where the Company is a lessor

a) Leases in which the Company transfers substantially all the risks and rewards of ownership of the asset are classified as finance leases. Assets given under finance lease are recognised as a receivable at an amount equal to the net investment in the lease. After the initial recognition, the Company apportions lease rentals between principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognised in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc., are recognised immediately in the Statement of Profit and Loss.

b) Leases in which the Company does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognised in the Statement of Profit and Loss on a straight line basis over the lease terms. Costs, including depreciation, are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs etc. are charged to the Statement of Profit and Loss in the period of incurrence.

10. Government grants

Grants in the form of capital / investment subsidy are treated as Capital reserve. Export incentives and incentives in the nature of subsidies given by the Government are reckoned in revenue in the year of eligibility.

11. Research and Development costs

Expenditure on the design and production of prototypes is charged to the Statement of Profit and Loss as and when incurred. Product development costs, including knowhow developed / acquired, incurred on new vehicle / engine platforms, variants on existing platforms and aggregates are recognised as intangible assets and amortised over their estimated useful life.

12. Employee benefits

12.1 Short term employee benefit obligations are estimated and provided for.

12.2 Post-employment benefits and other long term employee benefits

- Defined contribution plans:

Company''s contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and / or statute and charged to the Statement of Profit and Loss in the period of incurrence.

- Defined benefit plans and compensated absences:

Company''s liability towards gratuity, other retirement benefits and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period of occurrence.

12.3 Termination benefits

Expenditure on termination benefits (including expenditure on Voluntary Retirement scheme) is recognised in the Statement of Profit and Loss in the period of incurrence.

13. Product warranties

Provision for product warranties is made for contractual obligations in accordance with the policy in force and is estimated for the unexpired period.

14. Income taxes

14.1 Income tax expenses comprise current and deferred taxes. Current tax is determined on income for the year chargeable to tax in accordance with the Income Tax Act, 1961 and after considering credit for Minimum Alternate Tax available under the said Act.

14.2 Deferred tax is recognised on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods.

Deferred tax asset pertaining to unabsorbed depreciation and carry forward of losses are recognised only to the extent there is a virtual certainty of its realisation.


Mar 31, 2012

1. Accounting convention

1.1 Financial statements are prepared in accordance with the generally accepted accounting principles including accounting standards in India under historical cost convention except so far as they relate to revaluation of certain land and buildings.

1.2 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 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 realization in cash and cash equivalents, the Company has determined its operating cycle as twelve months for the purpose of current - noncurrent classification of assets and liabilities.

1.3 Use of estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt with in the period in which the results are known/ materialize.

2. Fixed assets and depreciation / amortization

2.1 Cost of all civil works (including electrification and fittings) is capitalized with the exception of alterations and modifications of a capital nature to existing structures where the cost of such alteration or modification is Rs 1,00,000 and below. Other fixed assets, including intangible assets and assets given on lease, where the cost exceeds Rs. 10,000 and the estimated useful life is two years or more, is capitalized. Cost of initial spares and tools is capitalized along with the respective assets. Cost of fixed assets is net of eligible credits under CENVAT / VAT Scheme. Expenditure directly related and incidental to construction / acquisition of tangible / intangible assets are capitalized up to the date the assets are ready for their intended use. Interest and other related costs, including amortized cost of borrowings attributable only to major projects are capitalized as part of the cost of the respective assets. Exchange differences are capitalized to the extent dealt with in para 5.2 below.

2.2 Assets are depreciated / amortized, as below, on straight line basis:

a) Leasehold land over the period of lease

b) Leasehold land and buildings subject to revaluation, is calculated on the respective revalued amounts, over the balance useful life as determined by the valuers in the case of buildings and as per (a) above in the case of land;

c) Buildings, plant and machinery (except assets subject to impairment) and other assets, including assets given on lease and assets in leased premises / customer premises, over their estimated useful lives or lives derived from the rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is lower and in the case of intangible assets, over their estimated useful life;

d) Assets subject to impairment, on the asset's revised carrying amount, over its remaining useful life.

2.3 Depreciation / amortization is provided on a pro-rata basis from the month the assets are put to use during the financial year. In respect of assets sold or disposed off during the year, depreciation / amortization is provided till the month of sale or disposal of the assets.

3. Investments

Non-current investments are stated at cost. However, provision for diminution is made to recognize a decline, other than temporary, in the value of the investment, if any. Current investments are valued at lower of cost and fair value.

