INTRODUCTION

In 1948, when independent India was one year old, Ashok Leyland was born. We were Ashok
Motors then, assembling Austin vehicles at the first plant, at Encore near Chennai. In 1950
started assembly of Leyland commercial vehicles and soon local manufacturing under license
from British Leyland. With British Leyland participation in the equity capital, in 1954, the
Company was rechristened Ashok Leyland.

Since then Ashok Leyland has been a major presence in India's commercial vehicle industry.
These years have been punctuated by a number of technological innovations which went on
to become industry standards. This tradition of technological leadership was achieved
through tie-ups with international technology leaders and through vigorous in-house R&D.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 375,000
vehicles we have put on the roads have shared the additional pressure placed on road
transportation in independent India.

The share of goods movement by road rose from 12% in 1950 to 60% in 1995. In passenger
transportation, the jump is equally dramatic: from 25% to 80%. At 60 million passengers a
day, Ashok Leyland buses vehicles more people than the entire Indian rail network. In the
populous Indian metros, four out of the five State Transport Undertaking (STU) buses come
from Ashok Leyland. Some of them like double decker and vestibule buses are unique
models from Ashok Leyland, tailor-made for high density routes.

In 1987, the overseas holding by LRLIH (Land Rover Leyland International Holdings
Limited) was taken over by a joint venture between the Hinduja Group, the Non-Resident
Indian transnational group and IVECO Fiat SPA, part of the Fiat Group and Europe's leading
truck manufacturer.
Global Standards, Global Markets The blue-print prepared for the future reflected the global
ambitions of the Company, captured in four words: Global Standards, Global Markets
(Liberalisation and globalisation were not yet in the air). Buoyed by the backing of the two
international giants, Ashok Leyland embarked on a major product and process technology

Up gradation to world-class standards of technology. In the journey towards global standards

of quality, Ashok Leyland reached a milestone in 1993 when it became the first in India's
automobile industry to win the ISO 9002 certification. The more comprehensive ISO 9001
certification came in 1994. 1994 was also the year, when international technology changed
the way India perceived trucks. The year when a new breed of world class trucks-
technologically superior and eco-friendly - rolled out on Indian roads. From our state-of the-
art manufacturing Plant at Hosur, near Bangalore. They vehiclesried the name Vehicles go.
Vehicles go brought with it, a new set of values and an unmatched basket of benefits,
ushering in a change.

The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by independent
India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded Mr. Raghunandan
Saran, an industrialist, to enter automotive manufacture. In 1948, Ashok Motors was set up in
what was then Madras, for the assembly of Austin Vehicles. The Company's destiny and
name changed soon with equity participation by British Leyland and Ashok Leyland
commenced manufacture of commercial vehicles in 1955.

Since then Ashok Leyland has been a major presence in India's commercial vehicle industry
with a tradition of technological leadership, achieved through tie-ups with international
technology leaders and through vigorous in-house R&D.

Access to international technology enabled the Company to set a tradition to be first with
technology. Be it full air brakes, power steering or rear engine busses, Ashok Leyland
pioneered all these concepts. Responding to the operating conditions and practices in the
country, the Company made its vehicles strong, over-engineering them with extra metallic
muscles. "Designing durable products that make economic sense to the consumer, using
appropriate technology, became the design philosophy of the Company, which in turn has
moulded consumer attitudes and the brand personality.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 5, 00,000
vehicles we have put on the roads have considerably eased the additional pressure placed on
road transportation in independent India. In the populous Indian metros, four out of the five
State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them like the
double-decker and vestibule buses are unique models from Ashok Leyland, tailor-made for
high-density routes In 1987, the overseas holding by Land Rover Leyland International
Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja Group, the
Non-Resident Indian transnational group and IVECO. (Since July 2006, the Hinduja Group is
100% holder of LRLIH).

The blueprint prepared for the future reflected the global ambitions of the company, captured
in four words: Global Standards, Global Markets. This was at a time when liberalisation and
globalisation were not yet in the air. Ashok Leyland embarked on a major product and
process up gradation to match world-class standards of technology.

In the journey towards global standards of quality, Ashok Leyland reached a major milestone
in 1993 when it became the first in India's automobile history to win the ISO 9002
certification. The more comprehensive ISO 9001 certification came in 1994, QS 9000 in
1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. It has also
become the first Indian auto company to receive the latest ISO/TS 16949 Corporate
Certification (in July 2006) which is specific to the auto industry.

This is part of a series of articles peeking into clean car industries and car manufacturers of
China, India, South Korea and Germany.

Among many other goals, Ashok Leyland aims to expand its operations to penetrate into
overseas markets. Included in the companys plans is to acquire smaller car manufacturers in
China and in other developing countries. In October 2006, Ashok Leyland bought a majority
stake in the Czech based- Avia. Called Avia Ashok Leyland Motors s. r. o., this will give
Ashok Leyland a channel into the competitive European market. According to the company,
in 2008 the joint venture sold 518 LCVs in Europe despite tough economic conditions.
Furthermore, the company will expand its product offers into construction equipment,
following a joint venture with John Deere. Newly formed in June 2009, the John Deere
partnership is a 50/50 split between the companies. The company says negotiation is
progressing on land acquisition, and the production plans are in place. The venture is
scheduled to start rolling out wheel loaders and backhoe loaders in October 2010. Aside from
the full expansion planned for the company, Ashok Leyland is also paying close attention to
the environment. In fact, they are one of the companies showing the strongest commitment to
environmental protection, utilizing eco-friendly processes in their various plants. Even as
they thrust into different directions, Ashok Leyland maintains an R&D group that aims to
uncover ways to make their vehicles more fuel efficient and reduce emissions.

