Basic HTML Version
176
Sixty-Seventh Annual Report 2011-2012
NOTESFORMINGPARTOFCONSOLIDATEDFINANCIALSTATEMENTS
(ii)
Revenue fromsale of vehicleswithguaranteed repurchase option /repurchase arrangement
Some of the subsidiary companies sell vehicles to daily rental car companies and other fleet customers subject to guaranteed repurchase options and to
Ford Motor Group management employees, with repurchase arrangements. At the time of sale, the proceeds are recorded as deferred revenue in other
current liabilities and the cost of the vehicles are recorded as inventories. The difference between the proceeds and the guaranteed repurchase amount
is recognised in Sales over the term of the arrangement, using a straight-line method. The difference between the cost of the vehicle and the estimated
auction value is netted off against revenue over the term of the lease.
(iii)
Revenue from software consultancy on time andmaterials contracts is recognised based on certification of time sheet and billed to clients as per the terms
of specific contracts. On fixed price contracts, revenue is recognised based on milestone achieved as specified in the contracts on the proportionate
completion method on the basis of the work completed. Foreseeable losses on such contracts are recognized when probable. Revenue from rendering
annual maintenance services is recognised proportionately over the period in which services are rendered. Revenue from third party software products and
hardware sale is recognised upon delivery.
(iv)
Dividend from investments is recognized when the right to receive the payment is established and when no significant uncertainty as to measurability or
collectability exits.
(v)
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.
(b)
Depreciationandamortisation
(i)
Depreciation is provided on Straight Line Method basis (SLM) over the estimated useful lives of the assets. Estimated useful lives of assets are as
follows:
Type of Asset
Estimateduseful life
Leasehold land
amortised over the period of the lease
Buildings
20 to 40 years
Plant, machinery and equipment
9 to 30 years
Computers and other IT assets
3 to 6 years
Vehicles
3 to 10 years
Furniture, fixtures and office appliances
3 to 20 years
Technical know-how
2 to 10 years
Developed technologies
10 years
Computer software
1 to 8 years
Special tools are amortised on a straight line basis over the lives of the model concerned, which is 7 to 10 years.
Capital assets, the ownership of which does not vest with the Company, other than leased assets, are depreciated over the estimated period of their
utility or five years, whichever is less.
(ii)
Product development cost are amortised over a period of 36months to 120months 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 / intangible assets under development until construction and installation are complete and
asset is ready for its intended use.
(c)
Fixedassets
(i)
Fixed assets are stated at cost of acquisition or construction less accumulated depreciation / amortisation.
(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.
(d)
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 towhich 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.
(e)
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 termat 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 lease term.