4. Inventories

4.1 Inventories are valued at lower of cost and net realizable value; cost being ascertained on the following basis:

- Stores, spares, consumable tools, raw materials and components and work-in-progress: On monthly moving weighted average basis.

- In respect of works-made components, cost includes applicable production overheads.

- Finished / trading goods: under absorption costing method.

4.2 Cost includes taxes and duties and is net of eligible credits under CENVAT / VAT Schemes.

4.3 Cost of patterns and dies is amortized equally over five years.

4.4 Surplus / obsolete / slow moving inventories are adequately provided for.

5. Foreign currency transactions and derivatives

5.1 Foreign currency transactions are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency are translated at closing rate. Exchange differences arising on settlement or translation of monetary items other than those mentioned in para 5.2 below are recognized as income or expense in the Statement of Profit and Loss.

5.2 Exchange differences on translation or settlement of long term foreign currency monetary items (i.e. whose term of settlement exceeds twelve months from date of its origination) at rates different from those at which they were initially recorded or reported in the previous financial statements, in so far as it relates to acquisition of depreciable assets are adjusted to the cost of the assets. In other cases, these are accumulated in "Foreign currency monetary item translation difference account" and amortized by recognition as income or expense in each period over the balance term of such items till settlement occurs but not beyond March 31, 2020.

5.3 Gains and losses on certain forward contracts designated as effective Cash flow hedges are recognized in the Hedge Reserve Account till the underlying forecasted transaction occurs.

5.4 Gains and losses on all other derivatives (including forward contracts not designated as Cash flow hedge) are recognized in the Statement of Profit and Loss. Premium or discount on forward contracts is amortized over the life of the contract.

5.5 Investments in equity capital of companies registered outside India are carried in the Balance Sheet at the rates prevailing on the date of the transaction.

5.6 Income / expenditure of overseas branches are recognized at the average rate prevailing during the month in which transaction occurred.

6. Amortization of deferred expenditure

Expenditure incurred on raising loans is amortized over the period of such borrowings. Premium paid on prepayment of any borrowing is amortized over the unexpired period thereof or sixty months, whichever is less. Expenditure incurred on issue of debentures is adjusted against Securities Premium Account.

7. Segment Reporting

The Company's primary segment is identified as business segment based on nature of product, risks, returns and the internal business reporting system and secondary segment is identified based on geographical location of the customers. As per Accounting Standard - 17, the Company is principally engaged in a single business segment viz. Commercial vehicles and related components.

8. Revenue recognition

8.1 Revenue from sale of products is recognized on dispatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty. Revenue arising due to price escalation claim is recognized in the period when such claim is made in accordance with terms of sale.

8.2 Revenue from services is recognized in accordance with the specific terms of contract on performance.

8.3 Other operating revenues comprise of income from ancillary activities incidental to the operations of the Company and is recognized when the right to receive the income is established as per the terms of the contract.

9. Leases

9.1 Leases in which the Company transfers substantially all the risks and rewards of ownership of the asset are classified as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After the initial recognition, the Company apportions lease rentals between principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc., are recognized immediately in the Statement of Profit and Loss.

9.2 Leases in which the Company does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the Statement of Profit and Loss on a straight line basis over the lease terms. Costs, including depreciation, are recognized as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs etc. are recognized immediately in the Statement of Profit and Loss.

10. Government grants

Grants in the form of capital/investment subsidy are treated as Capital reserve. Export incentives and incentives in the nature of subsidies given by the Government are reckoned in revenue in the year of eligibility.

11. Research and Development Costs

Expenditure on the design and production of prototypes is charged to revenue as incurred. Product development costs, including knowhow developed / acquired, incurred on new vehicle/ engine platforms, variants on existing platforms and aggregates are recognized as Intangible assets and amortized.

12. Employee benefits

12.1 Short term employee benefit obligations are estimated and provided for.

12.2 Post-employment benefits and other long term employee benefits

- Defined contribution plans:

Company's contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and / or statute and charged to revenue.

- Defined benefit plans and compensated absences:

Company's liability towards gratuity, other retirement benefits and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognized in revenue.

13. Product warranties

Provision for product warranties is made for contractual obligations in accordance with the policy in force and is estimated for the unexpired period.

14. Deferred tax

Deferred tax is recognized on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods.

