Annual Report 2004 - Gammon India

SCHEDULE 16
NOTES TO ACCOUNTS
A. ACCOUNTING POLICIES :
1. PRINCIPLES OF CONSOLIDATION :
The Consolidated Financial Statement relates to GAMMON INDIA LTD (“The Company”) and its majority owned Subsidiary
Companies and Joint Ventures in the form of Jointly controlled entities. The Consolidated financial statements have been prepared
on the following basis:
(a) The Financial Statements of the Company and its subsidiary Companies have been combined on a line by line basis by
adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-group
balances and intra-group transactions resulting in unrealized profits or losses.
(b) The Consolidated Financial Statements have been prepared using uniform policies for like transaction and other events in
similar circumstances and are presented to the extent possible in the same manner as the Company’s separate financial
statements.
(c) The excess of cost of investment over share of equity of the subsidiary/Joint Venture is recognised as goodwill and excess of
share of equity of subsidiaries is recognised as capital reserve.
(d) The Interests in Joint Ventures which are in the nature of jointly controlled entities have been consolidated by using the
proportionate consolidation method as per the Accounting Standard – 27 on Financial reporting of Interests in Joint Venture
issued by the Institute of Chartered Accountants of India.
(e) Investment in Associates Companies are accounted under the equity method as per the Accounting Standard 23 –
Accounting for Investment in Associates in Consolidated Financial Statements issued by The Institute of Chartered
Accountants of India. The Company’s share of pre-acquisition losses/gains is reflected as goodwill/capital reserve in the
carrying value of the Investments.
2. REVENUE RECOGNITION :
A. On Construction Contracts:
Long-term contracts including Joint Ventures Projects are progressively evaluated at the end of each accounting period. On
contracts under execution which have reasonably progressed, profit is recognised by evaluation of the percentage of work
completed at the end of the accounting period, whereas, foreseeable losses are fully provided for, in the respective
accounting period.
Additional claims (including for escalation), which in the opinion of the Management are recoverable on the contract, are
recognised at the time of evaluating the job.
B. Insurance claims are accounted for on cash basis.
C. On Infrastructure Development Business :
The fee collections from the users of facility are accounted when the amount is due and recovered.
Annuity income is accounted as and when the same is accrued.
Bonus for completion of project before schedule date is accounted on accrual basis as per the terms of Concession
Agreement.
Revenue by way of Berth Hire Charges, Wharfage, Handling and other charges etc., are recognized as income upon raising
of bills on its clients immediately upon clearing / unberthing of ship/vessel.
3. TURNOVER FROM CONSTRUCTION CONTRACTS :
Turnover represents work certified as determined by taking into consideration the actual cost incurred and profit evaluated by
adopting the percentage of the work completion method of accounting. Where the material is supplied by the client, the market
value of such material is considered as part of turnover to reflect the value of work done.
4. RESEARCH AND DEVELOPMENT EXPENSES :
All expenditure of revenue nature is charged to the Profit and Loss Account of the period. All expenditure of capital nature is
capitalised and depreciation provided thereon, at the rates as applied to other assets of similar nature.
5. EMPLOYEE BENEFITS :
Provision for gratuity liability to eligible employees is actuarially valued, funded and accounted for during the accounting period, in
which the same accrues.
The Company’s contribution to the recognised Employees’ Provident Fund and Superannuation Fund are charged to Profit and
Loss Account on accrual basis.
Leave encashable on retirement has been provided on the basis of actuarial valuation.
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