179
(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 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 Statement of Profit and Loss on a straight line basis over the lease term.
(f) 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 recognised as
income or expense in the year in which they arise. Exchange differences considered as borrowing cost are capitalised to the extent these relate to the
acquisition / construction of qualifying assets and the balance amount is recognised in the Statement of Profit & Loss.
(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 amortised 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.
(3)
On consolidation, the assets, liabilities and goodwill or capital reserve arising on the acquisition, of the Group’s overseas operations are translated at exchange
rates prevailing on the balance sheet date. Income and expenditure items are translated at the average exchange rates for the year/month. Exchange differences
arising in case of Integral Foreign operations are recognised in the Statement of Profit and Loss and exchange differences arising in case of Non integral Foreign
Operations are recognised in the Group’s Translation Reserve classified under Reserves and surplus.
(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 recognised directly in Hedging Reserve Account under Reserves and Surplus, net of applicable deferred income taxes and
the ineffective portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in Hedging Reserve Account are reclassified to profit and loss in the same periods during which the forecasted transaction affects
Statement of Profit and Loss
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 Statement of Profit and Loss. Foreign currency options and other derivatives are stated at fair value as at the year end with change in fair
value recognised in the Statement of Profit and Loss.
(iii)
Premiumor discount on forward contracts other than those covered in (ii) above is amortised over the life of such contracts and is recognised as income and expense.
(g) 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 five years.
(h) Income on vehicle loan
Interest income from loan contracts in respect of vehicles and income from plant given on lease, 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 and its subsidiary provides an
allowance for finance 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.
(i)
Sale of finance receivables
One of the subsidiary sells finance receivables to Special Purpose Entities (“SPE”) in securitisation transactions. Recourse is in the form of the subsidiary’s investment
in subordinated securities issued by these special purpose entities, cash collateral and bank guarantees.The loans are derecognised in the balance sheet when they are sold
and consideration has been received by the subsidiary. Sales and transfers that do not meet the criteria for surrender of control are accounted for as secured borrowings.
Gains or losses from the sale of loans are recognised in the period the sale occurs based on the relative fair value of the portion sold and the portion allocated to
NOTES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors’Report
Balance Sheet
(176-206)
Statement of Profit and Loss
Cash Flow Statement
Notes to Accounts
