Tata Motors AR

Statutory Reports

Corporate Overview

Financial Statements

F-14

(Standalone)

72nd Annual Report 2016-17

Incentives are recognized when there is reasonable assurance that the Company will comply with the conditions and the incentive will be received. Incentives

are recorded at fair value where applicable. Sales of products include incentives of

309.86 crores

and

481.62 crores for the years ended March 31, 2017

and 2016, respectively.

(ii)

Other operating revenue

Include incentive of

110.01 crores

and

82.84 crores for the year ended March 31, 2017 and 2016, respectively, towards

Exports Promotion Capital Goods (EPCG) scheme.

(e)

Cost recognition

Costs and expenses are recognized when incurred and are classified according to their nature.

Expenditure capitalized represents employee costs, stores and other manufacturing supplies, and other expenses incurred for construction including product

development undertaken by the Company.

(f)

Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is

probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash

flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

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 incidences based on actions on product failures. The

timing of outflows will vary as and when warranty claim will arise, being typically up to four years.

(g)

Foreign currency

These financial statements are presented in Indian rupees, which is the functional currency of Tata Motors Limited.

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Foreign currency denominated monetary assets

and liabilities are re-measured into the functional currency at the exchange rate prevailing on the balance sheet date.

Exchange differences are recognized in the Statement of Profit and Loss except to the extent, exchange differences which are regarded as an adjustment to

interest costs on foreign currency borrowings, are capitalized as part of borrowing costs.

(h)

Income taxes

Income tax expense comprises current and deferred taxes. Income tax expense is recognized in the Statement of Profit and Loss except when they relate to

items that are recognized outside profit or loss (whether in other comprehensive income or directly in equity), in which case tax is also recognized outside

profit or loss.

Current income taxes are determined based on respective taxable income of each taxable entity.

Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities

and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Such deferred tax assets and liabilities are

computed separately for each taxable entity. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available

against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.

Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period when the asset is realized or the liability is

settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they

relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

(i)

Earnings per share

Basic earnings per share has been computed by dividing profit/loss for the year by the weighted average number of shares outstanding during the year.

Partly paid up shares are included as fully paid equivalents according to the fraction paid up. Diluted earnings per share has been computed using the

weighted average number of shares and dilutive potential shares, except where the result would be anti-dilutive.

(j)

Inventories

Inventories are valued at the lower of cost and net realizable value. Cost of raw materials, components and consumables are ascertained on a moving

weighted average/monthly moving weighted average basis. Cost, including fixed and variable production overheads, are allocated to work-in-progress and

finished goods determined on a full absorption cost basis. Net realizable value is the estimated selling price in the ordinary course of business less estimated

cost of completion and selling expenses.

NOTES FORMING PART OF FINANCIAL STATEMENTS