Deferred tax asset pertaining to unabsorbed depreciation and carry forward of losses are recognized only to the extent there is a virtual certainty of its realization.


Mar 31, 2011

1. Accounting convention

1.1. Financial statements are prepared in accordance with the generally accepted accounting principles including accounting standards in India under historical cost convention except so far as they relate to revaluation of certain land and buildings.

1.2. Use of estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt within the period in which the results are known / materialize.

2. Fixed assets and depreciation / amortisation

2.1. Cost of all civil works (including electrification and fittings) is capitalised with the exception of alterations and modifications of a capital nature to existing structures where the cost of such alteration or modification is Rs. 1,00,000 and below. Other fixed assets, including intangible assets and assets given on lease, where the cost exceeds Rs. 10,000 and the estimated useful life is two years or more, is capitalised. Cost of initial spares and tools is capitalised along with the respective assets. Cost of fixed assets is net of eligible credits under CENVAT / VAT Scheme. Expenditure directly related and incidental to construction are capitalised upto the date of attainment of commercial production. Interest and other related costs, including amortised cost of borrowings attributable only to major projects are capitalised as part of the cost of the respective assets. Exchange differences are capitalised to the extent dealt with in para 5.2 below.

2.2. Assets are depreciated / amortised, as below, on straight line basis:

a) Leasehold land, over 40 years or the period of the lease, whichever is less;

b) Leasehold land and buildings subject to revaluation, is calculated on the respective revalued amounts, over the balance useful life as determined by the valuers in the case of buildings and as per (a) above in the case of land;

c) Buildings, plant and machinery (except assets subject to impairment) and other assets, including assets given on lease and assets in leased premises / customer premises, over their estimated useful lives or lives derived from the rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is lower and in the case of intangible assets, over their estimated useful life;

d) Assets subject to impairment, on the assets revised carrying amount, over its remaining useful life.

2.3. Depreciation / amortisation is provided on a pro-rata basis from the month the assets are put to use during the financial year. In respect of assets sold or disposed off during the year, depreciation / amortisation is provided till the month of sale or disposal of the assets.

3. Investments

Long term investments are stated at cost less provision for diminution other than temporary, if any. Current investments are valued at lower of cost and fair value.

4. Inventories

4.1. Inventories are valued at lower of cost and net realisable value; cost being ascertained on the following basis:

- Stores, spares, consumable tools, raw materials and components: on monthly moving weighted average basis. In respect of works-made components, cost includes applicable production overheads.

- Work-in-progress, finished / trading goods: under absorption costing method.

4.2. Cost includes taxes and duties and is net of eligible credits under CENVAT / VAT Schemes.

4.3. Cost of patterns and dies is amortised equally over five years.

4.4. Surplus / obsolete / slow moving inventories are adequately provided for.

5. Foreign currency transactions and derivatives

5.1. Foreign currency transactions are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency are translated at closing rate. Exchange differences arising on settlement or translation of monetary items other than those mentioned in para 5.2 below are recognized as income or expense in the Profit and Loss Account.

5.2. Exchange differences on translation or settlement of long term foreign currency monetary items (i.e. whose term of settlement exceeds twelve months from date of its origination) at rates different from those at which they were initially recorded or reported in the previous financial statements, insofar as it relates to acquisition of depreciable assets are adjusted to the cost of the assets. In other cases, these are accumulated in "Foreign currency monetary item translation difference account" and amortised by recognition as income or expense in each period over the balance term of such items till settlement occurs but not beyond March 31, 2011.

5.3. Gains and losses on certain forward contracts designated as effective Cash flow hedges as per Accounting Standard 30 - "Financial Instruments" are recognised in the Hedge Reserve Account till the underlying forecasted transaction occurs.

5.4. Gains and losses on all other derivatives (including forward contracts not designated as Cash flow hedge) are recognised in the Profit and Loss Account. Premium or discount on forward contracts is amortized over the life of the contract.

5.5. Investments in equity capital of companies registered outside India are carried in the Balance Sheet at the rates prevailing on the date of the transaction.

5.6. Income / expenditure of overseas branches are recognized at the average rate prevailing during the month in which transaction occurred.

6. Amortisation of deferred expenditure

Expenditure incurred on issue of debentures / raising loans is amortised over the period of such borrowings. Premium paid on prepayment of any borrowing is amortised over the unexpired period thereof or sixty months, whichever is less.

