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Ircon International
BSE: 523596|SECTOR: Construction & Contracting - Civil
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Ircon International is not traded in the last 30 days
Ircon International is not listed on NSE
Mar 09
Accounting Policy Year : Mar '10
1.  Basis of Preparation
 
 (a) The financial statements are prepared according to the historical
 cost convention on accrual basis and in line with the fundamental
 accounting principles of prudence, consistency and materiality.
 
 (b) The financial statements are reported in Indian rupees and all
 values are rounded to the nearest million rupees except where otherwise
 stated.
 
 2.  Statement of Compliance
 
 The financial statements are prepared on the basis of generally
 accepted accounting principles in India and the provisions of the
 Companies Act, 1956.
 
 3.  Foreign Currency Transactions
 
 (a) Transactions within the Country:
 
 Foreign Currency transactions within the Country are translated in the
 following manner:
 
 i) All foreign currency transactions are translated into Indian
 Currency at the Telegraphic Transfer (TT) buying rate prevalent on the
 date of transaction.
 
 ii) Depreciation is translated at the rates used for translation of the
 value of the  assets on which depreciation is calculated.
 
 iii) Monetary items and contingent liabilities denominated in foreign
 currency are translated at-the prevailing closing TT buying rate at
 each balance sheet date.
 
 iv) Fixed assets and non-monetary items are translated using the TT
 buying rate on the date of transaction.
 
 (b) Transactions of Integral Foreign Operations
 
 Financial statements of Foreign Operations are translated in the
 following manner:
 
 i) Revenue items are translated into Indian currency at the monthly
 average of opening and closing TT buying rates. 
 
 ii) Inventories are translated at the TT buying rates at each balance
 sheet date.
 
 iii) Depreciation is translated at the rates used for the translation
 of the value of the assets on which depreciation is calculated.
 
 iv) Monetary items and contingent liabilities are translated at the
 prevailing closing TT buying rate. 
 
 v) Fixed assets and non-monetary items are translated at the TT buying
 rate at the date of transaction.
 
 (c)1 The net exchange differences resulting from the translations at
 (a) & (b) above are recognised as income or expense for the year.
 
 (d) Transactions of Non-Integral Foreign Operations
 
 Financial statements of Non- Integral Foreign Operations are translated
 in the following manner-
 
 I) The assets and liabilities, both monetary and non-monetary are
 translated at the closing TT buying rate. 
 
 ii) Income and expense items are translated at the monthly average of
 opening and closing TT buying rates. 
 
 iii) All resulting exchange difference is accumulated in foreign
 currency translation reserve until disposal of the net investment and
 is recognised as income or as expense in the period in which gain or
 loss on disposal is recognised.
 
 4.  Fixed assets
 
 (a) Fixed assets are stated at historical cost less accumulated
 depreciation and any impairment in value.
 
 (b) Machinery spares which can be used only in connection with an item
 of fixed asset and whose use is expected to be irregular are
 capitalized.
 
 (c) Incidental expenditure during construction period incurred up to
 the date of commissioning is capitalized.
 
 5.  Investments
 
 (a) Long Term Investments are valued at cost less provision . for
 permanent diminution in value, if any.
 
 (b) Current Investments are valued at lower of cost and fair value.
 
 6.  Inventories
 
 (A) Construction Work in Progress
 
 (i) Construction work-in-progress is valued at cost till such time the
 outcome of the job cannot be ascertained reliably and at realisable
 value thereafter. Site mobilisation expenditure to the extent not
 written off are valued at cost.
 
 (B) Others
 
 (i) In-Cost Plus contracts, the cost of all materials, spares and
 stores not reimbursable as per the terms of the contract is shown as
 inventory valued as per (iii) below.
 
 (ii) In Item Rate and Lump Sum Turnkey contracts, the cost of all
 materials, spares (other than capitalised) and stores are charged to
 Profit and Loss Account in the year of use.
 
 (iii) Inventories are valued at lower of the cost arrived at on First
 In First Out (FIFO) basis and net realisable value.
 