In fact, even before laws were placed on car emissions, Ashok Leyland was already
producing low-emission vehicles. Back in 1997, they have already released buses with quiet
engines and low pollutant emission based on the CNG technology. In 2002 it developed the
first hybrid electric vehicle. Ashok Leyland has also launched a mobile emission clinic that
operates on highways and at entry points to New Delhi. The clinic checks vehicles for
emission levels, recommends remedies and offers tips on maintenance and care. This work
will help generate valuable data and garner insight that will guide further development.

When it comes to the development of environmentally friendly technologies, Ashok Leyland

has developed Hythane engines. In association with the Australian company EDEN
ENERGY, Ashok Leyland successfully developed a 6-cylinder, 6-liter 92 kW BS-4 engine
which uses Hythane (H-CNG,) which is a blend of natural gas and around 20% of hydrogen.
Hydrogen helps improve the efficiency of the engine but the CNG aspect makes sure that
emissions are at a controlled level. A 4-cylinder 4-litre 63 KW engine is also being developed
for H-CNG blend in a joint R&D program with MNRE (Ministry of New and Renewable
Energy) and Indian Oil Corporation.

The H-CNG concept is now in full swing, with more than 5,500 of the technologys vehicles
running around Delhi. The company is also already discussing the wide-scale use of Hythane
engines with the Indian government. Hythane engines may be expected in the near future, but
these may not be brought to the United States as yet. Ashok Leylands partnership with
Nissan is also focusing on vehicle, power train, and technology development listed under
three joint ventures. With impressive investment, the joint ventures will focus on producing
trucks with diesel engines that meet Euro 3 and Euro 4 emission standards.

In the coming years, Ashok Leyland also has some hybrid trucks and buses in store for its
market. The buses and trucks are set to feature a new electronic shift-by-wire transmission
technology as well as electronic-controlled engine management for greater fuel efficiency.
Ashok Leyland focuses on improving fuel efficiency without affecting automotive power, and
the vehicles will have a 5% improvement on fuel efficiency. Ashok Leyland is also
developing electric batteries and bio-fuel modes.
Ashok Leyland Ltd.s March quarter results were expected to be impressive, as its monthly
vehicle output reports had indicated a 138% jump in volumes. But what impressed was its net
profit growth of 317%, to Rs223 crore, over the year-ago period, even as sales rose by 139%.
Ashok Leylands operating profit margin rose to 13% compared with 10.5%. Higher volume
growth, a better product mix due to higher sales of multi-axle vehicles and tractor trailers,
and cost reduction were key reasons for margin expansion. Its estimate for volume growth in
2015 is conservative, at 15% compared with over 30% in FY2016
 INDEPENDENT AUDITORS REPORT

TO THE MEMBERS OF ASHOK LEYLAND LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Ashok Leyland

Limited (the Company), which comprise the Balance Sheet as at March 31, 2016, the
Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a
summary of the significant accounting policies and other explanatory information.

Managements Responsibility for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in Section
134(5) of the Companies Act, 2013 (the Act) with respect to the preparation of these
standalone financial statements that give a true and fair view of the financial position,
financial performance and cash flows of the Company in accordance with the accounting
principles generally accepted in India, including the Accounting Standards prescribed under
Section 133 of the Act as applicable. This responsibility also includes maintenance of
adequate accounting records in accordance with the provisions of the Act for safeguarding the
assets of the Company and for preventing and detecting frauds and other irregularities;
selection and application of appropriate accounting policies; making judgments and estimates
that are reasonable and prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and presentation of the
financial statements that give a true and fair view and are free from material misstatement,
whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these standalone financial statements

based on our audit. We have taken into account the provisions of the Act, the
accounting and auditing standards and matters which are required to be included in
the audit report under the provisions of the Act and the Rules made thereunder and the
Order under Section 143(11) of the Act.
We conducted our audit of the standalone financial statements in accordance with the
Standards on Auditing specified under Section 143(10) of the Act. Those Standards
 require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and the disclosures in the financial statements. The procedures selected depend on the
auditors judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control relevant to the Companys
preparation of the financial statements that give a true and fair view in order to design
audit procedures that are appropriate in the circumstances. An audit also includes
evaluating the appropriateness of the accounting policies used and the reasonableness
of the accounting estimates made by the Companys Directors, as well as evaluating
the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations
given to us, the aforesaid standalone financial statements give the information
required by the Act in the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in India, of the state of
affairs of the Company as at March 31, 2016, and its profit and its cash flows for the
year ended on that date.

Report on Other Legal and Regulatory Requirements

As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the
Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt
with by this Report are in agreement with the books of account.
d) In our opinion, the aforesaid standalone financial statements comply with the Accounting
Standards prescribed under Section 133 of the Act, as applicable.

e) On the basis of the written representations received from the directors as on March 31,
2016 taken on record by the Board of Directors, none of the directors is disqualified as on
March 31, 2016 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of
the Company and the operating effectiveness of such controls, refer to our separate Report in
Annexure A. Our report expresses an unmodified opinion on the adequacy and operating
effectiveness of the Companys internal financial controls over financial reporting.

g) With respect to the other matters to be included in the Auditors Report in accordance with
Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of
our information and according to the explanations given to us:

i. The Company has, in accordance with the generally accepted accounting practice, disclosed
the impact of pending litigations on its financial position in its financial statements Also
Refer Note 3.2.7 to the financial statements.

ii. The Company did not have any long-term contracts including derivative contracts for
which there were any material foreseeable losses under the applicable law or accounting
standards.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor
Education and Protection Fund by the Company.

