Annual Report 2010-2011 - Gammon India

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14. Borrowing Cost:
Borrowing costs directly attributable to the acquisition or construction of qualifying assets are capitalized. Other borrowing costs are recognized
as expenses in the period in which they are incurred. In determining the amount of borrowing costs eligible for capitalization during a period,
any income earned on the temporary investment of those borrowings is deducted from the borrowing costs incurred.
15. Employee Stock Option Scheme:
Employee stock options are evaluated and accounted on intrinsic value method as per the accounting treatment prescribed under Guidance
Note on “Accounting for Employee Share-based payments” issued by the ICAI read with SEBI (Employee Stock Option Scheme & Employee
Stock Purchase Scheme) Guidelines, 1999 issued by Securities and Exchange Board of India. Accordingly the excess of market value of the
stock options as on the date of grant over the exercise price of the options is recognized as deferred employee compensation and is charged
to profit and loss account on graded vesting basis over the vesting period of the options. The un-amortized portion of the deferred employee
compensation is reduced from Employee Stock Option Outstanding which is shown under Reserves and Surplus.
16. Taxation:
Tax expenses comprise Current Tax and Deferred Tax.
Current Tax is calculated after considering benefits admissible under Income tax Act, 1961. Deferred Tax is recognized on timing differences being
the differences between the taxable incomes and accounting income that originate in one period and are capable of reversal in one or more
subsequent periods. Deferred Tax Assets, subject to the consideration of prudence are recognized and carried forward only to the extent that
there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized. The
tax effect is calculated on the accumulated timing difference at the year-end based on the tax rates and laws enacted or substantially enacted
on balance sheet date.
In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is
virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
At each balance sheet date the Company re-assesses un-recognized deferred tax assets. It recognized unrecognized deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available
against which such deferred tax assets can be realized.
17. Sales Tax/Cenvat Credit/VAT/WCT:
Sales Tax/VAT/Works Contract Tax on construction contracts are accounted on payment basis. The cost of Material (inputs) is accounted
at purchase cost net of excise duty and Value Added Tax, wherever applicable. The excise duty elements of materials (inputs) is debited to
“Modvat Credit Receivable A/c.” and Value Added Tax element of materials (inputs) is debited to “VAT Credit Receivable A/c.”, under the head
“Loans & Advances” The excise duty and Value Added Tax payable on dispatch of goods are credited to Modvat Credit Receivable A/c. and VAT
Credit Receivable A/c. by debiting the same to excise duty and Value Added Tax (sales tax), respectively in Profit and Loss A/c.
18. Provision, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement are recognised when an enterprise has a present obligation as a result
of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can
be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent Liabilities are not recognized but are disclosed in the notes to accounts. Disputed demands in respect of Central Excise, Customs,
Income tax and Sales Tax are disclosed as Contingent Liabilities. Payment in respect of such demands, if any, is shown as advance, till the final
outcome of the matter. Contingent Assets are neither recognized nor disclosed in the financial statements.
19. Earning per share:
Basic and Diluted earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the
weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earning per share, the net profit or loss for the period attributable to equity shareholders and weighted
average number of equity shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
20. Prior Period Items:
Prior period items are included in the respective head of accounts and material items are disclosed by way of notes to accounts.
B. NOTES TO ACCOUNTS:
1. 8.75% – Secured Redeemable Non Convertible Debentures of ` 5 Crores are secured by hypothecation of specific Plant & Machinery with
paripassu charge by mortgage of immovable property in Gujarat. Out of ` 5 Crores, based on contractual terms, debentures valuing ` 1.5 Crores
have been redeemed on 30 th March, 2011. The debentures are due for repayment at the end of 8 th , 9 th and 10 th year from the date of allotment.
i.e. 30 th March, 2003.
7.50% – Redeemable Non Convertible Debentures of ` 15 Crores and 7.25% – Redeemable Non Convertible Debentures of ` 6 Crores are secured
by hypothecation of specific Plant & Machinery with paripassu charge by mortgage of immovable property in Gujarat with 8.75% Secured
Redeemable Non Convertible Debentures of ` 3.5 Crores. The Debenture holders holding ` 15 Crores of 7.50% Redeemable Non-Convertible
Debentures and ` 6 Crores of 7.25% Redeemable Non Convertible Debentures have exercised their put option and accordingly same have been
redeemed on 29th September, 2010.
7.50% – Redeemable Non-Convertible Debentures of ` 50 Crores are secured by hypothecation of specific Plant & Machinery with paripassu
charge by mortgage of immovable property in Gujarat with 8.75% Secured Redeemable Non-Convertible Debentures of ` 3.5 Crores. The
Debentures are due for repayment at the end of 8th , 9th and 10th year from the date of allotment i.e. 5th August, 2005.
A NNUAL R EPORT I 2010/11