a) Method of Accounting
The financial statements are based on historical cost convention on an
accrual basis (except for revaluation of certain Fixed Assets), in
accordance with Generally Accepted Accounting Principles (GAAP) and in
compliance with the accounting standards notified in the Companies
(Accounting Standards) Rules, 2006 and relevant Provisions of the
Companies Act, 1956. The Company follows mercantile system of
accounting and recognizes income and expenditure on accrual basis.
Pursuant to the amendment to the Schedule VI to the Act, effective 1
April 2011 the Company has adopted revised schedule VI for preparation
and presentation of the financial statements and have reclassified
previous year figures to conform to this year''s presentation and
classification. Except accounting for dividend on investment in
subsidiaries, the adoption of revised Schedule VI does not impact
recognition and measurement principles followed for preparation of
financial statements. However, it significantly impacts presentation
and disclosures made in the financial statements.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the revised schedule VI to the Act, based on the
nature of work and the time between the acquisition of assets for
processing and their realization in cash and cash equivalents.
b) Use of Accounting Estimates
The preparation of the financial statements in conformity with GAAP
requires the management to make estimates and assumptions that affect
the balances of assets and liabilities and disclosures relating to
contingent liabilities as at the reporting date of the financial
statements and amounts of income and expenses during the year of
account. Examples of such estimates include contract costs expected to
be incurred to complete construction contracts, provision for doubtful
debts, income taxes and future obligations under employee retirement
Although these estimates are based upon management''s best knowledge of
current events and actions, actual results could differ from these
estimates. Any revision to accounting estimates is recognized
prospectively in the current and future periods.
c) Fixed Assets
Fixed Assets are stated at cost of acquisition/revaluation less
accumulated depreciation, amortization and impairment losses, if any.
Cost is inclusive of duties and taxes (net of Convert and other
Credits), incidental expenses, erection/commissioning expenses and
interest up to the date the qualifying asset is put to use.
Capital work in Progress comprises advances paid to acquire fixed
assets and the cost of fixed assets not ready for their intended use as
at the reporting date of the financial statements.
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment of assets. If any indication of
such impairment exists, the recoverable amount of such assets is
estimated and impairment is recognized if the carrying amount of these
assets exceeds their recoverable amount. The recoverable amount is
greater of the asset''s net selling price and value in use. In assessing
value in use, the estimated future cash flows are discounted to their
present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life.
Current investments are carried at lower of cost and fair value.
Long-term investments are stated at cost. Provision for diminution in
value is made to recognise a decline other than temporary in the value
of such investments.
g) Borrowing Costs:
Borrowing costs that are attributable to the acquisition and
construction of a qualifying asset are capitalised as a part of the
cost of such assets till such time the asset is ready for its intended
use. A qualifying asset is one that requires substantial period of time
to get ready for its intended use. Other borrowing costs are recognised
as an expense in the year in which they are incurred.
Inventories are valued at lower of cost and net realizable value after
providing for obsolescence and other anticipated losses, if any. Cost
of manufactured goods and Work-in-Progress include related overheads
incurred in bringing the inventories to their present location and
condition and excise duty paid/payable.
i) Revenue Recognition:
Contract Revenue is recognized by reference to the stage of completion
of the contract activity at the reporting date of the financial
statements on the basis of percentage of completion method.
The stage of completion of contracts is measured by reference to the
proportion that contract costs incurred for work performed up to the
reporting date bear to the estimated total contract costs for each
An expected loss on the construction contract is recognized as an
expense immediately when it is certain that the total contract costs
will exceed the total contract revenue.
Price escalation and other claims and/or, variation in the contract
work are included in contract revenue only when negotiations have
reached an advanced stage such that it is probable that the customer
will accept the claim; and the amount that is probable will be accepted
by the customer can be measured reliably.
Incentive payments, as per customer-specified performance standards,
are included in contract revenue only when the contract is sufficiently
advanced and that it is probable that the specified performance
standards will be met and the amount of the incentive payment can be
In the case of other contracts, sales and profits are accounted for on
the basis of actual work done on the contracts / dispatch of items.
Foreign Currency Transactions
a. The reporting currency of the Company is Indian Rupee.
b. Foreign currency transactions are recorded on initial recognition
in the reporting currency, using the exchange rate at the date of the
transaction. At each balance sheet date, foreign currency monetary
items are reported using the closing rate.
c. Exchange differences that arise on settlement of monetary items or
on reporting of monetary items at each balance sheet date at the
closing date are recognized as income or expense in the period in which
j) Employee Benefits
The company provides for obligation towards Gratuity, a defined benefit
plan, covering eligible employees on the basis of an actuarial
valuation using the projected unit credit method as at the year end. In
case of funded defined plans, the fair value of the plan assets is
reduced from the gross obligation under the defined benefit plans to
recognize the net obligation. Further, for certain employees,
contributions are made to the fund administered by the management.
Contributions made under a scheme of Life Insurance Corporation of
India are charged to the profit and loss account.
iii) Leave Encashment
Liability for leave encashment is provided on the basis of actuarial
valuation using the projected unit credit method as on the Balance
Sheet date. Actuarial Gain/Losses, if any, are immediately recognized
in the Profit and Loss account.
iv) Provident Fund
The contribution towards Provident Fund is made to the Statutory
Authorities/ fund administered by the management and is charged to the
profit and loss account.
k) Provisions and Contingencies
A provision is recognised when the Company has a present legal or
constructive obligation as a result of past event and it is probable
that an outflow of resources will be required to settle the obligation,
in respect of which 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. Contingencies are recorded when it is
probable that a liability will be incurred, and the amount can be
reasonably estimated. Contingent liabilities are disclosed by way of a
note to the accounts.
Tax Expenses for the year comprises both current tax and deferred tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year. Deferred tax is recognised on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods and quantified using the tax rates and law
enacted or substantively enacted by the reporting date. Where there is
an unabsorbed depreciation or carry forward loss, deferred tax assets
are recognised only if there is virtual certainty of realisation of
such assets. Other deferred tax assets are recognised only to the
extent there is reasonable certainty of realisation in future. Deferred
tax assets are reviewed for the appropriateness of their respective
carrying values at each balance sheet date.
m) Earnings Per Share
Basic earnings per share is calculated by dividing the net earnings
after tax for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
For calculating diluted earnings per share, the number of shares
comprises the weighted average shares considered for deriving basic
earnings per share, and also the weighted average number of shares, if
any which would have been used in the conversion of all dilutive
potential equity shares. The number of shares and potentially dilutive
equity shares are adjusted for the bonus shares and the sub-division of
shares, if any.
n) Contingent Liabilities
Contingent liabilities are determined on the basis of available
information and are disclosed by way of a note to the accounts.