As required by the Companies (Auditors Report) Order, 2016 (the Order) issued
by the Central Government in terms of Section 143(11) of the Act, we give in
Annexure B a statement on the matters specified in paragraphs 3 and 4 of the
Order.
BASIS FOR PREPARATION OF FINANCIAL STATEMENTS

Accounting convention

1.1 The Financial statements of the Company have been prepared in accordance with the
Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the
Accounting Standards prescribed under Section 133 of the Companies Act, 2013, and the
relevant provisions of the Companies Act, 2013 (the 2013 Act), as applicable. The financial
statements have been prepared on accrual basis under the historical cost convention except
for certain categories of fixed assets that are vehiclesried at re-valued amounts.

1.2 All assets and liabilities have been classified as current or non-current as per the
Companys normal operating cycle and other criteria set out in the Schedule III to the 2013
Act. Based on the nature of products and the time between the acquisition of assets for
processing and their realisation in cash and cash equivalents, the Company has determined its
operating cycle as twelve months for the purpose of current - noncurrent classification of
assets and liabilities.

1.3 Use of estimates

The preparation of the financial statements, in conformity with the generally accepted
accounting principles, requires management to make estimates and assumptions that are
considered in the reported amounts of assets including decline in vehiclesrying value of
investments and liabilities on the date of the financial statements, disclosure of contingent
liabilities and reported amounts of revenues and expenses for the year. Estimates are based on
historical experience, where applicable and other assumptions that management believes are
reasonable under the circumstances. Actual results could vary from these estimates and any
such differences are dealt with in the period in which the results are known / materialize.

2. Tangible and Intangible Fixed assets and depreciation / amortisation

2.1 Cost of all civil works (including electrification and fittings) is capitalised with the
exception of alterations and modifications of a capital nature to existing structures where the
cost of such alteration or modification is ` 100,000 and below. Other fixed assets, including
intangible assets and assets given on lease, where the cost exceeds ` 10,000 and the estimated
useful life is two years or more, is capitalised. Cost of initial spares and tools is capitalised
along with the respective assets. Cost of fixed assets is net of eligible credits under
CENVAT / VAT Scheme. Expenditure directly related and incidental to construction /
development and borrowing costs in para 3 below are capitalised upto the date the assets are
ready for their intended use. Exchange differences are capitalised to the extent dealt with in
para 6.2 below. Certain categories of fixed assets were revalued and are vehiclesried at the
revalued amounts less accumulated depreciation and impairment loss, if any. Increase in the
net book value on such revaluation is credited to Revaluation Reserve Account. Upon the
sale, disposal, extinguishment of the revalued assets the amount of revaluation reserve against
such assets is transferred to General Reserve.

2.2 Tangible fixed assets and Intangible assets, that are not yet ready for their intended use,
are vehiclesried at costs, comprising direct cost, and other incidental / attributable expenses
and reflected under Capital work in progress / Intangible assets under development,
respectively.

2.3 Assets are depreciated/ amortised on straight line basis over their estimated useful
life as below:

a) Leasehold land over the period of lease;

b) Leasehold land and buildings as revalued, is calculated on the respective revalued

amounts, over the balance useful life as determined by the valuers in the case of buildings
and as per (a) above in the case of land;

c) Assets subject to impairment, on the assets revised vehiclesrying amount, over its
remaining useful life.

d) All other tangible and intangible assets (including assets given on lease and assets in
leased/ customer premises) are depreciated/ amortised over their estimated useful lives.
Estimated useful life of assets are determined based on internal technical parameters/
assessment and supported by external technical advice obtained periodically.

The aforesaid estimated useful life for computing depreciation/ amortisation are different in
certain cases from the life specified in the Schedule II to the 2013 Act and such differences
are disclosed in Note 3.2.9 to the financial statements.
2.4 Depreciation/ amortisation is provided on a pro-rata basis from the month the assets are
put to use during the financial year. In respect of assets sold or disposed off during the year,
depreciation/ amortisation is provided upto the month of sale or disposal of the assets.

2.5 The vehiclesrying values of assets/ cash generating units at each balance sheet date are
reviewed for impairment. If any indication of impairment exists, the recoverable amount of
such assets is estimated and impairment is recognised, if the vehiclesrying amount exceeds
the recoverable amount.

3. Borrowing costs

Borrowing costs attributable to the acquisition, construction or production of qualifying

assets, are added to the cost of those assets, upto the date when the assets are ready for their
intended use. Expenditure incurred on issue of debentures is adjusted against Securities
Premium Account. Expenditure incurred on raising loans is amortised over the period of such
borrowings. Premium paid on prepayment of borrowing is amortised over the unexpired
period thereof or six months, whichever is less. All other borrowing costs are recognised in
the Statement of Profit and Loss in the period in which they are incurred.

