Statutory Reports
Corporate Overview
Financial Statements
F-82
(Consolidated)
72nd Annual Report 2016-17
f.
Revenue recognition
Revenue is measured at fair value of consideration received or receivable.
i) Sale of products
The Company recognizes revenues on the sale of products, net of discounts, sales incentives, customer bonuses and rebates granted, when
products are delivered to dealers or when delivered to a carrier for export sales, which is when title and risks and rewards of ownership pass to
the customer. Sale of products includes export and other recurring and non-recurring incentives from governments (referred to as “incentives”).
Revenues are recognized when collectability of the resulting receivable is reasonably assured.
If the sale of products includes a determinable amount for subsequent services (multiple component contracts) the related revenues are deferred
and recognized as income over the relevant service period. Amounts are normally recognized as income by reference to the pattern of related
expenditure.
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. Sale of products include incentives of
R
930.22 crores
and
R
2,149.58 crores
for the years ended March 31, 2017 and 2016, respectively. These include during the years ended March 31, 2017 and 2016,
R
561.04 crores
and
R
996.08 crores, respectively, received by a foreign subsidiary as an indirect tax incentive that requires the subsidiary to meet certain criteria
relating to vehicle efficiency and investment in engineering and research and development. The incentive is provided as a partial off set to the
higher sales tax payable following implementation of new legislation.
ii) Other operating revenues
Other operating revenues include incentive of
R
110.01 crores
and
R
82.84 crores for the years ended March 31, 2017 and 2016 respectively, towards
Exports Promotion Capital Goods (EPCG) scheme. Further, it also includes during the years ended March 31, 2017 and 2016,
R
504.72 crores
and
R
501.20 crores, respectively for Research and Development Expenditure Credit (RDEC) on qualifying expenditure by an indirect subsidiary in the UK.
iii) Finance revenues
Finance and service charges are accrued on the unpaid principal balance of finance receivables using the effective interest method.
g. 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.
h. 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.
i)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 five years.
ii) Residual risk
In certain markets, the Company is responsible for the residual risk arising on vehicles sold by dealers under leasing arrangements. The provision
is based on the latest available market expectations of future residual value trends. The timing of the outflows will be at the end of the lease
arrangements – being typically up to three years.
iii) Legal and product liability
Legal and product liability provision is recorded in respect of compliance with regulations and known litigations which impact the Company.
The product liability claim primarily relates to motor accident claims, consumer complaints, dealer terminations, personal injury claims and
compliance with regulations.
iv) Environmental liability
Environmental liability relates to various environmental remediation cost such as asbestos removal and land clean up. The timing of when these
costs will be incurred is not known with certainty.
NOTES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS