Tata Motors AR

F-83

Foreign currency

These consolidated 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.

For the purpose of consolidation, the assets and liabilities of the Company’s foreign operations are translated to Indian rupees at the exchange rate

prevailing on the balance sheet date, and the income and expenses at the average rate of exchange for the respective months. Exchange differences

arising are recognized as currency translation reserve under equity.

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, or where they arise from the initial accounting for business combination. In the case of a business combination the

tax effect is included in the accounting for the business combination.

Current income taxes are determined based on respective taxable income of each taxable entity and tax rules applicable for respective tax

jurisdictions.

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 and for each taxable jurisdiction. 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.

k. Earnings per share

Basic earnings per share has been computed by dividing profit 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.

l. Inventories

Inventories (other than those recognized consequent to the sale of vehicles subject to repurchase arrangements) are valued at the lower of cost and

net realizable value. Cost of raw materials, components and consumables are ascertained on a first in first out 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.

Inventories include vehicles sold subject to repurchase arrangements. These vehicles are carried at cost to the Company and are amortized in

changes in inventories of finished goods to their residual values (i.e., estimated second hand sale value) over the term of the arrangement.

m. Property, plant and equipment

Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any.

Freehold land is measured at cost and is not depreciated.

Heritage assets, comprising antique vehicles purchased by the Company, are not depreciated as they are considered to have a residual value in

excess of cost. Residual values are re-assessed on an annual basis.

Cost includes purchase price, taxes and duties, labor cost and direct overheads for self-constructed assets and other direct costs incurred up to the

date the asset is ready for its intended use.

Interest cost incurred for constructed assets is capitalized up to the date the asset is ready for its 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.

Depreciation is provided on the Straight Line Method (SLM) over the estimated useful lives of the assets considering the nature, estimated usage,

operating conditions, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support. Taking

into account these factors, the Company and its domestic group companies have decided to apply the useful life for various categories of property,

plant and equipment, which are different from those prescribed in Schedule II of the Act.

NOTES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS