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
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
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
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
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
(c) Incidental expenditure during construction period incurred up to
the date of commissioning is capitalized.
(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.
(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.
(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
(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
(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
(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.
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
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
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
(ii) in respect of contracts executed by a jointly controlled entity,
the profit / loss from the Joint Venture is accounted for in the year
(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
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
(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
(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
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.
(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
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
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
(d) Contingent Liabilities disclosed are net of estimated provisions
considering possible outflow on settlement.