gayatri projects limited - Edelweiss

ANNEXURE II-AConsolidated Notes to Accounts: (Financial year 2001-02 to 2005-06)1. Significant accounting policies:1.1. Method of accountingThe financial statements have been prepared to comply in all material respect with the mandatory Accountingstandards issued by Institute of Chartered Accountants of India and the relevant provisions of the CompaniesAct 1956. The accounts are prepared under historical cost convention and on the going concern basis, withrevenue recognized, expenses accounted on their accrual and in accordance with the applicable AccountingStandards issued by Institute of Chartered Accountants of India. The accounting policies have been consistentlyapplied by the Company. There is no change in the accounting policy for the last 5 years i.e. financial year2001-02 to 2005-06.1.2. Income recognitionIncome is recognized on fixed price construction contracts in accordance with the percentage completionmethod, as specified in Accounting Standard 7 issued by ICAI.1.3. Fixed assets and depreciationAssets are stated at cost of acquisition less accumulated depreciation. On additions and disposals, depreciationis provided for the period of use during the year under report. Expenditure which are of capital in nature arecapitalized at cost, which comprises of purchase price (net of rebates and discounts), import duties, leviesand all other expenditure directly attributable to cost of bringing the asset to its working condition for itsintended use. Depreciation on fixed assets is provided on the basis of Straight Line Method, at the rates andmanner prescribed in the Schedule XIV to the Companies Act.1.4. Inventory and work in progressRaw materials and stores & spares are valued at cost and work in progress is valued at cost up to the stageof completion. Cost includes direct material, work expenditure, labor cost and appropriate overheads. Inrespect of claims, revenue is recognized on receipt basis.1.5. Deferred revenue expenditureExpenditure incurred up to the date of commencement commercial activity of the project work like initialmobilization of resources, establishment and administration expenditure and bank guarantee commissions,are amortized over the expected project completion period.1.6. InvestmentsInvestments are classified as long term or current in accordance with Accounting Standard 13 on Accountingfor investments. All investments are being carried at cost and market value of quoted investments is mentionedin the balance sheet for information.1.7. Foreign currency transactionsForeign exchange transactions are accounted at the rates prevailing on the date of transactions.1.8. Borrowing Costs:Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized aspart of the cost of such asset. A qualifying asset is one that requires substantial period of time to get ready forits intended use. All other borrowing costs are charged to revenue account.123