NAME : DHEERAJ SHETTY

STD : F.Y.B.A.F
DIV : B
SUBJECT : FINANCIAL ACCOUNTING
TOPIC : ACCOUNTING STANDARD OF ANY
PUBLIC COMPANY
ACCOUNTING STANDARD OF MAHINDRA AND
MAHINDRA LTD.COMPANY
Mar 31, 2019

(a) Statement of compliance and basis of preparation and presentation These

standalone or separate financial statements of Mahindra & Mahindra Limited
(‘the Company’) have been prepared in accordance with Indian Accounting
Standards as per the Companies (Indian Accounting Standards) Rules, 2015 as
amended and notified under Section 133 of the Companies Act, 2013 (the
‘Act’) and other relevant provisions of the Act. These standalone or separate
financial statements were approved by the Company’s Board of Directors and
authorised for issue on 29th May, 2019.

(b) Basis of measurement The financial statements have been prepared on the
historical cost basis except for certain financial instruments which are measured at
fair values.

(c) Measurement of fair values A number of Company’s accounting policies and

disclosures require the measurement of fair values, for both financial and non-
financial assets and liabilities. The Company has established policies and
procedures with respect to the measurement of fair values. Fair values are
categorised into different levels in a fair value hierarchy based on the inputs used in
the valuation techniques as follows: —

Level 1: Quoted prices (unadjusted) in active markets for identical assets and
liabilities. —

Level 2: Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly.

(i) Useful lives of property, plant and equipment and intangible

assets
The Company reviews the useful lives of property, plant and equipment and
intangible assets at the end of each reporting period. This re-assessment may result
in change in depreciation and amortisation expense in future periods.

(ii) Provision for product warranties

The Company recognises provision for warranties in respect of the products that it
sells. Provisions are discounted, where necessary, to its present value based on the
best estimate required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current best
estimates.

(iii) Fair value of financial assets and liabilities and

investments
The Company measures certain financial assets and liabilities on fair value basis at
each balance sheet date or at the time they are assessed for impairment. Fair value
measurement that are based on significant unobservable inputs (Level 3) requires
estimates of operating margin, discount rate, future growth rate, terminal values,
etc. based on management’s best estimate about future developments.

(iv) Impairment of investments

Company assesses impairment of investments in subsidiaries, associates and joint
ventures which are recorded at cost. At the time when there are any indications that
such investments have suffered a loss, if any, is recognised in the statement of
Profit and Loss. The recoverable amount requires estimates of operating margin,
discount rate, future growth rate, terminal values, etc. based on management’s
best estimate. (e) Property, plant and equipment Property, plant and equipment are
stated at cost of acquisition or construction less accumulated depreciation and
accumulated impairment, if any. Cost includes financing cost relating to borrowed
funds attributable to the construction or acquisition of qualifying tangible assets
upto the date the assets are ready for use. Depreciation is provided on straight-line
basis for property, plant and equipment so as to expense the depreciable amount,
i.e. the cost less estimated residual value, over its estimated useful lives. The
estimated useful lives and residual values are reviewed annually and the effect of
any changes in estimate is accounted for on a prospective basis. When an asset is
scrapped or otherwise disposed off, the cost and related depreciation are removed
from the books of account and resultant profit or loss, if any, is reflected in the
Statement of Profit and Loss. The management’s estimate of useful lives are in
accordance with Schedule II to the Companies Act, 2013, other than the following
asset classes, based on the Company’s expected usage pattern supported by
technical assessment: (f) Intangible assets Intangible assets are initially recognised
at cost. Intangible assets with definite useful lives are amortised on a straight line
basis so as to reflect the pattern in which the asset’s economic benefits are
consumed. Intangible assets under development The Company expenses costs
incurred during research phase to profit or loss in the year in which they are
incurred. Development phase expenses are initially recognised as intangible assets
under development until the development phase is complete, upon which the
amount is capitalised
Intangible assets under development
The Company expenses costs incurred during research phase to profit or loss in the
year in which they are incurred. Development phase expenses are initially
recognised as intangible assets under development until the development phase is
complete, upon which the amount is capitalised as intangible asset.

