MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2021-22

209 MAHINDRA & MAHINDRA LTD. Integrated Annual Report 2021-22   Report on the Audit of the Standalone Financial Statements Opinion We have audited the standalone financial statements of Mahindra & Mahindra Limited (the “Company”), which comprise the standalone balance sheet as at 31 March 2022, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information. 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 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 state of affairs of the Company as at 31 March 2022, and its profit and other comprehensive income, changes in equity and its cash flows for the year ended on that date. 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 Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements. Emphasis of matter We draw attention to Note 44(B)(i) of the standalone financial statements which describes the accounting for the Scheme of Amalgamation between the Company and Mahindra Vehicle Manufacturers Limited, a wholly owned subsidiary. The Scheme has been approved by the National Company Law Tribunal (‘NCLT’) vide its order dated 26 April 2021 and a certified copy has been filed by the Company with the Registrar of Companies, Mumbai Maharashtra, on 1 July 2021. Though the appointed date as per the NCLT approved Scheme is 1 April 2019, as per the requirements of Appendix C to Ind AS 103 “Business Combinations”, the combination has been accounted for as if it had occurred from the beginning of the preceding period in the standalone financial statements. Accordingly, the amounts relating to the year ended 31 March 2022 include the impact of the business combination for the entire year and the corresponding amounts for the previous year ended 31 March 2021, have been restated by the Company after recognising the effect of the amalgamation as above. The aforesaid Note 44(B)(i) also describes in detail the impact of the business combination on the standalone financial statements. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone 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 long-term investments in subsidiaries, joint ventures and associates The key audit matter How the matter was addressed in our audit The Company has long-term investments in subsidiaries, joint ventures and associates (collectively “the investments”) aggregating Rs. 17,208 crores as at 31 March 2022. The Company records the investments at cost less any provision for impairment loss. Changes in business environment, including the economic uncertainty created by the novel corona virus (COVID-19), geopolitical situation and general inflationary trend could have a significant impact on the valuation of these investments. The investments are tested for impairment periodically. The Company assesses the carrying amounts of the investments to determine indicators of impairment loss as the recoverable values rely on certain assumptions and estimates of future performance which impact the valuation. If any such indication exists, the recoverable amount, which is the higher of the market value or Value In Use (VIU) or fair value less cost of disposal of the investment is estimated and the impairment loss, if any, is recognised in the statement of profit and loss and carrying amount of investments is reduced to its recoverable amount. Refer note 2(d)(iv) – significant accounting policy for impairment of investments. Our audit procedures included: • Assessed the design, implementation and operating effectiveness of key controls in respect of the Company’s impairment assessment process, including the approval of forecasts and valuation models; • 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 valuation specialists, as applicable, to evaluate the assumptions including the discount rates used in VIU calculations, through reference to reports of industry analysts; • Evaluated past performance where relevant, and assessed historical accuracy of the forecast produced by management; and • Assessed the adequacy of disclosures on key judgements, assumptions and quantitative data with respect to impairment losses. Independent Auditors’ Report to the Members of Mahindra & Mahindra Limited