Tata Motors, a Tata group company, is the largest automobile company in India. It manufactures light and medium commercial vehicles and cars. Its plants are located in Pune, Lucknow, Dharwad, and Jamshedpur. It recently also acquired plants abroad one of them being located in Korea.

The following are excerpts from the Tata Engineering and Locomotive Company Limited’s (now TATA Motors Ltd.) fifty-seventh annual report, for the financial year 2001–02.

In order to more appropriately reflect its operational efficiency and present a more accurate financial performance in the future, the company undertook a financial restructuring exercise, which was approved by the shareholders in March 2002. As a result, an aggregate amount of ₹1,178.91 crore, standing to the credit of 

(i) the balance of unamortized expenditure as on December 31, 2001, and accretions thereto, in the period January-March 2002, 

(ii) balance of certain assets under Capital Work in Progress as on December 31, 2001, and variations thereto, during the period January-March’02, and 

(iii) diminution in the value of its investment in Concorde Motors Limited, were set-off against the Company’s Securities Premium Account as on March 31, 2002.

To shareholders of the company at the extra-ordinary General Meeting held on March 27, 2002, approved and the High Court of Judicature at Mumbai vide its order passed on May 2, 2002 confirmed the utilisation of Securities Premium. Account in accordance with the provisions of Section 78 read with Section 100 of the Companies Act, 1956, towards adjustment of the following debit balances:

• You are required to analyze and comment on the impact of the above move on the financial statements of the company.
• Are these moves as per the GAAP of India (of the earlier times)? Are these moves as per the GAAP of India (with the present times)?
• Comment on the move of the above organization in the light of the statement ‘corporate governance with impeccable financial reporting practices’.

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What The Company Owned Summarized Balance Sheet 1. Net Fixed Assets 2. Investments 3. Deferred Tax Assets (Net) 4. Net Current Assets 5. Miscellaneous Expenditure 6. Total Assets (Net) What the Company Owned 1. Loans 2. Net Worth Represented by: Share Capital *319.82 crore (Previous Year *255.90 crore) Reserves 2145.24 crore (Previous Year *2997.88 crore) 3. Total Funds Employed As on March 31, 2002 3478.34 1189.92 95.00 9.52 4772.78 2307.72 2465.06 4772.78 (₹ crore) As on March 31, 2001 3823.60 1387.18 150.00 891.88 6252.66 2998.88 3253.78 6252.66