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Standalone Financials
133
CORPORATE OVERVIEW (1-31)
STATUTORY REPORTS (46-122)
FINANCIALS
NOTESFORMINGPARTOFFINANCIAL STATEMENTS
(g)
Leases
(i)
Finance lease
Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception and the
present value of minimum lease payments. Lease payments are apportioned between the finance charge and the outstanding
liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining
balance of the liability. Assets given under finance leases are recognised as receivables at an amount equal to the net investment
in the lease and the finance income is based on a constant rate of return on the outstanding net investment.
(ii)
Operating lease
Leases other than finance lease, are operating leases, and the leased assets are not recognised on the Company’s Balance Sheet.
Payments under operating leases are recognised in the Profit and Loss Statement on a straight-line basis over the term of the
lease.
(h)
Transactions in foreign currencies and accounting of derivatives
(i)
Exchange differences
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Foreign currency
monetary assets and liabilities are translated at year end exchange rates.
(1) Exchange differences arising on settlement of transactions and translation of monetary items other than those covered
by (2) below are recognized as income or expense in the year in which they arise. Exchange differences considered as
borrowing cost are capitalized to the extent these relate to the acquisition / construction of qualifying assets and the
balance amount is recognized in the Profit and Loss Statement.
(2) Exchange differences relating to long term foreign currency monetary assets / liabilities are accounted for with effect
from April 1, 2007 in the following manner:
-
Differences relating to borrowings attributable to the acquisition of the depreciable capital asset are added to / deducted
from the cost of such capital assets.
-
Other differences are accumulated in Foreign Currency Monetary Item Translation Difference Account, to be amortized
over the period, beginning April 1, 2007 or date of inception of such item, as applicable, and ending on March 31, 2011
or the date of its maturity, whichever is earlier.
- Pursuant to notification issued by the Ministry of Corporate Affairs, on December 29, 2011, the exchange differences on
long term foreign currency monetary items (other than those relating to acquisition of depreciable asset) are amortised
over the period till the date of maturity or March 31, 2020, whichever is earlier.
(ii)
Hedge accounting
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating
to highly probable forecast transactions. With effect from April 1, 2008, 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.
These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that
are designated and effective as hedges of future cash flows are recognized directly in Hedging Reserve Account under Reserves
and surplus, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Profit and
Loss Statement.
Amounts accumulated in Hedging Reserve Account are reclassified to profit and loss in the same periods during which the
forecasted transaction affects Profit and Loss Statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies
for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in Hedging
Reserve Account is retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in Hedging Reserve
Account is immediately transferred to the Profit and Loss Statement.
(iii) Premium or discount on forward contracts other than those covered in (ii) above is amortised over the life of such contracts and
is recognised as income or expense. Foreign currency options and other derivatives are stated at fair value as at the year end
with changes in fair value recognized in the Profit and Loss Statement.
(i)
Product warranty expenses
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future
incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise -
being typically upto three years.
(j)
Income on vehicle loan
Interest income on loan contracts are accounted for by using the Internal Rate of Return method. Consequently, a constant rate of return
on the net outstanding amount is accrued over the period of contract. The Company provides an allowance for hire purchase and loan
receivables that are in arrears for more than 11 months, to the extent of an amount equivalent to the outstanding principal and amounts
due but unpaid, considering probable inherent loss including estimated realisation based on past performance trends. In respect of
loan contracts that are in arrears for more than 6 months but not more than 11 months, allowance is provided to the extent of 10%
of the outstanding and amount due but unpaid.
FINANCIAL HIGHLIGHTS (32-45)