Cash Flow Statement Accounting Policy disclosed by Eicher Motors Limited

Ind AS 1 was amended with effect from 1 April 2023 to replace the requirement to disclose significant accounting policy with disclosure of material accounting policy information. The amendment also provided the principles for assessing whether an accounting policy is material accounting policy. This post compares the accounting policy on cash flow statement disclosed by Eicher Motors Limited in the financial statements before and after the amendement.

Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit / (loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
(Eicher Motors Limited Financial Year Ended 31 March 2023)

Analysis for Material Accounting Policy Information:
Primary condition – Accounting policy relates to material transaction, other event or condition:
Paragraph 10 of Ind AS 1, Presentation of Cash Flows, requires the company to present Statement of Cash Flows as one of the components of financial statements. Accordingly, the primary condition is met.

Secondary conditions – Any one of these need to be met:
The company changed its accounting policy during the reporting period and this change resulted in a material change to the information in the financial statements – No. The company has not changed its policy of presenting statement of cash flows.
The company chose the accounting policy from one or more options permitted by Ind AS – Yes. Ind AS 7 permits presentation of cash flows from operating activities under indirect method and direct method. The company has presented under indirect method.
Accounting policy was developed in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors – No. Ind AS 7 specifically applies to presentation of Statement of Cash Flows. Therefore, in accordance with paragraph 7 of Ind AS 8, the company shall apply the requirements of Ind AS 7.
The accounting policy relates to an area for which an entity is required to make significant judgements or assumptions in applying an accounting policy, and the company discloses those judgements or assumptions in accordance with paragraph 122 and 125 of Ind AS 1. – No. The company has not disclosed presentation of statement of cash flows as an item in the note on critical accounting judgements and key sources of estimation uncertainty.
The accounting is complex such that the company applies more than one Ind AS to a class of material transactions – No. The presentation of statement of cash flows requires application of only Ind AS 7.
The disclosure of accounting policy is required by a standard. – No. Ind AS 7 does not require disclosure of accounting policy on presentation of statement of cash flows.

Conclusion:
As both the primary condition and one of the secondary conditions is met, the company shall disclose the policy on presentation of statement of cash flows. The policy suggests that all cash flows are reported using the indirect method. The company may redraft to specify that only cash flows from operating activities are reported using the indirect method.

It may be noted that the company has not disclosed the policy on cash flow statement in its separate financial statements for the year ended 31 March 2025. However, our analysis of the primary and secondary conditions reveal that disclosure of policy on presentation of cash flow statements is material accounting policy information. The company has not disclosed any information on the method selected for presentation of cash flows from operating activities in statement of cash flows. One of the reasons for non-disclosure could be that the presentation of statement of cash flows is self revealing that the company has followed indirect method. Action speak louder than words. 

Further, the company has specified ‘Summary of Material Accounting Policies’. Ind AS 1 requires disclosure of material accounting policies and not summary of material accounting policies. The way Ind AS 1 explains material accounting policies, there cannot be a summary of material accounting policies. Material accounting policies are expected to be in summary form itself. There cannot be a summary of summarised policies.