4. Investments

Long term investments are vehiclesried individually at cost. However, provision for
diminution is made to recognise a decline, if any, other than temporary, in the vehiclesrying
value of the investment. Current investments are vehiclesried individually at lower of cost
and fair value.

5. Inventories

5.1 Inventories are valued at lower of cost and net realisable value; cost being ascertained on
the following basis:

Stores, raw materials and components and work-in-progress: On monthly moving

weighted average basis - spares, consumable tools : weighted average basis In respect
of works-made components, cost includes applicable production overheads.
Finished/ trading goods: under absorption costing method.

5.2 Cost includes taxes and duties and is net of eligible credits under CENVAT/ VAT
Schemes.

5.3 Cost of patterns and dies is amortised over a period of five years.
5.4 Surplus/ obsolete/ slow moving inventories are adequately provided for.

6. Foreign currency transactions and derivatives

The Companys foreign operations (including foreign branches) are an integral part of the
Companys activities. The foreign currency transactions/ foreign currency monetary and non-
monetary items in such operations and others are recorded/ translated as mentioned below :

6.1 Foreign currency transactions are recorded at the rates prevailing on the date of the
transaction. Monetary assets and liabilities in foreign currency are translated at closing rate.
Exchange differences arising on settlement or translation of monetary items other than those
mentioned in para 6.2 below are recognised as income or expense in the Statement of Profit
and Loss in the period it arises.

6.2 Exchange differences on translation or settlement of long term foreign currency monetary
items (i.e. whose term of settlement exceeds twelve months from date of its origination) at
rates different from those at which they were initially recorded or reported in the previous
financial statements, insofar as it relates to acquisition of depreciable assets are adjusted to
the cost of the assets and depreciated over remaining useful life of such assets. In other cases,
these are accumulated in Foreign currency monetary item translation difference account
and amortised by recognition as income or expense in each period over the balance term of
such items till settlement occurs but not beyond March 31, 2020.

6.3 The Company uses foreign currency forward contracts to hedge its risks associated with
foreign currency fluctuations relating to firm commitments and highly probable forecast
transactions. The company designates such forward contracts in a cash flow hedging
relationship by applying the hedge accounting principles set out in Accounting Standard- 30
Financial Instruments

- Recognition and Measurement issued by ICAI. Gains and losses on these forward contracts
designated as effective Cash flow hedges are recognised in the Hedge Reserve Account
till the underlying forecasted transaction occurs. Any ineffective portion however, is
recognised immediately in the Statement of profit and loss.

6.4 Gains and losses on all other derivatives (including forward contracts not designated as
Cash flow hedge) are recognised in the Statement of Profit and Loss in the period it arises.
Premium or discount on forward contracts is amortized over the life of the contract.
6.5 Non-monetary items of the Companys integral foreign operations are vehiclesried at
historical cost.

6.6 Investments in equity capital of companies registered outside India are vehiclesried in the
Balance Sheet at the rates prevailing on the date of the transaction.

7. Segment Reporting

The Companys primary segment is identified as business segment based on nature of

product, risks, returns and the internal business reporting system and secondary segment is
identified based on geographical location of the customers as per Accounting

Standard 17. The Company is principally engaged in a single business segment viz.
Commercial vehicles and related components.

8. Revenue recognition

a) Sale of goods

Revenue from sale of products net of returns, is recognised on despatch or appropriation of

goods in accordance with the terms of sale and is inclusive of excise duty. Price escalation
claims are recognised to the extent there is reasonable certainty of its realisation.

b) Sale of Services

Revenue from services is recognised in accordance with the specific terms of contract on
performance.

c) Other operating revenues

Other operating revenues comprise of income from ancillary activities incidental to the
operations of the Company and is recognised when the right to receive the income is
established as per the terms of the contract.

d) Other Income

Interest income is accounted on accrual basis. Dividend income is accounted as and when the
right to receive the dividend is established.

9. Leases
Where the company is a lessor

a) Leases in which the company transfers substantially all the risks and rewards of ownership
of the asset are classified as finance leases. Assets given under finance lease are recognised as
a receivable at an amount equal to the net investment in the lease.

After the initial recognition, the company apportions lease rentals between principal
repayment and interest income so as to achieve a constant periodic rate of return on the net
investment outstanding in respect of the finance lease. The interest income is recognised in
the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc.,
are recognised immediately in the Statement of Profit and Loss.

b) Leases in which the company does not transfer substantially all the risks and rewards of
ownership of the asset are classified as operating leases. Assets subject to operating leases are
included in fixed assets. Lease income on an operating lease is recognised in the Statement of
Profit and Loss on a straight line basis over the lease terms. Costs, including depreciation, are
recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal
costs, brokerage costs etc. are charged to the Statement of Profit and Loss in the period of
incurrence.

10. Government grants

Grants in the form of capital/investment subsidy are treated as Capital reserve. Export
incentives and incentives in the nature of subsidies given by the Government are reckoned in
revenue in the year of eligibility.

11. Research and Development Costs

Expenditure on the design and production of prototypes is charged to the Statement of Profit
and Loss as and when incurred. Product development costs, including knowhow developed/
acquired, incurred on new vehicle/ engine platforms, variants on existing platforms and
aggregates are recognised as Intangible assets only when products technical feasibility is
established and amortised over their estimated useful life.

12. Employee benefits

12.1 Employee benefit expenses include salary, wages, performance incentives, compensated
absences, medical benefits, and other perquisites. It also includes post-employment benefits
such as provident fund, superannuation fund, gratuity, pensionary benefits etc.
12.2 Short term employee benefit obligations are estimated and provided for.

