Tata Motors AR

Statutory Reports

Corporate Overview

Financial Statements

F-16

(Standalone)

72nd Annual Report 2016-17

Assets taken on finance lease

A finance lease is recognized as an asset and a liability at the commencement of the lease, at the lower of the fair value of the asset and the present value of

the minimum lease payments. Initial direct costs, if any, are also capitalized and, subsequent to initial recognition, the asset is accounted for in accordance

with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense

and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic

rate of interest on the remaining balance of the liability.

Assets taken on operating lease

Leases other than finance leases are operating leases, and the leased assets are not recognized on the Company’s balance sheet. Payments made under

operating leases are recognized in the Statement of Profit and Loss on a straight-line basis over the term of the lease.

(o)

Impairment

At each balance sheet date, the Company assesses whether there is any indication that any property, plant and equipment and intangible assets with finite

lives may be impaired. If any such impairment exists the recoverable amount of an asset is estimated to determine the extent of 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.

Intangible assets not yet available for use, are tested for impairment annually at each balance sheet date, or earlier, if there is an indication that the asset may

be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to

their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for

which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-

generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.

As at March 31, 2017, none of the Company’s property, plant and equipment and intangible assets were considered impaired.

(p)

Employee benefits

Gratuity

Tata Motors Limited and its Joint operations have an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The

plan provides for a lump-sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount

equivalent to 15 to 30 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. Tata Motors Limited

make annual contributions to gratuity funds established as trusts. Tata Motors Limited account for the liability for gratuity benefits payable in the future

based on an actuarial valuation.

ii)

Superannuation

Tata Motors Limited have two superannuation plans, a defined benefit plan and a defined contribution plan. An eligible employee on April 1, 1996 could

elect to be a member of either plan.

Employees who are members of the defined benefit superannuation plan are entitled to benefits depending on the years of service and salary drawn.

The monthly pension benefits after retirement range from 0.75% to 2% of the annual basic salary for each year of service. Tata Motors Limited account for

superannuation benefits payable in future under the plan based on an actuarial valuation.

With effect from April 1, 2003, this plan was amended and benefits earned by covered employees have been protected as at March 31, 2003. Employees

covered by this plan are prospectively entitled to benefits computed on a basis that ensures that the annual cost of providing the pension benefits would

not exceed 15% of salary.

Separate irrevocable trusts are maintained for employees covered and entitled to benefits. Tata Motors Limited contributes up to 15% or

1,50,000,

whichever is lower, of the eligible employees’ salary to the trust every year. Such contribution are recognised as an expense when incurred. Tata Motors

Limited has no further obligation beyond this contribution.

iii)

Bhavishya Kalyan Yojana (BKY)

Bhavishya Kalyan Yojana is an unfunded defined benefit plan for employees of Tata Motors Limited. The benefits of the plan include pension in certain

cases, payable up to the date of normal superannuation had the employee been in service, to an eligible employee at the time of death or permanent

disablement, while in service, either as a result of an injury or as certified by the appropriate authority. The monthly payment to dependents of the

deceased/disabled employee under the plan equals 50% of the salary drawn at the time of death or accident or a specified amount, whichever is greater.

Tata Motors Limited account for the liability for BKY benefits payable in the future based on an actuarial valuation.

iv)

Provident fund and family pension

In accordance with Indian law, eligible employees of Tata Motors Limited and its Joint operations are entitled to receive benefits in respect of provident

fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered

employees’salary (currently 12% of employees’salary). The contributions, as specified under the law, are made to the provident fund and pension fund set

up as an irrevocable trust by Tata Motors Limited.

NOTES FORMING PART OF FINANCIAL STATEMENTS