 (iv) Loose tools are expensed in the year of purchase.
 
 7.  Cash and Cash Equivalents
 
 Cash and bank balances in the Balance Sheet comprise of cash at banks,
 in hand and demand deposits and cheques in hand.
 
 For the purpose of cash flow statement, cash and cash equivalents
 consist of cash and bank balances as defined above, net of bank
 overdrafts.
 
 8.  Provisions
 
 (a) Provision for maintenance
 
 (i) In Cost Plus contract, no provision for maintenance is required to
 be made where cost is reimbursable.
 
 (ii) In Item Rate and Lump Sum turnkey contracts, provision is made for
 maintenance to cover companys liability during defect liability period
 keeping into consideration the contractual obligations, the obligations
 of...the sub-contractors, operating turnover and other relevant
 factors.
 
 (iii) For design guarantees after the maintenance period, a token
 provision of Rs. 10 lakhs is kept for each such contract.
 
 (b) Provision for Demobilisation
 
 Provision for demobilisation to meet the expenditure towards
 demobilisation of Manpower and Plant & Equipment is made in foreign
 projects.
 
 (c) Provision for Doubtful Debts /Advances
 
 Provision for Doubtful Debts /Advances is made when there is
 uncertainty of realisation irrespective of the period of its dues. For
 outstanding over 3 years full provision is made unless the amount is
 considered recoverable.  Debts/Advances are written off when
 unrealisibility is almost established.
 
 (d) Others
 
 Provision is recognised when:
 
 i) the Company has a present obligation as a result of a past event,
 
 ii) a probable outflow of resources is expected to settle the
 obligation and
 
 iii)a reliable estimate of the amount of the obligation can be made.
 
 Reimbursement, of the expenditure required to settle a provision is
 recognised as per contract provisions or when it is virtually certain
 that reimbursement will be received.
 
 Provisions are reviewed at each Balance Sheet date.
 
 9.  Contract Revenue Recognition
 
 Contract Revenue is recognised to the extent it is probable that the
 economic benefits will flow to the Company and the revenue can be
 reliably measured. Depending on the nature of contract, revenue is
 recognised as under-
 
 (a) In cost plus contracts, revenue is worked out by including eligible
 items of expenditure in the bills raised on the clients and charging
 specified margin thereon.
 
 (b) In fixed price contracts, revenue is recognized by adding the
 aggregate cost of work certified and proportionate margin using the
 percentage of completion method. The percentage of completion is
 determined as a proportion of cost incurred to date to the total
 estimated cost of the contract.
 
 Full provision is made for any loss in the period in which it is
 foreseen.
 
 Receipts are inclusive of sales tax etc., as applicable.
 
 10.  Contracts executed under Joint Venture (JV) Contracts executed
 under Joint Venture (JV)
 
 (i) in jointly controlled operations, are accounted as independent
 contracts;
 
 (ii) in respect of contracts executed by a jointly controlled entity,
 the profit / loss from the Joint Venture is accounted for in the year
 when determined.
 
 11.  Leases
 
 (i) Lease income from assets given on operating lease are recognized as
 income in the statement of Profit & Loss account on straight-line basis
 over the lease term.
 
 (ii) Lease payments for assets taken on operating lease are recognized
 as expense in the statement of Profit & Loss account on straight-line
 basis over the lease term.
 
 12.  Liquidated Damages and Escalations
 
 (i) Liquidated damages actually paid/recovered are adjusted against
 Contract
 
 Revenue/Contract Cost. Liquidated damages arising from contractual
 obligation but under negotiation and not considered payable and not
 recovered by the client are treated as contingent liability.
 
 (ii) Escalation receivable / payable is accounted for as per the
 provisions of the contract. Escalation receivable but not certified
 before close of project accounts is included in work- in- progress.
 
 13.  Research & Development Expenses
 
 Expenses on research & development are charged to revenue.
 
