GAMMON INDIA LIMITED

14. Borrowing Cost
Borrowing costs directly attributable to the acquisition or construction of qualifying assets are
capitalized. Other borrowing costs are recognized as expenses in the period in which they are incurred.
In determining the amount of borrowing costs eligible for capitalization during a period, any income
earned on the temporary investment of those borrowings is deducted from the borrowing costs
incurred.
15. Public Grant
Public Grants, in the presence of a formal allocation resolution, and in any event, when the right to
their disbursement is considered definitive since reasonably certainty exists that the Group will observe
the conditions envisaged for perception thereof and that the grants will be collected, are recorded on an
accrual basis in direct correlation with the costs incurred. The public grants provided for investments
are therefore booked against the purchase price or the production costs of the asset. Other operating
grants are credited to the income statement under the item “Other revenues and income”.
The SPV on receipt of grant as equity support from NHAI accounts the same under Shareholders funds
under Reserves and Surplus, in accordance with the terms of the concession granted to the company.
The grant related to operations not forming part of equity support will be credited to the Profit and Loss
account
16. Employee Stock Option Scheme
Employee stock options are evaluated and accounted on intrinsic value method as per the accounting
treatment prescribed under Guidance Note on "Accounting for Employee Share-based payments"
issued by the ICAI read with SEBI (Employee Stock Option Scheme & Employee Stock Purchase
Scheme) Guidelines, 1999 issued by Securities and Exchange Board of India. Accordingly the excess
of market value of the stock options as on the date of grant over the exercise price of the options is
recognized as deferred employee compensation and is charged to profit and loss account on graded
vesting basis over the vesting period of the options. The un-amortized portion of the deferred employee
compensation is reduced from Employee Stock Option Outstanding which is shown under Reserves
and Surplus.
17. Sales Tax /Cenvat Credit / VAT / WCT
Sales Tax/VAT/Works Contract Tax on construction contracts are accounted on payment basis. The
cost of Material (inputs) is accounted at purchase cost net of excise duty and Value Added Tax,
wherever applicable. The excise duty elements of materials (inputs) is debited to "Modvat Credit
Receivable A/c." and Value Added Tax element of materials (inputs) is debited to “VAT Credit
Receivable A/c.”, under the head "Loans & Advances" The excise duty and Value Added Tax payable
on dispatch of goods are credited to Modvat Credit Receivable A/c. and VAT Credit Receivable A/c by
debiting the same to excise duty and value added tax (sales tax), respectively in Profit & Loss A/c.
18. Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognised when an
enterprise has a present obligation as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions
are not discounted to its present value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to
reflect the current best estimates.
Contingent Liabilities are not recognized but are disclosed in the notes to accounts. Disputed demands
in respect of Central Excise, Customs, Income Tax and Sales Tax are disclosed as Contingent
Liabilities. Payment in respect of such demands, if any, is shown as advance, till the final outcome of
the matter.
Contingent Assets are neither recognized nor disclosed in the financial statements.
19. Earning Per Share
F
31