I.            BASIS OF ACCOUNTING:

i)               The financial statements are brpared under the historical cost convention on accrual basis of accounting, in accordance with the Generally Accepted Accounting Principles (GAAP). GAAP comprises mandatory accounting standards as brscribed by the  Companies (Accounting Standards) Rules, 2006, as applicable, the relevant provisions of the Companies Act, 1956 and the provisions of the Companies Act, 2013 (to the extent notified and applicable).

ii)           In brparing the financial statements in conformity with accounting principles generally accepted in India, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of financial statements and the accounts of revenue and expenses during the reported period.  Actual result could differ from those estimates.  Any revision to such estimates is recognised in the period the same is determined. 

  II.   FIXED ASSETS:

i)             Fixed Assets procured by the Company are shown at Cost. Capital Works executed internally are valued at prime cost plus appropriate overheads. No charges for supervision are levied on civil capital projects.

Cost means cost of acquisition inclusive of inward freight, duties and taxes and incidental expenses related to acquisition. In respect of major projects involving construction, related br-operational expenses form part of the value of assets capitalised. Expenses capitalised also include applicable borrowing costs, if any.

ii)           Software cost is capitalized where it is expected to provide future enduring economic benefits. Capitalization costs include license fees and costs of implementation/system integration services. The costs are capitalised in the year in which the relevant software is implemented for use.

iii)          Retirement of Assets: Unserviceable   fixed assets are valued at the net realisable value.  In case the net realisable value is not available, the same is considered at 5% of original cost as scrap value.

iv)          Fixed Assets acquired with financial assistance from outside agency either wholly or partially are capitalised at net cost to the company.

III.    DEbrCIATION :

A.         Debrciation on Fixed Assets

(i)          Debrciation on Fixed Assets, not being assets mentioned in  (ii) to (iv) below, is charged on straight-line method based on Schedule XIV to the Companies Act, 1956 as amended from time to time.

(ii)         Debrciation on software, computer hardware & accessories–

a)          For assets acquired up to 31 Mar 2001, debrciation is charged on straight-line method @ 16.21%.

b)          In respect of assets acquired after 31 Mar 2001, debrciation is charged on straight-line method @ 19% so as to write off 95 % of the original cost on the expiry of 5 years.

(iii)        The rates of debrciation of Furniture, Fixture and office equipment have been applied on straight line method at @19% w.e.f 1st April, 2010.

(iv)       Debrciation on second hand assets –

Debrciation on second hand assets is charged on straight-line method to write off 95% of the cost on the basis of estimated  life of asset.

(v )  Pro-rata debrciation / amortization  is charged from / upto date on which the assets are ready to be   put to use / are deleted or discarded.

B.       Leasehold properties

            Leasehold properties are amortized evenly over the period of the lease.

IV.      IMPAIRMENT OF ASSETS:

On the basis of annual assessment, impairment loss, if any, is provided. Impairment loss is the shortfall of the recoverable amount vis-à-vis the carrying amount. The recoverable amount is determined for defined Cash Generating Units (CGU).

V.      VALUE OF INVENTORIES:

            Inventories  other than  Work in Progress arising under Construction contract are valued at the lower  of cost and net realisable value .The cost is determined as under :

i)             (a) Raw materials, stores and spares : Valued at weighted average rates.

(b) Inplant items : Valued at standard cost.

ii)           Equipment for specific projects : Valued at cost.

iii)           Stores in transit and non-stock items : Valued at cost.

Note:

a)       Cost comprises expenditure incurred in the normal course of business in bringing such inventories to its location. Cost includes taxes and duties and is net of credit under CENVAT and VAT, where applicable.

b)      Inplant items are valued at standard cost for convenience taking into account normal level of activity and regularly reviewed.

v)                 Obsolete, slow-moving and defective inventories are identified at the time of physical verification and where necessary provision is made for such inventories. Project specific stores not moving for 4 years and more from the date of delivery of a vessel are valued at 50% on review. Such valuation at 50% on review is also made in respect of materials not for any specific project which do not move for 4 years or more from the date of receipt.

vi)          Scrap: Valued at estimated net realizable value.

vii)         Inter-transfer items (Pending final transfer) :At cost, limited to transfer price.

viii)        Work-in-progress : Valuation of work-in-progress is done  on the following basis and the term cost includes all overheads

1.Recognition of revenue – Valuation of Work in Progress

a)   Cost Plus Contracts:

“At cost incurred plus profits accrued up to the reporting date as per Contract / Letter of Intent.”

b)    Fixed Price Contracts:

(i)                 Where profit can be reliably measured:

“At costs incurred up to the reporting date plus profits recognized under percentage completion method in the proportion the actual costs incurred bear to the estimated total cost to completion as on that date”.