12.3 Post-employment benefits and other long term employee benefits

- Defined contribution plans:

Companys contribution to provident fund, superannuation fund, employee state insurance

and other funds are determined under the relevant schemes and/ or statute and charged to the
Statement of Profit and Loss in the period of incurrence when the services are rendered by the
employees. In respect of provident fund, contributions made to a trust administered by the
Company, the interest rate payable to the members of the trust shall not be lower than the
statutory rate of interest declared by the Central Government under the Employees Provident
Fund and Miscellaneous Provisions Act 1952 and shortfall, if any, shall be contributed by the

Company and charged to the Statement of Profit and Loss.

- Defined benefit plans and compensated absences:

Companys liability towards gratuity (funded), other retirement benefits and compensated
absences are actuarially determined at each balance sheet date using the projected unit credit
method. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the
period of occurrence.

12.4 Termination benefits

Expenditure on termination benefits (including expenditure on Voluntary Retirement Scheme)

is recognised in the Statement of

Profit and Loss in the period of incurrence.

13. Provisions and Contingencies

A provision is recognised when the Company has a present obligation as a result of past
events and it is probable that an outflow of resources will be required to settle the obligation
in respect of which a reliable estimate can be made. Provisions are reviewed at each balance
sheet date and adjusted to reflect the current best estimates. Contingent liabilities are
disclosed in the notes. Contingent assets are neither recognised nor disclosed in the financial
statements.

Provision for product warranties is made for contractual obligations in accordance with the
policy in force and is estimated for the unexpired period.
14. Income taxes

14.1 Income tax expenses comprise current and deferred taxes. Current tax is determined on
income for the year chargeable to tax in accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961 and other applicable tax laws and after considering
credit for Minimum Alternate Tax (MAT) available under the said Act. MAT paid in
accordance with the tax laws which gives future economic benefits in the form of adjustments
to future tax liability, is considered as an asset if there is convincing evidence that the future
economic benefit associated with it will flow to the Company resulting in payment of normal
income tax.

14.2 Deferred tax is recognised on timing differences, being the difference between taxable
income and accounting income that originate in one period and are capable of reversing in
one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax assets are recognised
for timing differences other than unabsorbed depreciation and vehiclesry forward losses only
to the extent that there is a reasonable certainty that there will be sufficient future taxable
income to realise the assets. Deferred tax asset pertaining to unabsorbed depreciation and
vehiclesry forward of losses are recognised only to the extent there is a virtual certainty of its
realisation.

15. Cash Flow statement

Cash flow statement is reported using the indirect method, whereby profit/ (loss) before
extra-ordinary items/ exceptional items and tax is adjusted for the effects of transactions of
non-cash nature and any deferrals or accruals of past or future cash receipt or payments. The
cash flows from operating, investing and financing activities of the Company are segregated
based on available information including taxes paid relating to these activities.
COMPARISON OF FINANCIAL STATEMENT:

The total revenue (net of excise) was Rs. 107,068.34 million as against Rs.
100,389.01 million in the previous year showing an increase of 6.23 per cent. Sale of vehicles
in the domestic market was 1,305,351 units as compared to 1,170,702 units in the previous
year showing an increase of 12 per cent. Total number of vehicles exported was 123,897 units
as compared to 121,713 units in the previous year showing an increase of 2 per cent.
Profit before tax (PBT) was Rs. 65,350 million against Rs. 48,682 million showing an
increase of 34 per cent and profit after tax (PAT) stood at Rs. 45,714 million against Rs.
37,112 million in the previous year showing an increase of 23 per cent. Price earnings ratio
(based on last quoted price on NSE) as on 31st March 2016 and 31st March 2015 was 24.56
and 30.10 respectively.

DIVIDEND
The board recommends a dividend of Rs. 35 per equity share of Rs. 5 each for the
year ended 31st March 2016 amounting to Rs. 10,573 million

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 on Consolidated Financial
Statements read with Accounting Standard 23 on Accounting for Investments in Associates
and Accounting Standard - 27 on Financial Reporting of Interest in Joint Ventures, the
audited consolidated financial statements are provided in the annual report.
A report on the performance and financial position of each of the subsidiaries, associates and
joint venture companies as required by the Companies Act, 2013 is provided as an annexure
to the consolidated financial statements and hence are not repeated here for the purpose of
brevity. No company has become or ceased to become a subsidiary, joint venture or associate
company during 2015-16.

.
MANAGERIAL REMUNERATION

a) No Waiver: The Company shall not waive the recovery of any sum refundable to it
under sub-section (9) unless permitted by the central government.
b) Disclosure: Every listed company shall disclose in the Boards Report, the ratio of the
remuneration of each director to the median employees remuneration and such other
details as may be prescribed.
c) Fees: The percentages a foresaid shall be exclusive of any fees payable to directors
under sub-section (5)
d) Fine: If any person contravenes the provisions of this section, he shall be punishable
with fine which shall not be less than one lakh rupees but which may be extend to five
lakh rupees.

CONTRIBUTION TO CHARITY

a) M/A: The auditor should examine whether memorandum of association of the

company empowers it to make contributions to charitable or others funds not directly
relating to the business of the company or the welfare of its employees. If the objects
clause in the memorandum does not contain such authority, the company has no
power to make such contributions.
b) Statements: The auditor should ask the managements to prepare a schedule of
contribution to various funds covered by section 181 made during the year, giving the
names of the institutions to which contributions have been made, the amounts paid
and the dates on which the contributions were improved by board of Directors. He
should also ask the management to prepare a computation showing the limits of
permissible contributions which can be made under this section.
CONTRIBUTION TO DEFENSE FUNDS
a) M/A: It may be noted that contribution to National Defence Fund (or other similar
funds) can be made by a company even where the Memorandum of Association of the
company does not specifically empower it in this regard.
b) Disclosure: The auditor should examine whether the total amount or amounts
contributed by the company to the National Defence Fund during the year have been
suitably disclosed in the profit and loss account.
REMUNERATION PAID TO DIRECTORS
Remuneration of the directors should be vouched in the following manner:
a) Terms: Refer to general meeting or board meeting resolution for the appointment and
terms of appointment of the director.
b) Mode: Examine articles of association and general meeting resolution to determine
the mode of payment monthly quarterly or by way of commission.
c) Agreement: Check agreement with the director.
d) Attendance: Verify directors attendance in the board meetings.
e) Compliance: Ensure compliance with the provisions of sections 197 and 198 and
Schedule V of the Companies Act, where appropriate.
f) Receipts: Verify receipts issued by the director.

DIRECTORS COMMISSION
Directors commission should be vouched in the following manner:
a) A/A: See the articles of association of the company and note the rules regarding the
payment of commission.
b) Agreement: Examine terms and conditions of the agreement to find out rate of
commission payable.
c) Compliance: Check compliance with Sections 197 and 198 of the Companies Act,
2013 subject to limits laid down in Schedule V to the Act. Also see calculation of
profits as per Act.
d) Calculation: Vouch calculation of commission paid and verify with receipts etc.
e) VEHICLESO 2016: The auditor has to report whether managerial remuneration
including directors commission has been paid or provided in accordance with the
requisite approvals mandated by S. 197 read with Schedule V to the Companies Act,
2013. If not he has to state the amount involved and steps by the company securing
refund for same.
DIRECTORS SITTING FEES
Audit should vouch the payment of Directors fees in the following manner:
a) Supporting Documents: The payment for directors fees should be supported by
regulating in the articles of association allowing payment of fees to directors for
attending board meetings, copy of resolution passed by the board of directors to fix
the amount of fees per meeting minute book and directors attendance register to verify
the date of meeting and the attendance of directors and receipt by the directors to
acknowledge amount received.
b) Pertains to directors of Company: The payment should pertain to the directors of
the company and to none else.
c) Date of Meeting: The board meeting should have been held during the accounting
year and not pertain to the earlier or next year.
d) Details of fees: The contents of the articles of association, minute books, directors
attendance register etc., should be checked to verify the rates of fees, date of meeting,
attendance of director etc.
e) Amount: The auditor should vehiclesefully check that the amount paid as per the
voucher is in accordance with the rate fixed by the articles or board and the provisions
of the Companies Act.
f) Signature of Director: The attendance register, voucher etc. should be properly
signed by the concerned director.
g) Accounting principles: The payment should be accounted according to the basic
principles of accounting, e.g., classification of payment into pre-paid expenses and
current expenses etc.

PERSONAL EXPENSES OF DIRECTORS MET BY COMPANY

Personal expenses of the directors met by the company should be vouched in the following
manner:
a) Authorization: Check the articles of association, service contract, minutes of general
meeting etc., to check the authorization for such payment.
b) S.143: Enquire to ensure that personal expenses are not camouflaged in any other
revenue items as contemplated under Section 143 of the Companies Act, 2013.
c) Schedule III disclosure: Ascertain compliance with disclosure according to
requirements of Schedule III to the Companies Act, 2013
 d) Supporting documents: Check documentary evidences to examine the payments
reimbursed.
e) VEHICLESO, 2016: Check compliance with requirements of VEHICLESO, 2016.

COMPENSATION FOR LOSS OF OFFICE

Section 202 of the Companies Act, 2013 contains the following provisions for compensation
for loss of office of managing or whole time director or manager.
a) MD/ Manager: A company may make payment to a managing or director or
manager, but not to any other director, by way of compensation for loss of office, or
as consideration for retirement from office or in connection with such loss or
retirement.
b) Exceptions: No payment of such compensation shall be made in the following cases:
where the director resigns from his office otherwise than on the reconstruction
of the company or its amalgamation as aforesaid
where the office of the director is vacated under sub-section (1) of section 167
c) Basis: The compensation payable shall be on the basis of average remuneration
actually earned by such persons for three years immediately preceding the ceasing of
holding of such office, and shall be for the unexpired portion of his term or for three
years.
d) No Payment: No such payment however can be made at all if winding up of the
company is commenced before or commences within 12 months after he ceases to
hold office if the assets on winding up are not sufficient to repay the shareholders the
capital contributed by them.
e) Remuneration: Nothing in this section shall be deemed to prohibit the payment to a
managing or whole-time director, or manager, of any remuneration for services
rendered by him to the company in any other capacity.

