Annual Report 2010-2011 - Gammon India

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Capital work in progress represents the costs incurred on project activity till completion of the project. It includes all direct material, labour and
sub-contracting costs and those indirect costs related to constructions that are identifiable with or allocable to the project including borrowing
costs.
Depreciation and Amortization
Indian Operations
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(c) Depreciation on revalued component of the assets is withdrawn from the Revaluation Reserve.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) Expenses incurred by the Company on periodic maintenance (required to be incurred by it in the 5 th , 10 th and 15 th year as per the Contract
with NHAI) are capitalised on the completion of said activity as the same enhances the useful life of the project. These costs are amortised
over the period up to which the next periodic maintenance is due. The periodic maintenance of 15 th year is written off over the balance
concession period.
Overseas Operations
Depreciation is charged on a straight line basis over the useful life of the assets or as prescribed as per the relevant local laws of such country.
Where the asset being depreciated is made up of distinctly identifiable elements, whose useful life significantly differs from that of the other
parts the depreciation is provided separately in accordance with the component approach.
The estimated useful lives of the assets for calculating depreciation are as follows:
ASSET From To
Building 20 Years 40 Years
Plant & Machinery 3 Years 20 Years
Computer 3 Years 7 Years
Furniture & Fixtures 3 Years 10 Years
Office Equipment 2 Years 15 Years
Motor Vehicles 3 Years 8 Years
Temporary Site Office 2 Years 8 Years
Intangible Assets
Intangible assets are amortised over the period of the useful life of the rights and it begins when the asset is available for use. Intangible assets
of infinite useful lives are not amortized but subject to impairment test, on an annual basis.
Intangible assets are represented by non-monetary elements, identifiable and lacking physical consistency, controllable and capable of generating
future economic benefits. These elements are recorded at purchase and/or production cost, inclusive of any directly attributable expenses for
preparing the asset for use, net of accumulated amortisation and any impairment losses.
Intangible assets also represents the concession rights in relation to toll roads to collect toll fees for improvement, operations and maintenance,
rehabilitation and strengthening of existing 2 lane road and widening to 4 lane divided carriageway from Km. 539.500 to Km. 440.000 (Vadape-
Gonde Section) of NH-3 on Build, Operate and Transfer (BOT) basis in the State of Maharashtra. Such costs include all construction costs
including sub-contract costs and other costs attributable to the said project asset including borrowing costs and the proportionate cash payout
(negative grant) at the end of concession period to NHAI.
Concession rights are amortised on the pro-rata basis of Actual Tollable Traffic volume for the period over the Total Projected Tollable Traffic
volume over the Toll Periods granted for the Project. The projections for the Total Traffic Volume are based on the Report of Independent
Professionals for this purpose. The Volume of Traffic is reviewed on periodic intervals for its consistency and appropriateness. If the Right to
Collect Toll being amortised is revised on account of the material change in the Projected Traffic Volume arising out of the periodic review, the
amortization would be revised accordingly.
9. 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.
An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss
recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
A NNUAL R EPORT I 2010/11