Maruti Udyog's Accounting Policies

Abstract

Maruti Udyog Limited, India''s largest car manufacturer is a joint venture between Suzuki Motors of Japan and the Indian government. The financial statements of the company are prepared in accordance with the Indian generally accepted accounting policies. The case discusses Maruti Udyog''s accounting policies with special reference to revenue recognition, depreciation, inventory, investments, foreign currency transactions and deferred taxation.

INTRODUCTION

In 2003, Maruti Udyog Ltd. (Maruti), a joint venture between Suzuki Motors of Japan and the Indian government, dominated India's automobile market with a 54% market share. Maruti had the widest product range among Indian car manufacturers, with ten basic models and more than 50 variants. Three out of the five top selling car models in India (Maruti 800, Zen and Omni) belonged to Maruti. The company dominated the Indian small car market with a 100% share in 'A' segment and 36% in 'B' segment. Maruti produced 359,960 vehicles, operating at a capacity utilization of 103%, against the industry average of 57.8%. In 2002-03, Maruti reported a net profit of Rs 146.4 crores, a 40% increase from Rs 104.5 crores in 2001-02 compared to a net loss of Rs 269 crores in 2000-01. In 2003, Maruti was ranked 12th amongst the "Most Respected Companies" in India by Business World. In 2000, 2001, 2002, and 2003, J.D.Power Asia Pacific, had ranked Maruti No.1 in the India Customer Satisfaction Index study.

The assets of Maruti Ltd. were acquired by the government under the Maruti Ltd. (Acquisition and Transfer of Undertakings) Act, 1980. In 1982, the government signed a joint venture agreement with Suzuki, which was offered a 26% equity stake in Maruti.

In December 1983, Maruti launched its first car, Maruti 800, targeted at the masses, as the 'people's car' with a price tag of Rs.40,000 (ex-show room price). Maruti rapidly consolidated its competitive position by launching various other models. In 1984, Maruti introduced a utility vehicle, Omni that could seat up to eight people.

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        Case Code   FINA008
   Case Length    10 Pages
              Period    2003
 Organization     Maruti Udyog Limited
        Pub Date     2004
Teaching Note    Not Available
     Countries    India
      Industry    Automobile

Issues

Maruti Udyog's Accounting Policies

Unilever in India; Hindustan Lever Limited (HLL); Working capital; Banga; Fast moving consumer goods; Market value added; Economic value added; Financials; Balance sheet; Profit and loss; Dell; Finance case; Operational efficiency; Working capital needs

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.