Financial Accounting Project

Interpreting an Annual Report

“Hero MotoCorp”

Submitted to- Submitted by-

Dr. Kalyani Mulchandani Neha Jain

Nidhi Chaudhary

Nidhi Shukla

Nikhil Goyal
 Interpretation of Auditor’s Report

Auditors identified the recognition of government grants as a key

audit matter because of the significance of the number of brands and
due to significant management judgement involved in assessing the
consolidated financial statement. As the company obtains various
grants from government authorities in connection with manufacturing
and sales of two wheelers.
In the view of the significance of the matter, the auditors applied the
following audit procedures:
 Whether the company followed the accounting policy for
government brands as per the relevant accounting standards.
 Evaluated and tested the operating effectiveness and the design
and implementation of company’s financial controls.
 On sample basis they inspected and identified the documents
related to the specific conditions and approval requirements by
various government authorities.
 Assessed the adequacy and appropriateness of the disclosures
made in accordance with the relevant accounting standards.

Auditors’ comments on legal and regulatory requirements

of the company
 In auditors’ opinion proper books of accounts as required by the
law related to preparation of the consolidated financial statement
have been kept by the company.
 The consolidated financial statements are in agreement with the
relevant books of accounts maintained for the purpose of
preparation of the report.
 The company has complied with the Indian Accounting standard
specified under the Section 133 of the act.
Interpretation of notes to accounts
 The company’s financial statements have been prepared on the
historical cost concept except for certain financial instruments,
net defined benefit assets that are measured at fair values at the
end of each reporting period.
 The company has followed Revenue Recognition Concept
which means revenue from sales of goods is recognized when
the control of goods is transferred to the buyer.
 The company follows Straight Line Method for charging
depreciation. Depreciation is recognized on the cost of assets
less their residual value over their useful life. They charge
depreciation on property, plant and equipment (including
furniture, fixtures, vehicles etc.) They don’t charge depreciation
on free hold land.
 Cash Flow Statement is prepared by Indirect Method, whereby
profits/loss before extraordinary items and tax is adjusted for the
effects of transactions of non-cash nature and any deferrals or
accruals of past or future cash receipts or payments.
 Inventories are stated at the lower of cost and net realizable
value. Cost of inventories are determined on a moving weighted
average. Cost of inventories include expenditure incurred in
acquiring the inventories, production and conversion cost and
other cost incurred in bringing them to their present location.
 The amount recognized as provisions is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risk and
uncertainties surrounding the obligation.

Director’s Report and management discussion

Mangament reports contain performance data and analysis. This
is so management can make decisions and advise other senior
executives.

 The goal of management reporting is to:

 Measure and monitor specific performance metrics and
KPIs.
 Understand your status, health and what you should do
next.
 Determine benchmarks.
 Economic Overview Global: On the path of robust recovery:
 In the year 2020 hero commenced with a consumption
slowdown and protectionism in every part of the world.
 Short Term Slowdown:
 For the year 2021 GDP is slowed down to about 4.5%
following by slow recovery.
 FY2022 will be the crucial year for to grow and get again
on track.
 Long Term Slowdown:
 The industry has significant potential, considering that
overall penetration levels are only 1/2 to 1/3 of the level in
other ASIAN countries.
 Growing urbanisation, increasing numbers of women in
the work force and an affordable product that supports last
mile connectivity — these factors are likely to keep the
demand for two-wheelers buoyant.
 Technology Upgrades:
 To stay in sync with the changing technology landscape
the company upgraded multiple components of the tech
ecosystem of the Company.
 Diversity and Inclusion (D&I): We adopted recruitment
initiatives, education and training, career development, and
mentoring programmes to increase and retain workforce
heterogeneity within the organisation.