Annual Report 2010-2011 - Gammon India

SCHEDULE 16
SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS
A. SIGNIFICANT ACCOUNTING POLICIES:
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1. Basis of preparation of Financial Statements:
The financial statements have been prepared to comply in all material respects with the notified accounting standards by the Companies
Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under
the historical cost convention, on an accrual basis of accounting. The accounting policies discussed more fully below, are consistent with those
used in the previous year.
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:
(a) On Construction Contracts:
Long-term contracts including Joint Ventures 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 expected 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 related to the transmission towers, revenue is recognized upon the delivery of goods to the client in accordance
with the terms of contract. Sales include excise duty & other receivable from the customers but exclude VAT, wherever applicable.
(c) Insurance claims are accounted for on cash basis.
(d) Interest income is recognized on time proportion method basis taking into account the amounts outstanding and the rate applicable.
(e) Dividend Income is accounted when the right to receive the same is established. The dividend declared by the subsidiary companies after
the date of balance sheet are also included if they are in respect of accounting period which closed on or before the date of Company’s
Balance Sheet.
4. Turnover:
Turnover represents work certified upto and after taking into consideration the actual cost incurred and profit evaluated by adopting the
percentage of the work completion method of accounting.
Turnover also includes the revenue from the supply of material in the transmission tower contracts in accordance with the terms of contract.
5. Joint Venture:
(a) Joint Venture Contracts under Consortium are accounted as independent contracts to the extent of work completion.
(b) In Joint Venture Contracts under Profit Sharing Arrangement, services rendered to Joint Ventures are accounted as income on accrual basis,
profit or loss is accounted as and when determined by the Joint Venture and net Investment in Joint Venture is reflected as investments or
loans & advances or current liabilities.
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 capitalized and
depreciation provided thereon, at the rates as applied to other assets of similar nature.
7. Employee Retirement Benefits:
Retirement benefits in the form of provident fund and superannuation is a defined contribution scheme and contributions are charged to the
Profit and Loss Account for the year/period when the contributions are due.
Gratuity a defined benefit obligation is provided on the basis of an actuarial valuation made at the end of each year/period on projected Unit
Credit Method.
Leave encashment is recognized on the basis of an actuarial valuation made at the end of each year on projected Unit Credit Method.
Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
8. 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. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition of its intended use.
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.
A NNUAL R EPORT I 2010/11