7. Revenue recognition

Revenue from sale of products is recognised on despatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty and export incentives, but net of incentive on sales including

commission, rebates and discounts. Revenue arising due to price escalation claim is recognised in the period when such claim is made in accordance with terms of sale.

Revenue from services is recognised in accordance with the specific terms of contract on performance.

8. Government grants

Grants in the form of capital / investment subsidy are treated as Capital reserve. Export incentives and incentives in the nature of subsidies given by the Government are reckoned in revenue in the year of eligibility.

9. Research and Development Costs

Expenditure on the design and production of prototypes is charged to revenue as incurred. Product development costs, including knowhow developed / acquired, incurred on new vehicle/ engine platforms, variants on existing platforms and aggregates are recognised as Intangible assets and amortised.

10. Employee benefits

10.1. Short term employee benefit obligations are estimated and provided for.

10.2. Post-employment benefits and other long term employee benefits

Defined contribution plans:

Companys contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and / or statute and charged to revenue.

Defined benefit plans and compensated absences:

Companys liability towards gratuity, other retirement benefits and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in revenue.

10.3. Termination benefits

Compensation under voluntary retirement scheme is amortised over lesser of thirty six months and the period from incurrence of expenditure to March 31, 2011.

11. Product warranties

Provision for product warranties is made for contractual obligations in accordance with the policy in force and is estimated for the unexpired period.

12. Deferred tax

Deferred tax is recognised on timing differences; being the difference between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods.

Deferred tax assets on unabsorbed depreciation and carry forward of losses are recognised only to the extent there is a virtual certainty of its realisation.

Of the above,

1. 1,47,88,880 (2010: 1,47,88,880) Equity shares were allotted under an agreement without payment being received in cash.

2. 6,23,08,110 (2010: 6,23,08,110) Equity shares were allotted as fully paid up by way of bonus shares by capitalisation out of General reserve and from Securities premium account.

3. Hinduja Automotive Limited, the holding company, holds 51,36,18,712 (2010: 51,36,18,712) equity shares and 54,86,669 (2010: 54,86,669) Global depository receipts equivalent to 16,46,00,070 (2010: 16,46,00,070) Equity shares.

1.2 RESERVES AND SURPLUS

1. a) D ebentures and term loans from banks aggregating Rs. 1,16,000 lakhs (2010: Rs. 66,666.67 lakhs) are secured by a first paripassu charge created / to be created on certain immovable properties and movable assets of the company. External commercial borrowing from bank aggregating to Rs. 2,229.75 lakhs (2010: Rs. 4,490.01 lakhs) is secured by a first charge on the Aircraft of the company.

b) C ash credit facility is secured by a first charge on certain movable assets and goods-in-transit and book debts (excluding deferred receivables).

1.5 Fixed ASSETS

1. Buildings include installations of gross value Rs. 10,582.38 lakhs (2010: Rs. 9,714.61 lakhs)

2. Land and Buildings, other than those given on lease and installations, were revalued as at March 31, 2009 after considering depreciation / amortisation upto that date as per external valuers report, on the governing principles of current cost. The amount of increase on such revaluation was Rs. 1,36,486.44 lakhs. This valuation superseded the previous valuation done as at December 31, 1984.

3. A portion of buildings in Bhandara revalued at Rs. 950.00 lakhs is on a land, title for which is yet to be transferred to the company.

4. Additions to Land - Freehold include Rs. 0.42 lakhs (2010: Rs. Nil), title for which is yet to be transferred to the company.

5. Cost of Buildings as at March 31, 2011 includes:

a) Rs. 3.42 lakhs (2010: Rs. 3.42 lakhs) being cost of shares in Housing Co-operative Society representing ownership rights in residential flats and furniture and fittings thereat.

b) Rs.132.38 lakhs (2010: Rs. 132.38 lakhs) representing cost of residential flats including undivided interest in land.

6. Depreciation / amortisation / impairment for the year is disclosed in Schedules 2.3(C) and 2.4 to the Profit and Loss account.

7. Additions to fixed assets and capital work in progress include:

a) Exchange gain of Rs. 879.51 lakhs (2010: Rs. 14,934.34 lakhs)

b) Borrowing cost of Rs. 175.34 lakhs (2010: Rs. 3,613.27 lakhs) and

c) Other expenses capitalised Rs. 2,178.10 lakhs (2010: Rs. 1,499.93 lakhs).

8. Consequent to the cancellation of lease in respect of windmills during the year, Rs. 5,703.70 lakhs has been reclassified from assets given on lease to Plant and Machinery.

3. Other financial information

b) depreciation for the year computed on assets revalued as on March 31, 2009 over the balance useful life on straight line method includes a net charge of Rs. 2,685.06 lakhs (2010: Rs. 2,982.47 lakhs) [Rs. 1,514.71 lakhs (2010: Rs. 1,658.93 lakhs) in schedule 2.3 and Rs. 1,170.35 lakhs (2010: Rs. 1,323.53 lakhs) in schedule 2.4] respectively being the excess over the depreciation computed by the method followed by the company prior to revaluation and the same has been transferred from Revaluation reserve to the profit and Loss Account.

6. Segment information

The companys primary segment is identified as business segment based on nature of products, risks, returns and the internal business reporting system and secondary segment is identified based on the geographical location of the customers as per Accounting standard 17. the company is principally engaged in a single business segment viz., commercial vehicles and related components.

7. Related party disclosure

a) List of parties where control exists

Holding company

Hinduja Automotive Limited, united Kingdom

Machen Holdings SA (Holding company of Hinduja Automotive Limited, united Kingdom)

Machen development corporation, panama (Holding company of Machen Holdings SA)

Amas Holdings SA (Holding company of Machen development corporation, Panama)

b) Other related parties

Fellow subsidiary

Hinduja foundries Limited, a company under the same management

Hinduja Auto components Limited

Hinduja Automotive (UK) Limited

Associates

Albonair GmbH, Germany

Albonair India private Limited

Ashley Airways Limited (under liquidation)

Ashley Bio-fuels Limited

Ashley Holdings Limited

Ashley investments Limited

Ashley transport services Limited

Ashok Leyland defence systems Limited

Ashok Leyland (UAE) LLC, Ras Al Khaimah, UAE

Automotive coaches and components Limited

Avia Ashok Leyland Motors s.r.o, czech Republic

Defiance technologies Limited

Defiance testing and engineering services, inc. USA

Gulf Ashley Motor Limited

Hinduja Leyland finance Limited

Irizar TVS Limited

Lanka Ashok Leyland Limited, Sri Lanka

Mangalam Retail services Limited

Optare plc, UK

Joint Ventures

Ashley Alteams India Limited

Automotive Infotronics private Limited

Ashok Leyland John Deere construction equipment company private Limited

Ashok Leyland Nissan Vehicles Limited

Nissan Ashok Leyland Powertrain Limited

Nissan Ashok Leyland Technologies Limited

Key management personnel

Mr. R Seshasayee, Managing director

Mr. Vinod K Dasari, Managing director (Designate)


Mar 31, 2010

1. Accounting convention

1.1 Financial statements are prepared in accordance with the generally accepted accounting principles including accounting standards in India under historical cost convention except so far as they relate to revaluation of certain land and buildings.

1.2 Use of estimates

The preparation of the fnancial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the fnancial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt within the period in which the results are known/ materialise.

2. Fixed assets and depreciation / amortisation

2.1 Cost of all civil works (including electrifcation and fttings) is capitalised with the exception of alterations and modifcations of a capital nature to existing structures where the cost of such alteration or modifcation is Rs.1,00,000 and below. Other fxed assets, including intangible assets and assets given on lease, where the cost exceeds Rs.10,000 and the estimated useful life is two years or more, is capitalised. Cost of initial spares and tools is capitalised along with the respective assets. Cost of fxed assets is net of eligible credits under Cenvat / Vat Scheme. Expenditure directly related and incidental to construction are capitalised upto the date of attainment of commercial production. Interest and other related costs, including amortised cost of borrowings attributable only to major projects are capitalised as part of the cost of the respective assets. Exchange differences are captialised to the extent dealt with in para 5.2 below.

2.2 Assets are depreciated / amortised, as below, on straight line basis:

a) Leasehold land, over 40 years or the period of the lease, whichever is less;

b) Leasehold land and buildings subject to revaluation, is calculated on the respective revalued amounts, over the balance useful life as determined by the valuers in the case of buildings and as per (a) above in the case of land;

c) Buildings, plant and machinery (except assets subject to impairment) and other assets, including assets given on lease, over their estimated useful lives or lives derived from the rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is lower and in the case of intangible assets, over their estimated useful life.

d) Assets subject to impairment, on the asset’s revised carrying amount, over its remaining useful life.

