Question

Property Plant and Equipment is an important component of manufacturers. Pick a manufacturing company from any source and tell us how they account for their PP&E in terms of obsolescence, depreciation and maintaining it - also if they develop their own equipment. Also, tell us what else you may have learned by reading the notes or other material.

Answer 1

The manufacturing company which has been taken to study their maintenance of account for their property plant and Equipment in terms of Obsolescence and maintaining it is " Tata motors".

Tata Motors

Tata Motors Limited is a leading global automobile manufacturer of cars, utility vehicles, buses, trucks and defence vehicles.

As India's largest automobile company and part of the USD 100 billion Tata group, Tata Motors has operations in the UK, South Korea, Thailand, South Africa, and Indonesia through a strong global network of 76 subsidiary and associate companies, including Jaguar Land Rover in the UK and Tata Daewoo in South Korea.

In India,Tata Motors is a market leader in commercial vehicles and among the top passenger vehicles manufacturers with 9 million vehicles on Indian roads.

Books and Accounts maintained by the Tata motors for Property plant and Equipment is as follows:-

• Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation less accumulated impairment, if any.
• Freehold land is measured at cost and is not depreciated.
• Cost includes purchase price, taxes and duties, labour cost and direct overheads for self-constructed assets and other direct costs incurred up to the date the asset is ready for its intended use.
• Interest cost incurred for constructed assets is capitalized up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset.
• Depreciation is provided on the Straight Line Method (SLM) over the estimated useful lives of the assets considering the nature, estimated usage, operating conditions, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support.
• Taking into account these factors, the Company has decided to apply the useful life for various categories of property, plant & equipment, which are different from those prescribed in Schedule II of the Act. Estimated useful lives of assets are as follows: The useful lives is reviewed at least at each year end.
• Changes in expected useful lives are treated as change in accounting estimate. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
• Depreciation is not recorded on capital work-in-progress until construction and installation are complete and the asset is ready for its intended use. (l) Other intangible assets Intangible assets purchased are measured at cost less accumulated amortization and accumulated impairment, if any.

Amortization is provided on a straight-line basis over estimated useful lives of the intangible assets as per details below: . The amortization period for intangible assets with finite useful lives is reviewed at least at each year-end. Changes in expected useful lives are treated as changes in accounting estimates Internally generated intangible assets Research costs are charged to the Statement of Profit and Loss in the year in which they are incurred.

• Product development costs are amortised over a period of 120 months for New Generation vehicles and powertrains on the basis of higher of the volumes between planned and actuals and on a straight line method over a period of 36 months for Vehicle Variants, Derivatives and other Regulatory Projects

An impairment loss is recognized immediately in the Statement of Profit and Loss.