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o. Leases
At the inception of a lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the substance of the lease
arrangement.
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.
p. Impairment
i) Goodwill
Cash generating units to which goodwill is allocated are tested for impairment annually at each balance sheet date, or more frequently when there
is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to that unit and then to the other assets of the unit pro rata
on the basis of carrying amount of each asset in the unit. Goodwill impairment loss recognized is not reversed in subsequent period.
ii) Property, plant and equipment and other intangible assets
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 with indefinite useful lives and 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.
q. Employee benefits
i) Pension plans
The Jaguar Land Rover subsidiaries operate several defined benefit pension plans, which are contracted out of the second state pension scheme
until April 5, 2016. The assets of the plan are held in separate trustee administered funds. The plans provide for monthly pension after retirement as
per salary drawn and service period as set out in rules of each fund.
Contributions to the plans by the subsidiary group take into consideration the results of actuarial valuations. The plans with a surplus position at the
year-end have been limited to the maximum economic benefit available from unconditional rights to refund from the scheme or reduction in future
contributions. Where the subsidiary group is considered to have a contractual obligation to fund the pension plan above the accounting value of the
liabilities, an onerous obligation is recognized.
A separate defined contribution plan is available to employees of Jaguar Land Rover. Costs in respect of this plan are charged to the Statement of
Profit and Loss as incurred.
ii) Gratuity
Tata Motors Limited and its subsidiaries in India 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 and such subsidiaries make annual contributions to gratuity funds established as trusts or insurance companies. Tata Motors Limited
and its subsidiaries in India account for the liability for gratuity benefits payable in the future based on an actuarial valuation.
NOTES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS