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Sixty-Seventh Annual Report 2011-2012
NOTES FORMING PART OF FINANCIAL STATEMENTS
1.
Significant accounting policies
(a)
Basis of preparation
The financial statements are prepared under the historical cost convention on an accrual basis of accounting in accordance with
the generally accepted accounting principles, Accounting Standards notified under Section 211 (3C) of the Companies Act, 1956
and the relevant provisions thereof.
(b)
Use of estimates
The preparation of financial statements requires management to make judgments, estimates and assumptions, that affect the
application of accounting policies and the reported amounts of assets and liabilities and disclosures of contingent liabilities at the
date of these financial statements and the reported amounts of revenues and expenses for the years presented. Actual results may
differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and future periods affected.
(c)
Revenue recognition
The Company recognises revenue on the sale of products, net of discounts, when the products are delivered to the dealer / customer
or when delivered to the carrier for export sales, which is when risks and rewards of ownership pass to the dealer / customer.
Sales include income from services, and exchange fluctuations relating to export receivables. Sales include export and other
recurring and non-recurring incentives from the Government at the national and state levels. Sale of products is presented gross
of excise duty where applicable, and net of other indirect taxes.
Revenues are recognised when collectibility of the resulting receivables is reasonably assured.
Dividend from investments is recognized when the right to receive the payment is established and when no significant
uncertainty as to measurability or collectability exists.
Interest income is recognized on the time basis determined by the amount outstanding and the rate applicable and where no
significant uncertainty as to measurability or collectability exists.
(d)
Depreciation and amortisation
(i) Depreciation is provided on Straight Line Method (SLM), at the rates and in the manner prescribed in Schedule
XIV to the Companies Act, 1956 except in the case of :
Leasehold land – amortised over the period of the lease
Technical know-how – at 16.67% (SLM)
Laptops – at 23.75% (SLM)
Cars – at 23.75% (SLM)
Assets acquired prior to April 1, 1975 – on Written Down Value basis at rates specified in Schedule XIV to the Companies
Act, 1956.
Software in excess of
`
25,000 is amortised over a period of 60 months or on the basis of estimated
useful life whichever is lower.
Assets taken on lease are amortised over the period of lease.
(ii) Product development cost are amortised over a period of 36 months to 120 months or on the basis of actual
production to planned production volume over such period.
(iii) In respect of assets whose useful life has been revised, the unamortised depreciable amount has been charged
over the revised remaining useful life.
(iv) Depreciation is not recorded on capital work-in-progress until construction and installation are complete and
asset is ready for its intended use.
(e)
Fixed assets
(i) Fixed assets are stated at cost of acquisition or construction less accumulated depreciation / amortization.
(ii) The product development cost incurred on new vehicle platform, engines, transmission and new products are recognised as
fixed assets, when feasibility has been established, the Company has committed technical, financial and other resources to
complete the development and it is probable that asset will generate probable future benefits.
(iii) Cost includes purchase price, taxes and duties, labour cost and directly attributable costs for self constructed assets and
other direct costs incurred upto the date the asset is ready for its intended use. Borrowing cost incurred for qualifying assets
is capitalised up to the date the asset is ready for intended use, based on borrowings incurred specifically for financing the
asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset. The
cost of acquisition is further adjusted for exchange differences relating to long term foreign currency borrowings attributable
to the acquisition of depreciable asset w.e.f. April 1, 2007.
(iv) Software not exceeding
`
25,000 and product development costs relating to minor product enhancements, facelifts and
upgrades are charged off to the Profit and Loss Statement as and when incurred.
(f )
Impairment
At each Balance Sheet date, the Company assesses whether there is any indication that the fixed assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment,
if any. Where it is not possible to estimate the recoverable amount of individual asset, the Company estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
As per the assessment conducted by the Company at March 31, 2012, there were no indications that the fixed assets have suffered
an impairment loss.