Annual Report 2006-2007 - Gammon India

SCHEDULE 18 : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES:
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Annual Report 2006-2007
1. Principles of consolidation
The consolidated financial statements relate to Gammon India Ltd. (“The Company”), its Subsidiary Companies, Associates and
Joint Ventures in the form of Jointly controlled entities “collectively referred to as the Group”. The consolidated financial statements
have been prepared on the following basis:
(a) The financial statements of the Company, its subsidiary companies and jointly controlled entities have been consolidated
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 in accordance with
Accounting Standard (AS) 21 “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India.
(b) The difference between Company’s cost of investment in the Subsidiaries / Joint Venture and its share of net assets in the
Subsidiaries / Joint Venture is recognised as Goodwill or Capital Reserve as the case may be.
(c) 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 (AS) 27 “Financial Reporting of Interests in Joint Venture”
issued by the Institute of Chartered Accountants of India.
(d) Investments in Associates are accounted under the equity method as per the Accounting Standard (AS) 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.
(e) Consolidated financial statements are 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.
2. Significant accounting policies and notes to these consolidated financial statements are intended to serve as a means of informative
disclosure and a guide to better understanding the consolidated position of the Company. Recognising this purpose, the Company
has disclosed only such policies and notes from the individual financial statements, which fairly presents the needed disclosure.
Further, in the opinion of the management, the accounting policies and notes could be better viewed when referred from the individual
financial statements.
3. Use of Estimates:
The preparation of financial statements requires estimates and assumptions to be made that effect the reported amount of assets
and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period.
Difference between the actual results and estimates are recognized in the period in which the results are known.
4. 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:
(i) Annuity and Toll Receipts:
The toll collection from the users is accounted when the amount is due and recovered.
The Company earns an annuity income from some of its Build, Own, Transfer (‘BOT’) projects which is recognised on a
time basis over the period during which the annuity is earned. Revenues from bonus and other claims are recognised upon
acceptance from customer/counterparty.
(ii) Berth Operations:
Revenue by way of Berth Hire Charges, Dust Suppression Charges, Cargo Handling Charges, Plot Rent, Wharf Age, Barge
Freight, Other Charges etc. are recognized on an accrual basis and is billed as per the terms of the contract with the
customers at the rates approved by Tariff Authority for Marine Ports (TAMP) as the related services are performed.
Other income is recognized on an accrual basis when the same is due.