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

304 MAHINDRA & MAHINDRA LTD. Integrated Annual Report 2022-23   Report on the Audit of the 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 2023, 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 the other auditors on separate/consolidated 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 and joint ventures as at 31 March 2023, of its consolidated profit 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 reports of the other auditors referred to in paragraph (a) of the “Other Matters” section 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 and based on the consideration of reports of other auditors on separate/ consolidated financial statements of components audited by them, 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. Key audit matters The key audit matter How the matter was addressed in our audit Impairment assessment of tangible assets and development expenditure capitalised and currently under development The Group’s Automotive Cash Generating Units (‘Auto CGU’) have aggregate tangible assets of Rs 11,291 crores, which includes property, plant and equipment of Rs 10,547 crores and capital-work-in-progress of Rs 744 crores as at 31 March 2023. Further, the Auto CGU has development expenditure capitalized of Rs 3,501 crores, and intangible assets under development of Rs 1,820 crores. 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 Group 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(h) to consolidated financial statements Our audit procedures included: • 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; • 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. Independent Auditor’s Report to the Members of Mahindra & Mahindra Limited