Annual Report 2010-2011 - Gammon India

When the hedge concerns the fair value changes of assets or liabilities recorded in the financial statements (fair value hedge), both the changes
in the fair value of the hedging instruments and the changes in the hedged item are charged to the income statement. If the hedge is not
perfectly effective, or differences are noted between the aforementioned changes, the “ineffective” part represents financial expense/income
recorded among the negative/positive components of the profit for the year.
Inthe event of hedging aimed at neutralising the risk of the changes in cash flows originated by the future execution of obligations contractually
defined at the balance sheet date (cash flow hedge), the changes in the fair value of the derivative instrument registered after the initial
statement are recorded, solely in relation to the effective part, under the item “Cash flow reserve” as part of the shareholders’ equity. When the
economic effects originated by the hedged item occur, the reserve is transferred to the income statement. If the hedge is not perfectly effective,
the fair value change of the hedging instrument, referring to the ineffective portion of it is immediately recorded in the income statement. If,
over the duration of a derivative instrument, the occurrence of the expected cash flows and the hedged item is no longer considered highly
probable, the portion of the “cash flow reserve” relating to this instrument is immediately transferred to the income statement for the year. Vice
versa, in the event that a derivative instrument is transferred or can no longer be qualified as an effective hedging instrument, the portion of
the “Cash flow reserve” representative of the fair value changes of the instrument, recorded up to that moment, is maintained as a component
of shareholders’ equity and transferred to the income statement following the classification approach described above, at the same time as the
manifestation of the transaction originally hedged.
The fair value of financial instruments listed on an active market is based on the market prices as of the balance sheet date. The fair value
of instruments which are not listed on an organised market is determined by using valuation techniques based on a series of methods and
assumptions linked to market conditions as of the balance sheet date. Other techniques, such as the estimation of the discounted cash flows,
are used for the purpose of determining the fair value of the other financial instruments. The fair value of interest rate swaps is calculated using
the average rate at maturity as of the balance sheet date.
Given the short-term characteristics of trade receivables and payables, it is deemed that the book values, net of any bad debts provisions for
doubtful receivables, represent a good approximation of the fair value.
20. Grant
Public Grants, in the presence of a formal allocation resolution, and in any event, when the right to their disbursement is considered definitive
since reasonably certainty exists that the Group will observe the conditions envisaged for perception thereof and that the grants will be collected,
are recorded on an accrual basis in direct correlation with the costs incurred. The public grants provided for investments are therefore booked
against the purchase price or the production costs of the asset. Other operating grants are credited to the income statement under the item
“Other revenues and income”.
The SPV on receipt of grant as equity support from NHAI accounts the same under Shareholders funds under Reserves and Surplus, in accordance
with the terms of the concession granted to the Company. The grant related to operations not forming part of equity support will be credited
to the Profit and Loss account.
21. Deferred Payment Liability:
The deferred payment liability represents the cash payout (Negative grant) payable to the NHAI as per the terms of the Concession agreement
at the end of the Concession period. The said deferred payment liability does not carry any interest thereon.
22. Minority Interest
Minority interest comprises of amount of equity attributable to the minority shareholders at the date on which investments are made by the
Company in the Subsidiaries and further movements in their share in the equity, subsequent to the date of the investments.
B. NOTES TO ACCOUNTS
1. SUBSIDIARIES
(a) The following subsidiaries companies have been consolidated in the Financial Statements:
Name of Subsidiaries Country of
For the Year 2010-11 For the Year 2009-10
Incorporation Ownership Effective Ownership
Effective
Interest Interest
Interest
Interest
1
GIPL GROUP
Gammon Infrastructure Projects
Limited (GIPL)
India 75.44% 75.44% 75.89% 75.89%
2 Andhra Expressway Limited (AEL) India 100.00% 75.44% 100.00% 75.89%
3 Cochin Bridge Infrastructure Co.
Limited (CBICL)
India 97.66% 73.68% 97.66% 74.11%
4 Tada Infra Development Limited
(TIDCL) (previously known as
Gammon Hospitality Limited (GHL))
India 100.00% 75.44% 100.00% 75.89%
5 Gammon Logistics Limited (GLL) India 100.00% 75.44% 100.00% 75.89%
6 Gammon Renewable energy
Infrastructure Limited (GReIL)
India 100.00% 75.44% 100.00% 75.89%
7 Gammon Road Infrastructure Limited
(GRIL)
India 100.00% 75.44% 100.00% 75.89%
8 Gammon Seaport Infrastructure
Limited (GSIL)
India 100.00% 75.44% 100.00% 75.89%
9 Gammon Projects Developers Limited
(GPDL)
India 100.00% 75.44% 100.00% 75.89%
A NNUAL R EPORT I 2010/11
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