A. Basis of preparation of financial statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by the Companies
(Accounting Standards) Rules, 2006, (as amended) and the relevant
provisions of the Companies Act, 1956 (''the Act''). The financial
statements are prepared under the historical cost convention, on an
accrual basis of accounting. The accounting policies applied are
consistent with those used in the previous year.
All assets and liabilities have been classified as current or
non-current, wherever applicable as per the operating cycle of the
Company as per the guidance as set out in the Revised Schedule VI to
the Companies Act, 1956.
B. Accounting estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities as at the date
of financial statements and the results of operation during the
reported period. Although these estimates are based upon management''s
best knowledge of current events and actions, actual results could
differ from these estimates.
C. Fixed assets and depreciation
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Borrowing costs relating to acquisition of fixed
assets which takes substantial period of time to get ready for its
intended use are also included to the extent they relate to the period
till such assets are ready to be put to use.
Depreciation is provided as per the written- down value method for
assets acquired on or after April 1, 1993, and as per the straight-line
method for assets acquired up to March 31, 1993. On additions and
disposals, depreciation is provided for from/up to the date of
addition/disposal. The rates of depreciation are determined on the
basis of useful lives of the assets estimated by the management, which
are at rates specified in Schedule XIV to the Companies Act, 1956.
Leasehold improvements are depreciated over the lease period of 5
years, which is lower of the period of the lease or their estimated
useful lives as determined by management.
Individual assets costing less than Rs.5,000 are depreciated in full in
the year they are put to use.
The carrying amounts of the Company''s assets are reviewed at each
balance sheet date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized whenever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
its value in use. Impairment loss is recognized in the Statement of
Profit and Loss or against revaluation surplus where applicable beyond
the carrying value that would have prevailed by charging usual
depreciation if there was no impairment.
A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
Construction materials are valued at cost. Identified direct materials
remaining on completion of contract are valued at their estimated scrap
value. Cost is determined on a first-in, first-out method and comprises
the purchase price including duties and taxes (other than those
subsequently recoverable by the enterprise from the taxing
Tools and equipment are stated at cost less the amount amortised. Tools
and equipment are amortised over their estimated useful lives ranging
from 3 to 10 years. Cost is determined by the weighted average method.
Machinery spares are valued at lower of cost and net realisable value.
Cost is determined by the weighted average method.
Unbilled work in progress: Cost of work yet to be certified/ billed, as
it pertains to contract costs that relate to future activity on the
contract, are recognised as unbilled work-in- progress provided it is
probable that they will be recovered. Unbilled work-in-progress is
valued at net realisable value.
G. Revenue recognition
- On contracts
Revenue from construction contracts is recognised on the basis of
percentage completion method. The stage of completion of a contract is
determined by the proportion that contract costs incurred for work
performed upto the reporting date bear to the estimated total contract
Amounts recoverable in respect of the price and other escalation, bonus
claims adjudication and variation in contract work required for
performance of the contract to the extent that it is probable that they
will result in revenue.
In addition, if it is expected that the contract will make a loss, the
estimated loss is provided for in the books of account.
Contractual liquidated damages, payable for delays in completion of
contract work or for other causes, are accounted for as costs when such
delays and causes are attributable to the Company or when deducted by
- On insurance claims
Insurance claims are recognized as income based on certainty of
- Management Fee
Management Fee income is recognized based on the contractual terms with
H. Advances from customers, progress payments and retention
Advances received from customers in respect of contracts are treated as
liabilities and adjusted against progress billing as per terms of the
Progress payments received are adjusted against amount receivable from
customers in respect of the contract work performed.
Amounts retained by the customers until the satisfactory completion of
the contracts are recognised as receivables. Where such retention has
been released by customers against submission of bank guarantees, the
amount so released is adjusted against receivable from customers and
the value of bank guarantees is disclosed as a contingent liability.
I. Foreign currency transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the closing rate.
Non monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise. Exchange differences arising in
respect of fixed assets acquired from outside India before accounting
period commencing on or after December 7, 2006 are capitalized as a
part of property,plant and equipment.
iv. Forward exchange contracts not intended for trading or speculation
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
J. Retirement and other employee benefits
Retirement benefits in the form of superannuation is a defined
contribution scheme and the contributions are charged to the statement
of profit and loss of the year when the contributions to the respective
funds are due. The Company does not have any other obligations in
respect of superannuation.
The Company has a provident fund scheme, a defined benefit plan, for
employees and a group gratuity and life assurance scheme for employees.
The life assurance scheme is the gratuity benefits payable towards
unexpired period of service in case of death. The group gratuity and
life assurance scheme are defined benefit obligations and are provided
for, on the basis of an independent actuarial valuation on projected
unit credit method made at the end of each financial year.
Provision for leave encashment, is made based on an independent
actuarial valuation on projected unit credit method made at the end of
each financial year.
Actuarial gains/losses are immediately taken to statement of profit and
loss account and are not deferred.
K. Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss after tax for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The number of shares used in computing diluted earnings per share
comprises the weighted average number of shares considered for deriving
basic earnings per share and also the weighted average number of shares
which could have been issued on conversion of all dilutive potential
Provision for current tax is recognized based on the estimated tax
liability computed after taking credit for allowances and exemptions in
accordance with the Income Tax Act, 1961.
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Profit and Loss Account and shown as
MAT Credit Entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to timing differences between the financial
statements'' carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are
measured using the enacted tax rates or tax rates that are
substantively enacted at the Balance Sheet dates. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognised in the period that includes the enactment date. Where there
is unabsorbed depreciation or carry forward losses, deferred tax assets
are recognized only if there is virtual certainty supported by
convincing evidence that they can be realised against future taxable
profits. Other deferred tax assets are recognized only to the extent
there is reasonable certainty of realization in the future. Such assets
are reviewed at each Balance Sheet date to reassess realization.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss account on a straight-line basis
over the lease term.
N. Provisions and Contingent Liabilities
A provision is recognized when the Company has a present obligation as
a result of past events and 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 their
present value and are determined based on management''s best estimates
required to settle the obligation at the Balance Sheet date. These are
reviewed at each Balance Sheet date and adjusted to reflect the current
Contingent Liabilities are disclosed in respect of possible obligations
that arise from past events, whose existence would be confirmed by the
occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the Company.
O. Accounting for Joint Venture Contracts
In respect of contract executed in Integrated Joint Ventures under
profit sharing arrangement (assessed as AOP under Income Tax laws), the
services rendered to the Joint Ventures is accounted as income on
accrual basis. The share of profit / loss is accounted based on the
audited financial statements of Joint Ventures and is reflected as
P. Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short-term investments with an original maturity
of three months or less.