GAMMON INDIA LIMITED

Our consolidated financial statements have been prepared on the following basis:
a) Interests in subsidiaries
The financial statements of our Company and our subsidiaries 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 our Company‘s separate financial statements
The excess of cost of investments of our Company over its share of equity in the
subsidiary is recognized as goodwill. The excess of share of equity of subsidiary over
the cost of investments is recognized as capital reserve.
b) Interests in Joint Ventures
Our 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‘). We combine our 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 Associates 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 our share of net assets of the associate. The income statement reflects our share
of the results of operations of the associates.
The excess of our 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 our 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.
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.
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
recognized 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. The percentage
of work completed is determined by the expenditure incurred on the job till each review date to total
expenditure of the job. Additional claims (including for escalation), which in the opinion of the
Management are recoverable on the contract, are recognized at the time of evaluating the job.
b) On supply of materials, revenue is recognized upon the delivery of goods to the client in accordance
with the terms of contract. Sales include excise duty and other receivable from the customers but
exclude VAT, wherever applicable.
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