Other intangible assets

1]Technical Knowhow The expenditure incurred is amortised over the estimated
period of benefit, commencing with the year of purchase of the technology.

ii) Development Expenditure The expenditure incurred on technical services and

other project/product related expenses are amortised over the estimated period of
benefit, not exceeding five years.

iii) Brand license fee The expenditure incurred is amortised over the period of
relevant licence fee or the estimated period of benefit, whichever is lower.

iv) Software Expenditure The expenditure incurred is amortised over three

financial years equally commencing from the year in which the expenditure is
incurred.

v) Others The expenditure incurred is amortised over the estimated period of

benefit. The amortisation period for intangible assets with finite useful lives are
reviewed annually and changes in expected useful lives are treated as changes in
estimates.

Impairment of assets
At the end of each reporting period, the Company reviews the carrying amounts of
its tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount, which is the higher of the value in use or fair value less cost to
sell, of the asset or cash-generating unit, as the case may be, is estimated and
impairment loss (if any) is recognised and the carrying amount is reduced to its
recoverable amount. In assessing the 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. When 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. When an impairment loss subsequently reverses, the carrying
amount of the asset or a cash-generating unit is increased to the revised estimate
of its recoverable amount, so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) earlier. Intangible assets
with indefinite useful lives and intangible assets not yet available for use are tested
for impairment at least annually, and whenever there is an indication that the asset
may be impaired.

Inventories
Inventories comprise all costs of purchase, conversion and other costs incurred in
bringing the inventories to their present location and condition. Raw materials and
bought out components are valued at the lower of cost or net realisable value. Cost
is determined on the basis of the weighted average
Inventories Inventories comprise all costs of purchase, conversion and other costs
incurred in bringing the inventories to their present location and condition. Raw
materials and bought out components are valued at the lower of cost or net
realisable value. Cost is determined on the basis of the weighted average method.
Finished goods produced and purchased for sale, manufactured components and
work-in-progress are carried at cost or net realisable value whichever is lower.
Excise duty is included in the value of finished goods inventory, where applicable.
Stores, spares and tools other than obsolete and slow moving items are carried at
cost. Obsolete and slow moving items are valued at cost or estimated net realisable
value, whichever is lower. (i) Foreign exchange transactions and translation
Transactions in foreign currencies i.e. other than the Company’s functional
currency of Indian Rupees are recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are translated at the functional currency using
exchange rates prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are retr

Classification and subsequent measurement Financial

assets
All regular way purchases or sales of financial assets are recognised and
derecognised on a trade date basis. Regular way purchases or sales are purchases
or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace. All recognised financial
assets are subsequently measured at either amortised cost or fair value depending
on their respective classification. On initial recognition, a financial asset is classified
as - measured at : — Amortised cost; or — Fair Value through Other
Comprehensive Income (FVTOCI) - debt investment; or — Fair Value through Other
Comprehensive Income (FVTOCI) - equity investment; or — Fair Value Through
Profit or Loss (FVTPL) Financial assets are not reclassified subsequent to their initial
recognition, except if and in the period the Company changes its business model
for managing financial assets. All financial assets not classified as measured at
amortised cost or FVTOCI are measured at FVTPL. This includes all derivative
financial assets unless designated as effective hedge instruments which are
accounted as per hedge accounting requirements discussed below. Financial assets
at amortised cost are subsequently measured at amortised cost using effective
interest method. The amortised cost is reduced by impairment losses. Interest
income, foreign exchange gains and losses and impairment expenses are
recognised in profit or loss. Any gain and loss on derecognition is also recognised in
profit or loss.

Financial liabilities and equity instruments

Debt and equity instruments issued by the Company are classified as either
financial liabilities or as equity in accordance with the substance of the contractual
arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its liabilities. Equity
instruments issued by the Company is recognised at the proceeds received, net of
directly attributable transaction costs. Financial liabilities Financial liabilities are
classified as measured at amortised cost or FVTPL. A financial liability is classified as
at FVTPL if it is classified as held-for-trading or it is a derivative (that does not meet
hedge accounting requirements) or it is designated as such on initial recognition.
Other financial liabilities are subsequently measured at amortised cost using the
effective interest method. Interest expense and foreign exchange gains and losses
are recognised in profit or loss. Any gain or loss on derecognition is also recognised
in profit or loss.

Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to the cash
flows from the financial asset expire, or it transfers the rights to receive the
financial asset and substantially all the risks and rewards of ownership of the asset
to another party. If the Company neither transfers nor retains substantially all of
the risks and rewards of ownership and continues to control the transferred asset,
the Company recognises its retained interest in the asset and an associated liability
for the amount it may have to pay. If the Company enters into transactions
whereby it transfers assets recognised on its balance sheet, but retains either all or
substantially all of the risks and rewards of the transferred assets, the transferred
assets are not derecognised and the proceeds received are recognised as a
collateralised borrowing.

Offsetting
Financial assets and financial liabilities are offset and the net amount presented in
the balance sheet when, and only when, the Company currently has a legally
enforceable right to set off the amounts and it intends either to settle them on a
net basis or to realise the asset and settle the liability simultaneously.

Financial guarantee contracts A financial guarantee contract is a contract that

requires the issuer to make specified payments to reimburse the holder for a loss it
incurs because a specified debtor fails to make payments when due in accordance
with the terms of a debt instrument. Financial guarantee contracts issued by the
Company are initially measured at their fair values and, if not designated as at
FVTPL, are subsequently measured at the higher of: - the amount of loss allowance
determined in accordance with impairment requirements of Ind AS 109; and - the
amount initially recognised less, when appropriate, the cumulative amount of
income recognised in accordance with the principles of Ind AS 115.

Derivative financial instruments and hedge accounting

The Company enters into derivative financial instruments, primarily foreign
exchange forward contracts and interest rate swaps, to manage its exposure to
foreign exchange and interest rate risks. Derivatives embedded in non-derivative
host contracts that are not financial assets within the scope of Ind AS 109 are
treated as separate derivatives when their risks and characteristics are not closely
related to those of the host contracts and the host contracts are not measured at
FVTPL. Derivatives are initially recognised at fair value at the date the contracts are
entered into and are subsequently remeasured to their fair value at the end of each
reporting period. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in profit or loss depends
on the nature of the hedging relationship and the nature of the hedged item.

Sale of goods
The Company recognizes revenue from sale of goods measured at the fair value of
the consideration received or receivable, upon satisfaction of performance
obligation which is at a point in time when control of the goods is transferred to the
customer, generally on delivery of the goods. Depending on the terms of the
contract, which differs from contract to contract, the goods are sold on a
reasonable credit term. As per the terms of the contract, consideration that is
variable, according to Ind AS 115, is estimated at contract inception and updated
thereafter at each reporting date or until crystallisation of the amount.

Sale of services
Sale of services are recognised on satisfaction of performance obligation towards
rendering of such services.

Dividend and interest income

Dividend from investments are recognised in profit or loss when the right to receive
payment is established. Interest income from a financial asset is recognised when it
is probable that the economic benefits will flow to the Company and the amount of
income can be measured reliably. (m) Government Grants The Company, directly or
indirectly through a consortium of Mahindra Group Companies, is entitled to
various incentives from government authorities in respect of manufacturing units
located in developing regions. The Company accounts for its entitlement as income
on accrual basis. Government grants are recognised in profit or loss on a systematic
basis over the periods in which the Company recognises as expenses the related
costs for which the grants are intended to compensate.

Superannuation Fund, ESIC and Labour Welfare Fund

The Company’s contribution paid / payable during the year to Superannuation
Fund, ESIC and Labour Welfare Fund are recognised in profit or loss. Provident Fund
Contributions to Provident Fund are made to a Trust administered by the
Company/Regional Provident Fund Commissioners and are charged to profit or loss
as incurred. The Company is liable for the contribution and any shortfall in interest
between the amount of interest realised by the investments and the interest
payable to members at the rate declared by the Government of India in respect of
the Trust administered by the Company. Long term Compensated Absences
Company’s liability towards long term compensated absences are determined
by independent actuaries, using the projected unit credit method. Gratuity, post
retirement medical benefit and post retirement housing allowance schemes
Company’s liability towards gratuity, post retirement medical benefit and post
retirement housing allowance schemes are determined by independent actuaries,
using the projected unit credit method. Past services are recognised at the earlier of
the plan amendment/ curtailment and the recognition of related restructuring
costs/termination benefits. The obligation on long term compensated absences and
defined benefit plans are measured at the present value of estimated future cash
flows using a discount rate that is determined by reference to the market yields at
the balance sheet date on government bonds where the currency and terms of the
government bonds are consistent with the currency and estimated terms of the