GAMMON INDIA LIMITED

SCHEDULE 18
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE REFORMATTED CONSOLIDATED
FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES:
1. Principles of consolidation
The Consolidated Financial Statements comprise the financial statements of GAMMON INDIA LTD.
(“the Company”) and its Subsidiary companies (the Company and its subsidiaries are hereinafter
referred to as „the Group‟), Associates and Joint Ventures in the form of jointly controlled entities. The
Consolidated Financial Statement has been prepared on the following basis:-
a) Interests in Subsidiaries
The Financial Statements of the Company and its subsidiary companies have been combined
on a line by line basis by adding 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 as per Accounting Standard - 21 “Consolidated Financial
Statements” issued by Institute of Chartered Accountants of India („AS-21‟).
The Consolidated Financial Statements have been prepared using uniform policies for like
transactions and other events in similar circumstances and are presented to the extent possible
in the same manner as the Company‟s separate financial statements
The excess of cost of investments of the Company over its share of equity in the Subsidiary is
recognised as goodwill. The excess of share of equity of Subsidiary over the cost of
investments is recognised as capital reserve.
b) Interests in Joint Ventures
The Company‟s interests in Joint Ventures in the nature of Jointly controlled entities are included
in these Consolidated Financial Statements using the proportionate consolidation method as per the
Accounting Standard – 27 “Financial Reporting of Interests in Joint Ventures” issued by the
Institute of Chartered Accountants of India („AS-27‟).The group combines its share of each of the
assets, liabilities, income and expenses of the joint venture with similar items, on a line by line
basis.
c) Investment in Associates
Investments in Associate Companies are accounted under the equity method as per the Accounting
Standard – 23 “Accounting for Investments in Associates in Consolidated Financial Statements” issued
by the Institute of Chartered Accountants of India („AS -23‟).
Under the equity method, the investment in associates is carried in the balance sheet at cost plus post
acquisition changes in the Group‟s share of net assets of the associate. The income statement reflects
the Group‟s share of the results of operations of the associates.
The excess of the Company‟s cost of investment over its share of net assets in the associate on the date
of acquisition of investment is accounted for as goodwill. The excess of the company‟s share of net
assets in the associate over the cost of its investment is accounted for as capital reserve.
Goodwill / Capital Reserve is included/adjusted in the carrying amount of the investment.
2. Use of Estimates
The preparation of financial statements requires estimates and assumptions to be made that affect 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.
3. Revenue Recognition
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