MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

229 COMPANY OVERVIEW BOARD’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT STANDALONE ACCOUNTS CONSOLIDATED ACCOUNTS Impairment assessment of tangible assets and development expenditure capitalised and currently under development The key audit matter How the matter was addressed in our audit The Company’s automotive and trucks and buses Cash Generating Units (‘Auto CGU’) have aggregate tangible assets of Rs. 10,748 crores, which includes property, plant and equipment of Rs. 10,040 crores and Rs. 708 crores of capital-work-in-progress as at 31 March 2023. Further, the Auto CGU has Rs. 3,620 crores of development expenditure capitalized, and Rs. 956 crores of intangible assets under development. Changes in business environment, including market or economic environment, geopolitical situation and general inflationary trend could have a significant impact on the valuation of the tangible and intangible assets of the Auto CGU. The tangible and intangible assets of the Auto CGU are tested for impairment periodically. The Company assesses the carrying amounts of the tangible and intangible assets 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 VIU or fair value less cost to sell of the Auto CGU, is estimated and the impairment loss is recognised in the statement of profit and loss. The carrying amount of the tangible and intangible assets of Auto CGU is reduced to its recoverable amount. See Note 2(g) to the Standalone financial statements. 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; • Evaluated past performance where relevant, and assessed historical accuracy of the forecast produced by management; • Evaluated the stage of development of the intangible assets, judgments used for expected probable economic benefits and associated expenditures, and their assessment of feasibility of the projects; and • Assessed the adequacy of disclosures on key judgements, assumptions and quantitative data with respect to impairment losses. Other Information The Company’s Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company’s annual report, but does not include the financial statements and auditor’s report thereon. The Company’s annual report is expected to be made available to us after the date of this auditor’s report. Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the Company’s annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take necessary actions, as applicable under the relevant laws and regulations. Management’s and Board of Directors’ Responsibilities for the Standalone Financial Statements The Company’s Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. In preparing the standalone financial statements, the Management and Board of Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors is also responsible for overseeing the Company’s financial reporting process.