2.3 Depreciation / amortisation on additions during the year is provided on a pro rata basis from the month the assets are put to use. In respect of assets sold or disposed off during the year, depreciation / amortisation is provided till the month of sale or disposal of the assets.

3. Investments

Long term investments are stated at cost less provision for diminution other than temporary, if any. Current investments are valued at lower of cost and fair value.

4. Inventories

4.1 Inventories are valued at lower of cost and net realisable value; cost being ascertained on the following basis:

- Stores, spares, consumable tools, raw materials and components: on monthly moving weighted average basis. In respect of works-made components, cost includes applicable production overheads.

- Work-in-progress, fnished / trading goods: under absorption costing method.

4.2 Cost includes taxes and duties and is net of eligible credits under Cenvat / Vat Schemes.

4.3 Cost of patterns and dies is amortised equally over fve years.

4.4 Surplus / obsolete / slow moving inventories are adequately provided for.

5. Foreign currency transactions and derivatives

5.1 Foreign currency transactions are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency are translated at closing rate. Exchange differences arising on settlement or translation of monetary items other than those mentioned in para 5.2 below are recognised as income or expense in the profit and Loss Account.

5.2 Exchange differences on translation or settlement of long term foreign currency monetary items (i.e. whose term of settlement exceeds twelve months from date of its origination) at rates different from those at which they were initially recorded or reported in the previous fnancial statements, insofar as it relates to acquisition of depreciable assets are adjusted to the cost of the assets. In other cases, these are accumulated in “Foreign currency monetary item translation difference account” and amortised by recognition as income or expense in each period over the balance term of such items till settlement occurs but not beyond March 31, 2011.

5.3 Gains and losses on certain forward contracts designated as effective cash fow hedges as per Accounting Standard 30 - “Financial Instruments” are recognised in the Hedge Reserve Account till the underlying forecasted transaction occurs.

5.4 Gains and losses on all other derivatives (including forward contracts not designated as cash fow hedge) are recognised in the profit and Loss Account. Premium or discount on forward contracts is amortised over the life of the contract.

5.5 Investments in equity capital of companies registered outside India are carried in the Balance Sheet at the rates prevailing on the date of the transaction.

5.6 Income / expenditure of overseas branches are recognised at the average rate prevailing during the month in which transaction occurred.

6. Amortisation of deferred expenditure

Expenditure incurred on issue of debentures / raising loans is amortised over the period of such borrowings. Premium paid on prepayment of any borrowing is amortised over the unexpired period thereof or sixty months, whichever is less.

7. Revenue recognition

Revenue from sale of products is recognised on despatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty and export incentives, but net of incentive on sales including commission, rebates and discounts. Revenue arising due to price escalation claim is recognised in the period when such claim is made in accordance with terms of sale.

Revenue from services is recognised in accordance with the specifc terms of contract on performance.

8. Government grants

Grants in the form of capital / investment subsidy are treated as Capital reserve. Export incentives and incentives in the nature of subsidies given by the Government are reckoned in revenue in the year of eligibility.

9. Research and Development Costs

Expenditure on the design and production of prototypes is charged to revenue as incurred. Product development costs, including knowhow developed / acquired, incurred on new vehicle / engine platforms, variants on existing platforms and aggregates are recognised as intangible assets and amortised.

10. Employee benefts

10.1 Short term employee beneft obligations are estimated and provided for.

10.2 Post employment benefts and other long term employee benefts

defined contribution plans:

Company’s contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and / or statute and charged to revenue.

Defined beneft plans and compensated absences:

Company’s liability towards gratuity, other retirement benefts and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in revenue.

10.3 Termination benefts

Compensation under voluntary retirement scheme is amortised over lesser of thirty-six months and the period from incurrence of expenditure to March 31, 2010.

11. Product warranties

Provision for product warranties is made for contractual obligations in accordance with the policy in force and is estimated for the unexpired period.

12. Deferred tax

Deferred tax is recognised on timing differences; being the difference between taxable income and accounting income that originate in one period and are capable of reversing in one or more subsequent periods.

Deferred tax assets on unabsorbed depreciation and carry forward of losses are recognised only to the extent there is a virtual certainty of its realisation.