Revenue Recognition

Mahindra & Mahindra is a $20.7 billion group with 150+ companies across 100+ countries. Mahindra
& Mahindra Ltd. (M&M) adheres to Ind AS 115 – Revenue from Contracts with Customers for
revenue recognition. The consolidated financial statement notes explain the revenue recognition for
its businesses across multiple industrial sectors.

1. Sale of Goods i.e. INR 78,005 cr. from manufacturing businesses like Mahindra & Mahindra Ltd.,
MVML is recognized when all the below conditions are satisfied:

a) the Group has transferred to the buyer the significant risks and rewards of ownership of
the goods;
b) the Group retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
c) the amount of revenue can be measured reliably;
d) it is probable that the economic benefits associated with the transaction will flow to the
entity; and
e) the costs incurred or to be incurred in respect of the transaction can be measured reliably

2. Income from vacation ownership

Income from vacation ownership business (Club Mahindra Ltd.) is classified as

i. Admissions fee: It is a non-refundable fee which is charged to new remembers and is
recognized as income subject to collection reliability.
ii. Entitlement fee: Entitlement fee shows the companies obligation to provide hospitality
services to its members based on the tenure of membership (33 years/25 years/10 years).
This income is recognized equally across the membership tenure and entitlement fees for
the future periods is accounted under other liabilities-Deferred income section.
iii. Annual subscription: Accounting for annual subscription fees follows accrual method and
fees for period beyond the date of balance sheet is accounted under Deferred Income.
iv. Room rents, food and beverages etc: Income is realised as and when services are
rendered.

3. Income from Dividends and Interest: INR 403 cr.

Income from dividends is recognized only when the right to receive the amount is confirmed. Interest
income is measured on probability basis when the company/group is sure that the economic benefits
will flow into the company and the amount of benefits can be measured reliably. Interest income also
takes in account the time value of money by reference to the outstanding principal and the applicable
rate of interest.

4. Income from financing business: INR 8353 cr.

The group follows the effective interest rate to recognize interest income from its financial services
business (Mahindra Finance Ltd.). The group segregates its assets based on credit impairment. For
assets which are out of credit impairment effective interest rate is calculated based on future cash
flows as per contractual terms. For credit impaired assets an adjusted effective interest rate is
calculated by estimating expected credit losses in future cash flows.

5. Income from construction contracts and property development:

When the outcome of the contract can be estimated reliably, revenue is recognised till the stage of
completion of contract activities when the financial statements are being prepared. The
measurement of revenue is based on the proportion of contract terms. Revenues which are received
before the work is performed are treated as a liability in advances received, whereas amount for
which the customer is already billed and are not received is accounted under trade receivables.

M&M follows the Accounting for Real Estate Transactions issues by the ICAI and recognises revenue
only when, the following conditions are met:

i. all critical approvals necessary for commencement of the project have been obtained,
ii. the actual construction and development cost incurred is at least 25% of the total construction
and development cost (without
considering land cost),
iii. when at least 10% of the sales consideration is realised, and
v. where 25% of the total saleable area of the project is secured by contracts of agreement
with buyers.