Statutory Reports
Corporate Overview
69th Annual Report 2013-14
178
Financial Statements
(Consolidated)
NOTES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS
(II) Significant accounting policies :
(a)
Revenue recognition
(i)
Sale of products
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 exports 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.
(ii)
Revenue from sale of vehicles with guaranteed 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 and materials 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 exists.
(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) Depreciation and Amortisation
(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
Estimated useful 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 costs 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 / intangible assets under development until construction and installation are complete and
asset is ready for its intended use.
(c) Fixed Assets
(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 Rs. 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 of Tangible Assets, Intangible Assets and Goodwill
At each Balance Sheet date, the Company assesses whether there is any indication that the tangible assets, intangible assets including Goodwill may be
impaired. If any such impairment indicators exists, the recoverable amount of an asset is estimated to determine the extent of the impairment, if any. Where it
is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which
the asset belongs. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to that unit and then to the other assets of the unit pro rata on the basis of carrying amount of each asset
in the unit. An impairment loss recognised for goodwill is not reversed in the subsequent period unless there are changes in external events. As of March 31, 2014
none of the tangible and intangible assets were considered impaired except for amounts disclosed in Note 14 to the Consolidated Financial Statements.
