Annual Report 2006-2007 - Gammon India

GAMMON INDIA LIMITED
(iii) Advisory Services:
Revenue on Professional services rendered is recognised only on completion of the services when the income thereon
accrues to the Company.
(iv) Operations and Maintenance Revenues:
Revenue on Operations & Maintenance (O & M) contracts is recognized proportionately over the period for which the
contract is received.
5. Turnover from Construction Activity
Turnover from Construction Activity 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.
6. 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.
7. Employee Retirement Benefits
Provision for liabilities in respect of Gratuity and Leave Encashment are made based on actuarial valuation as at Balance Sheet
date.
The Company’s contribution to recognised Employees’ Provident Fund and Superannuation Fund are charged to the Profit and Loss
Account.
In case of Gammon Al Matar Joint Venture, entitlement of employee’s retirement benefit is based upon the employee’s final salary
and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over
the period of employment.
In case of Gammon & Billimoria (L.L.C.) provision for employee terminal benefits has been made under the U.A.E. Labour Law based
on employees’ salaries and number of years of service. The terminal benefits are paid to employees’ on their termination or leaving
employment. Accordingly, the Company does not expect settlement against terminal benefit obligation in the near future.
8. Goodwill
Goodwill arising on consolidation is amortised over a period of 5 years.
9. Fixed Assets and Depreciation
Fixed Assets are valued and stated at cost of acquisition less accumulated depreciation thereon. Revalued assets are stated at the
revalued amount. Foreign exchange fluctuation relating to repayment of foreign currency loan utilized for acquisition of Fixed Assets
is adjusted in the carrying amount of Fixed Assets.
Depreciation for the accounting period is provided on:
(a) Straight Line Method, for assets purchased after 2-4-1987, at the rates and in the manner specified in Schedule XIV to the
Companies Act, 1956.
(b) Written Down Value Method, for assets acquired on or prior to 2-4-1987, at the rates as specified in Schedule XIV to the
Companies Act, 1956.
(c) Depreciation on revalued component of the assets is withdrawn from the Revaluation Reserve.
(d) The depreciation on assets used for construction has been treated as period cost.
(e) The Infrastructure Projects Assets are amortized over a period of the rights given under the various Concession Agreements to
which they relate.
(f) The assets lying in the books of Gammon & Billimoria (L.L.C.) and Gammon Al Matar JV are depreciated in equal annual
installments over the estimated useful lives of the assets. The estimated useful lives of the assets for calculating depreciation are
as follows:
Plant & Machinery 3 years
Furniture & Fixtures 3 years
Office Equipment 3 years
Motor Vehicle 3 years
10. Impairment of Assets
On annual basis Company makes an assessment of any indicator that may lead to impairment of assets. An asset is treated as
impaired when the carrying cost of asset exceeds its recoverable value. Recoverable amount is higher of an asset’s net selling price
and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an
asset and from its disposal at the end of its useful life.
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