GAMMON INDIA LIMITED

(c) Work in progress from manufacturing operation is valued at cost and Costs are determined on
FIFO method.
(d) Finished Goods are valued at cost or net realizable value, whichever is lower. Costs are determined
on FIFO method except in case of overseas operations where the Finished goods are valued on
Weighted Average Cost basis.
(e) In case of the overseas Operations, the Stores & spares and Construction materials are valued at
Weighted Average Cost basis
(f) Works in progress for service contracts are measured based on the status of completion of work.
Whenever the results of the agreement cannot be reliably evaluated, revenues are recognized only
to the extent that costs are deemed to be recoverable. The costs for purchasing goods and services
are recognized in the income statement on accrual basis and develop into decreases in economic
benefits, which occur in the form of cash outflows, or of impairment of assets or incurring
liabilities.
12. Foreign Currency Translation
(a) Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of
transactions.
(b) Current Assets and Current Liabilities are translated at the year end rate or forward
contract rate.
(c) Any Gain or Loss on account of exchange difference either on settlement or translation is
recognized in the Profit and Loss Account.
(d) Fixed Assets acquired in foreign currencies are translated at the rate prevailing on the date of Bill
of Lading or, if lower, to that in force at the year end if negative changes have resulted in
impairment of these assets.
(e) The transactions of Oman branch, overseas subsidiaries and joint ventures are accounted as nonintegral
operations. The related exchange difference on conversion is accounted under Foreign
Currency Translation Reserve Account.
(f) The transactions of branches at Kenya, Nigeria and Algeria are accounted as integral operation.
13. Taxation
Tax expenses comprise Current Tax, Deferred Tax and Fringe Benefit Tax.
Current Tax is calculated after considering benefits admissible under Income tax Act, 1961.
In case of overseas subsidiaries and joint ventures, current taxes are calculated on the basis of the
taxable income for the year, applying the tax rate in force, in those countries, as of the balance sheet
date.
Deferred Tax is recognized on timing differences being the differences between the taxable income and
accounting income that originate in one period and are capable of reversal in one or more subsequent
periods. Deferred Tax Assets, subject to the consideration of prudence are recognized and carried
forward only to the extent that there is a reasonable certainty that sufficient future taxable income will
be available against which such Deferred Tax Assets can be realized. The tax effect is calculated on the
accumulated timing difference at the year-end based on the tax rates and laws enacted or substantially
enacted on balance sheet date.
Current and Deferred taxes are recorded in the income statement, with the exception of those relating to
items directly debited against or credited to Shareholder‟s Equity, in which cases the tax effect is
directly recognized under Shareholder‟s Equity. Taxes are off set if and when the income taxes are
applied by the same Tax Authority and there is a legal right to off set and settlement of the net balance
is expected.
At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognised
unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be available against which such deferred
tax assets can be realized.
Tax on FBT means the specified rate on the value of fringe benefit in accordance with the provisions of
section 115WC of the income Tax Act, 1961. Accordingly, FBT is done as per the guidance note issued
by the Institute of Chartered Accountants of India.
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