 14.  Mobilisation Expenses
 
 The initial contract expenses on new projects for mobilisation are
 recognised as construction work in progress in the year of incidence
 and pro rata charged off to the project over the years at the same
 percentage as the stage of completion of the contract as at the end of
 financial year.
 
 15.  Depreciation
 
 (i) Depreciation.on fixed assets in India is provided on Straight Line
 basis (SLM) in the manner and at the rates specified in Schedule XIV of
 the Companies Act, 1956, except in following cases where it is provided
 at the rates higher than prescribed in the said Schedule :
 
 (a) General Construction Equipment 19.00%
 
 (b) Office Equipment 19.00%
 
 (c) Computer including UPS & Inverters 31.67%
 
 (d) Vehicles (including Heavy Vehicles) 23.75%
 
 (e) Furniture & Fixtures 23.75% (fi) Speed Boats 19.00%
 
 (ii) Depreciation on fixed assets in foreign countries is provided on
 straight-line method taking into consideration the commercial life of
 that asset and/or duration of the project. However, the rates adopted
 for depreciation are not lower than those specified in Schedule XIV for
 fixed assets in India (as stated in Para 15 (i) above). On closure of
 the project, assets are reduced to residual value of 5% and balance is
 expensed in the year of closure & / or transferred to other project/
 Plant & Machinery Division.
 
 (iii) Software cost exceeding Rs. 25 lakh each is amortised over a
 period of 36 months on straight line basis from the date of successful
 commissioning of the software subject to review at each financial year
 end.
 
 (iv) In case of leasehold land (other than perpetual lease) and
 leasehold property, depreciation is provided proportionately over the
 period of lease.
 
 (v) Assets acquired during the year costing upto Rs.5000/-and assets
 having written down value upto Rs.5000/- at the beginning of the year
 and camps / caravan/ temporary sheds / furnishing acquired during the
 year irrespective of the value are fully depreciated.
 
 16.  Borrowing Cost
 
 (i) Borrowing costs in ordinary course of business are recognised as an
 expense in the period in which they are incurred.
 
 (ii) Borrowing costs that are directly attributable to acquisition,
 construction or production of a qualifying asset is capitalized as part
 of the cost of the asset.
 
 17. Retirement Benefits
 
 (i) Provision for Leave Encashment, Gratuity & other retirement
 benefits is made based on actuarial valuation at the year end.
 
 (ii) Provident Fund contribution is made to PF Trust on accrual
 basis.
 
 18. Prior period adjustment, prepaid and extraordinary items
 
 (i) Income/expenditure relating to prior period and prepaid expenses
 not exceeding Rs. 5000/- in each case are treated as income/expenditure
 of the current year.
 
 (ii) Voluntary Retirement Scheme expenses are charged off in the year
 of incidence of expense.
 
 19.  Taxes
 
 (i) Taxes including current income-tax are computed using the
 applicable tax rates and tax laws. Liability for additional taxes, if
 any, is provided / paid as and when assessments are completed.
 
 (ii) Deferred income- tax is computed using the tax rates and tax laws
 that have been enacted or substantively enacted by the balance sheet
 date.
 
 20. Segment Reporting
 
 The Company has identified two primary reporting segments based on
 geographic location of the project viz. Domestic & International and
 two secondary reporting segments based on business of construction and
 Leasing of Assets & its operation (Leasing & Operation).
 
 21. Contingent Liabilities and Contingent Assets
 
 (a) Contingent Liabilities are disclosed in either of the following
 cases:
 
 i) a present obligation arising from a past event, when it is not
 probable that an outflow of resources will be required to settle the
 obligation; or ii) a reliable estimate of the present obligation cannot
 be made; or iii) a possible obligation, unless if the probability of
 outflow of resources is remote.
 
 (b) Contingent Assets are neither recognised, nor disclosed.
 
 (c) Contingent Liabilities and Provisions needed against Contingent
 Liabilities and Contingent Assets are reviewed at each Balance Sheet
 date.
 
 (d) Contingent Liabilities disclosed are net of estimated provisions
 considering possible outflow on settlement.
Source : Dion Global Solutions Limited
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