DECLARATION AND PAYMENT OF DIVIDEND

The following is the summary of the Guidance Note on Audit of Payment of Dividend issued
by the Auditing and Assurance Standards Board of the Council of the Institute of Chartered
Accountants of India.
a) Profits or Govt. Money: No dividend shall be declared or paid by a company for
any financial year except out of the profits of the company for that year arrived at
after providing for depreciation in accordance with the provisions of sub-section, or
 out of the profits of the company for any previous financial year or years arrived
after providing for depreciation in accordance with the provisions of that sub-
sections and remaining undistributed, or out of both; or out of money provided by
central government or a state government for the payment of dividend by the
company in pursuance of a guarantee given by that government.
b) Transfer to Reserves: A company may, before the declaration of any dividend in
any financial year, transfer such percentage of its profits for that financial year as it
may consider appropriate to the reserves of the company.
c) Out of Free Reserves: Further that where, owing to inadequacy or absence of profits
in any financial year, any company proposes to declare dividend out of the
accumulated profits earned by it in previous years and transferred by the company to
the reserves such declaration of dividend shall not be made except in accordance with
such rules as may be prescribed in this behalf.
d) Depreciation: For the purpose of clause (a) of sub-section (1), depreciation shall be
provided in accordance with the provisions of Schedule II.
e) Separate Bank A/c: The amount of the dividend, including interim dividend, shall
be deposited in a scheduled bank in a separate account within five days from the date
of declaration such dividend
f) Failure: A company which fails to comply with the provisions of sections 73 and 74
shall not, so long as such failure continues, declares any dividend on its dividend.

AUDIT OF LIABILITIES
According to the Guidance Note on audit of liabilities the auditor should employ the
following additional procedures in the case of audit of a company.
a) Borrowing Powers: In determining whether the loans obtained by the Company are
within its powers, the auditor should scrutinize its memorandum and articles of
association and also examine whether the provisions of Sections 179 and 180 of the
Companies Act, 2013 are complied with.
b) Charges: The Auditor should examine the register of charges to ensure that charges
created have been duly registered. He should also ensure that the description of such
charges disclosed in the balance sheet agrees in substance with that stated in the
document creating the charges.
c) Group Loans: The auditor should examine all loans taken from bodies corporate
under the same management or from a company, firm or other party in which any
director is interested and determine whether, in his opinion, the rate of interests and
 other terms and conditions of the loans are prima facie prejudicial to the interest of the
Company made in this regard to the Statement on the Companies.
d) Deposits: Where the Company has accepted deposits the auditor should examine
compliance with the relevant legal provisions, e.g., section 73 of the Companies Act,
2013 and the rules framed thereunder/directions issued by the Reserve Bank of India.
e) Unclaimed Dividends: In respect of unclaimed dividends, the auditor should
examine whether the Company has complied with the provisions of Section 205A of
the Companies Act, 1956 and the rules framed thereunder regarding transfer of certain
unpaid or unclaimed dividends to a special bank account/general revenue account of
the central government investors education and protection funds etc.

DEPRECIATION
a) Dividend: Section 123 prohibits a company from declaring dividend out of its profits
before providing for depreciation in the manner laid down in the section. Section 123
provides that the dividend shall be declared or paid by a company for any financial
year out of the profits of the company for that year arrived at after providing for
depreciation in accordance with the provisions of Schedule II Useful lives to compute
Depreciation , to the Companies Act, 2013.
b) Useful Life: Schedule II of the Act, provides that useful life of an asset shall not
ordinarily be different from the useful life specified in Part C to be said Schedule
and the residual value of an asset shall not be more than 5% of the original cost of the
asset. If a company does not use the useful life or residual value of the asset as
provided in the Schedule II, then justification for the difference shall be disclosed in
its financial statement.
c) Pro-rata: Where during any financial year, any addition has been made to any asset,
or where any asset has been sold, disvehiclesded, demolished or destroyed, the
depreciation on such asset shall be calculated on a pro-rata basis from the date of such
addition, or as the case may be, up to the date on which such asset has been sold,
disvehiclesded, demolished or destroyed.
d) Shifts: If an asset is used for any time during the year for double shift, the
depreciation will increase by 50% for that period and in case of the triple shift the
depreciation shall be calculated on the basis of 100% for that period.
e) Regulatory Authority: The useful life or residual value of any specific asset as
notified for accounting purpose by a regulatory Authority constituted under an act or
Parliament or by the Central Government shall be applied in calculating the
 depreciation to be provided for such asset irrespective of the requirement of Schedule
II.

SUGGESTIONS
These suggestions are the result of the researchers analyses, interpretation and findings.
They are made for Ashok Leyland to view seriously and implement as many as possible so
that their customers attain the maximum satisfaction in the quality of service rendered.
SUGGESTIONS TO IMPROVE THE SERVICE QUALITY AT ASHOK LEYLAND
WORKSHOPS

When a customer brings his/her Vehicles to a Ashok Leyland service station for service,
routine maintenance or the fixation of a problem, this itself is a burden. He/she faces real
annoyance, when he/she bring his/her vehicles more than once for the same reason such as
fixing a problem, which is half done at the service station or done improperly. A normal visit
of a vehicles owner to a service station means a series of hitches: travel to the station, the
wait at the reception, the loss of ones transportation hurry, the time spent, the transportation
required to pick the vehicle and the wait at the service reception to take the vehicle. The
following suggestions are recommended to a Ashok Leyland service station to improve its
customer satisfaction at its workshop level.

