Rates of Depreciation and notes contained in this schedule are subject to the provisions of the

Companies Act, 1956 and the Companies (Accounting Standards) Rules, 2006 as amended from time
to time

One of the consequences of generally accepted accounting principles (GAAP) is

that while cash is used to pay for a long-lived asset, such as a semi-trailer to
deliver goods, the expenditure is not listed as an expense against revenue at the
time. Instead, the cost is placed as an asset onto the balance sheet and that
value is steadily reduced over the useful lifetime of the asset. This reduction is an
expense called depreciation. This happens because of the matching principle
from GAAP, which says expenses are recorded in the same accounting period as
the revenue that is earned as a result of those expenses.
For example, suppose the cost of a semi-trailer is $100,000 and the trailer is
expected to last for 10 years. If the trailer is expected to be worth $10,000 at the
end of that period (salvage value), $9,000 would be recorded as a depreciation
expense for each of those 10 years (cost - salvage value/number of years).
Fixed / Intangible assets and depreciation / amortisation
Fixed assets are stated at cost less accumulated depreciation.
Cost of acquisition is inclusive of freight, duties, taxes and
other incidental expenses. Exchange differences arising
on restatement / settlement of long-term foreign currency
borrowings relating to acquisition of depreciable fixed
assets are adjusted to the cost of the respective assets and
depreciated over the remaining useful life of such assets.
Depreciation is charged on a pro-rata basis at the straight line
method rates prescribed in Schedule XIV to the Companies
Act, 1956. Assets covered under employee benefit schemes
are amortised over a period of five years. Assets costing upto
` 5,000 each are fully depreciated in the year of purchase.
Intangible assets, comprising of expenditure on model fee

etc, incurred are amortised on a straight line method over a

period of five years. Licenses for Technical know-how / export
licenses have been amortised on a straight line basis upto
June 30, 2014 i.e forty two months (refer note 11).
The carrying values of assets / cash generating units at each
Balance Sheet date are reviewed for impairment.
Leasehold land has been amortised over the period of lease.
Raw materials and components, stores and spares, loose tools,
finished goods and work in progress are valued at cost or net
realisable value, whichever is lower.
The basis of determining cost for various categories of
inventories are as follows:Stores and spares, loose tools, raw
materials and components
- Weighted average cost
Materials in transit - Actual cost
Work in progress and finished
goods
- Material cost plus
appropriate share of
labour, manufacturing
overheads and excise
duty

IFRS focuses on the transfer of risks and rewards when determining when a
sale is made whereas Indian GAAP allows the recording of sales too early in the sales process

Services income is recognized when the services are rendered.

- Scrap is accounted for on sale basis.

Sales-basis Method
Under the sales-basis method, revenue is recognized at the time of
sale, which is defined as the moment when the title of the goods or
services is transferred to the buyer.
The sale can be made for cash or credit. This means that, under this
method, revenue is not recognized even if cash is received before
the transaction is complete.
For example, a monthly magazine publisher that receives $240 a
year for an annual subscription will recognize only $20 of revenue
every month (assuming that it delivered the magazine).
Implication: This is the most accurate form of revenue recognition.

Depreciation
Hero MotoCorp Limited follows the Straight line method of depreciation which just spreads out
the cost of an asset equally over its lifetime. The rates used to calculate depreciation value is
charged on a pro-rata basis as prescribed in Schedule XIV to the Companies Act, 1956. The book
value or carrying amount of asset is then original cost less the accumulated depreciations. Asset
costing up to Rs. 5000 are depreciation 100% in the year they are purchased. Intangible assets,
amortized over a period of five years and some licenses are depreciated for 42 months. It is a
way to recover the cost (or other basis) of certain types of property as it decreases the taxable
income. Depreciation is non-cash charge which reduce net income but are not paid out in cash, so
it is added back to net income when calculating net cash ow.

Inventory
Company follows GAAPs (Generally accepted accounting principles) for valuing inventory, so
as to not overstate or understate the value of inventory goods. Raw materials and components,
stores and spares, loose tools, finished goods and work in progress are valued at cost or net
realizable value, whichever is lower. Net realizable value is generally selling price less selling
cost and the basis of determining cost for various categories of inventories are as follows:Stores and spares, loose tools, raw materials and components - Weighted average cost
Materials in transit - Actual cost
Work in progress and finished goods- Material cost plus appropriate share of labor,
manufacturing overheads and excise duty

Revenue Recognition
Company follows most accurate method of GAAPs (Generally accepted accounting principles)
for revenue recognition that is Sales basis Method Under the sales-basis method, revenue is
recognized at the time of sale, which is defined as the moment when the title and risks and
rewards of ownership have passed which is generally when a vehicle is released to the carrier
responsible for transporting it to a dealer and when collectability is reasonably assured as well
seller retains no effective control of the goods transferred to a degree usually associated with
ownership. The sale can be made for cash or credit. This means that, under this method, revenue
is not recognized even if cash is received before the transaction is complete.