annual-report-FY2020

291 MAHINDRA & MAHINDRA LTD. INTEGRATED ANNUAL REPORT 2019-20  Report on the Audit of Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Mahindra & Mahindra Limited (hereinafter referred to as the “Holding Company”) and its subsidiaries (Holding Company and its subsidiaries together referred to as “the Group”), its associates and its joint ventures, which comprise the consolidated balance sheet as at 31 March 2020, and the consolidated statement of profit and loss (including other comprehensive income), consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the consolidated financial statements”). In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of other auditors on separate financial statements of such subsidiaries, associates and joint ventures as were audited by the other auditors, the aforesaid consolidated financial statements give the information required by the Companies Act, 2013 (“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 consolidated state of affairs of the Group, its associates, joint ventures as at 31 March 2020, of its consolidated loss and other comprehensive loss, consolidated changes in equity and consolidated cash flows for the year then ended. Basis for Opinion We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group, its associates and joint ventures in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in terms of the Code of Ethics issued by the Institute of Chartered Accountants of India and the relevant provisions of the Act, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence obtained by us along with the consideration of audit reports of the other auditors referred to in sub paragraph (a) of the “Other Matters” paragraph below, is sufficient and appropriate to provide a basis for our opinion on the consolidated financial statements.  Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Description of Key Audit Matter 1. Impairment assessment of tangible assets, goodwill and development expenditure capitalised and currently under development The key audit matter How the matter was addressed in our audit The Group has aggregate tangible assets of Rs. 26,969 crores, which includes property, plant and equipment of Rs. 24,417 crores and Rs. 2,552 crores of capital- work-in-progress as at 31 March 2020. Further, the Group has Rs. 1,512 crores of goodwill, Rs. 3,350 of other development expenditure capitalised and Rs. 4,305 crores of intangible assets under development (collectively “the intangible assets”). Changes in business environment, including the economic uncertainty created by the novel corona virus (COVID-19), could have a significant impact on the valuation of the tangible and intangible assets. The Group assesses the carrying amount of its assets to determine the indicators of impairment loss. As such, the tangible and intangible assets are tested for triggers for impairment. If triggers are identified, the recoverable amounts of the tangible and intangible assets are determined and if the amount is lower than the carrying value of the assets, impairment loss is recognised in the statement of profit and loss. Our audit procedures include: • Assessed the design, implementation and operating effectiveness of key controls in respect of the Group’s impairment assessment process, including the approval of forecasts and valuation models; • Obtained understanding of the identification of CGU process including businesses which benefit from Group synergies; • Tested the key VIU assumptions used in estimating future cash flows such as revenue volumes and prices, operating costs, inflation and growth rates by comparing these inputs with externally derived data, past performances, consistency with the Board approved investment plans and knowledge of the industry; • Involved our valuation specialists to evaluate the assumptions including the discount rates used in the VIU calculations, through reference to external market data; • Evaluated the Holding Company’s decision to restrict funding of its significant subsidiary in Korea which resulted in the auditor of that component issuing an adverse opinion on the entity’s ability to continue as a going concern; Independent Auditors’ Report to the Members of Mahindra & Mahindra Limited