LATEST PRACTICES TO BE IMPLEMENTED

The company can enhance its after-sale services by adopting the latest practices. A few of the
practices are listed below:

Opening a twenty four hours toll-free numbers to register customer complaints Attending the
customers complaints in the least possible time by having service points at all dealerships
Free service camps once or twice in a year and

Adopting techniques like Six-Sigma to reduce the repetitions of errors.

MAJOR AREAS TO BE CONCENTRATED

Ashok Leyland has to concentrate more on the five basic areas of operation, namely Training
of Employees, Tooling and Equipment, Job Systems, Procedures and Manpower Loading,
and Parts Operations.

(A) STAFF TRAINING

Staff members of Ashok Leyland have to be trained. Following is the recommended scheme
of training to various staff categories.

(B) SALES STAFF

Sales staffs have to be properly trained in various operational features of all models of
vehicles. Tests may be conducted at regular intervals. Toppers may be given suitable
appreciation and incentives.

(C) SERVICE STAFF

Service staff needs good communication skills. Proper training in communication and rapport
building with customers shall be given to them. The most customer friendly service staff may
be suitably rewarded. Service staff shall be asked to have familiarity with customer comeback
and tracking/prevention.

(D) SERVICE ADVISOR

Service advisors shall be properly trained in preparing an accurate and complete job repair
order documentation. They must be advised to review all service bulletins.

(E) SERVICE TECHNICIANS

Service technicians must be insisted to have certification in their respective specialty areas.
Proper procedures for diagnosing, servicing, and repairing vehicles shall be implemented.
Service technicians should review all service bulletins. They must have knowledge in the use
of TIS.

(F) TOOLS AND EQUIPMENT

All service stations should have the following provisions:

Specialized diagnostic, testing, and calibration equipment

Tools, supplies, work materials and workshop equipment

Well-maintained library of service manuals

Logically catalogued set of service bulletins, and

Ready access to TIS.

(G)JOB SYSTEMS, PROCEDURES AND MANPOWER LOADING

 The following measures taken will improve the satisfaction level of customers coming for
service.

Utilization of an effective Quality Assurance Procedure

Not returning the vehicle to a customer until the fix has been verified

An appointment system for efficient handling of comebacks

A dispatch system that utilizes proper technicians

Adequate availability of service advisors on hand, and

Enough service technicians to handle scheduled workload. 196

(H)PARTS AVAILABILITY

The following points regarding spare parts will improve the customer satisfaction level.

A policy that allows parts stocking and expediting that minimizes parts-related repair
delays.

Stock parts comeback-tracking indicates a need. A cohesive and co-operative working

relationship between the Parts and Service Departments.

(I) COMEBACK CONTROL MEETINGS

A comeback is any instance in which a customer must bring his or her vehicle back to the
dealership to have work done that should have been done correctly the first time. Comebacks
erode consumer confidence, undermine customer loyalty and repurchase intention, and eat
away service department profits. Work done right at the first time is the major expectation of
a customer coming for a vehicle service. It can be achieved by adopting the following points:

Review each comeback

Determine and implement process improvements

Address service advisors, technicians, equipment and facility needs

Develop new customer satisfaction initiatives, and

Review Service Satisfaction Survey (SSS) programmes.

HOSPITALITY

Vehicles owners feel that the hospitality shown by dealers is better during their visits to the
places of dealers before and immediately after the purchase. But after some time they face a
problem with their dealers regarding after sales service. Therefore, it is suggested that the
services rendered or to be rendered should be properly explained; friendly approach and
reliability in service are to be further improved.
 CONCLUSION:

It could be concluded that Ashok Leyland has to close the gap between customers
expectation and perceptions of services. It should not exaggerate its quality of services in
order to prevent higher customer expectations of service. Otherwise, customers expectations
do not match their perceptions and service quality is considered low. Finally, in order to
enhance service quality, customer attraction should be retained, and competitive advantage
should be gained, people-based companies have to increase employees attitude, training and
improve their knowledge of services. Ashok Leyland should also introduce new vehicles with
the latest technology. It has to introduce more number of diesel and liquid petroleum gas
(LPG) versions. The study considered only the customers point of view from service quality
of car service agencies. Hence, future studies are recommended to conduct surveys of
managers and employees because their understanding of customers expectations as well as
their communication with customers is important to the final perceived service quality of car
agencies. The automobile industry is considered an engine for economic growth of the
country. Ashok Leyland has proven that it is always ahead than its competitors because of
continuous innovations and technological up gradations. The company has set a benchmark
of excellence because of Research & Development activity as Ashok Leyland believes that
this activity will enable the company to offer superior and environment friendly products to
customer with complete satisfaction. Ashok Leyland environmental performance is really
uncountable. Considering the growing vehicle pollution, the company introduced advanced
K-Series engine in its vehicles which resulted in reduction of CO, THC and NOx emissions
by almost 50 percent. As far as economic performance is concerned, Ashok Leyland last few
years statistics of Domestic sales, Export, narrates that still Ashok Leyland is one of leader of
Indian Automobile sector.
BIBLIOGRAPHY:

http://www.moneycontrol.com/annual-report/marutisuzukiindia/accounting-
policy/
http://www.moneycontrol.com/annual-report/ashokleyland/AL/2016
http://www.moneycontrol.com/company-notices/ashokleyland/notices/AL#AL
http://www.moneycontrol.com/financials/ashokleyland/balance-sheetVI/AL#AL
https://en.wikipedia.org/wiki/ashok _Leyland.