(ii)  Where loss is anticipated:

“When it is probable that total contract costs will exceed the total contract revenue, the expected loss is fully recognized as an expense immediately, irrespective of physical progress achieved on the reporting date.”

c)    Ship Repair Contracts:

(i)Work done against contracts extending up to 12 months is valued at cost or realizable value, whichever is lower. Profit, if any, is recognized in the year in which the repair is completed.

(ii)For contracts extending beyond 12 months, the valuation is done as per policy for construction contracts as stated above.

d)   Others :

All  items other than  the above  have been valued at lower of cost and net realisable value.

VI.         REVENUE RECOGNITION :

Revenue is recognized and accounted for if there is no significant uncertainty in collection of the amount of consideration.

(A)      SALES :

1. Sales other than Turnkey Projects :

a)   Sales against contracts are reflected in the accounts of the year in which the deliveries are made to the customer.

b)    Sale values are ascertained in accordance with contractual provisions.

c)    Where the contract prices are not finalized, sales are accounted for on provisional    basis.

d)    Additional revenue, in respect of contracts completed in earlier years, is accounted for as sales in the year in which such revenue materializes.

e)    Credit notes issued to customers and deductions accepted are reduced from sales in  the year in which they are effected.

f)    Sales include Excise duty and Service Tax,  wherever applicable, and excludes Value Added Tax, Central Sales Tax, Works Contract Tax etc.

g)   Revenue Recognition in respect of ongoing construction contracts is done using percentage completion method as stated in para V(vii)(1) above.

2. Sales in case of Turnkey Projects:

a)    If part delivery and payment is provided in the contract, sales on part delivery are accounted for.

b)    In case of an indivisible contract, or specific items thereof, sales are considered on completion and handing over of the project.

(B)  INTEREST INCOME:

Interest Income is accounted for on accrual basis in time proportion inclusive of related tax deducted at source.

VII.      GRANTS/SUBSIDY :

(i)  Capital Grants / Subsidies

Capital grants/Subsidies relating to specific assets are reduced from the gross value of the assets and capital grants for project capital subsidy are credited to Capital Reserve and retained till the requisite conditions are fulfilled.

               (ii)          Revenue Grants / Subsidies

Government grants related to revenue items are adjusted with the related expenditure. If not related to a specific expenditure, it is taken as income.

VIII.   BORROWING COST

Borrowing costs are capitalized as part of qualifying assets. Other borrowing costs are considered as revenue expenditure.

IX.        INSURANCE CLAIMS :

Amounts due against insurance claims are accounted for on accrual basis; in respect of claims not finally settled by the underwriter, credits are reckoned, based on the company’s estimate of the realisable value.

X.          TAXES ON INCOME :

Current tax is determined as the amount of tax payable in respect of  taxable income for the period in accordance with the Income Tax Act, 1961.

Deferred tax is recognized on timing difference between taxable income and accounting income subject to consideration of prudence and provided for as per the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred tax assets on unabsorbed debrciation and carrying-forward of losses are not recognized unless there is virtual certainty that there will be sufficient future taxable income available to realize such assets.

XI.        RETIREMENT BENEFITS: 

(i)      Provident Fund and Pension :

Retirement benefits in the form of Provident Fund and Family Pension Funds are defined contribution schemes and the contribution is charged to profit and loss of the year when the contributions to the respective funds are due in accordance with the relevant statute.

(ii)     Gratuity:

Gratuity Fund, a defined benefit scheme, is administered through duly constituted independent Trust and yearly contributions based on actuarial valuation as determined by LIC are charged to revenue. Any additional provision as may be required, is provided for on the basis of acturial valuation as per Accounting Standard -15 on Employee Benefits. Actuarial gains and losses in respect of such benefits are recognised in the Statement of Profit and Loss.

(iii)     Leave Liability:

Liability towards Earned Leave in respect of all employees is provided based on actuarial valuation as per Accounting Standard -15 on Employee Benefits using Projected Unit Credit method for the unused entitlements  that has accumulated at the Balance Sheet date. Actuarial gains and losses in respect of such benefits are recognised in the Statement of Profit and Loss.

          (iv)    Voluntary Retirement Scheme:

Actual disbursement made under Voluntary Retirement Scheme is charged to revenue.

(v)      Post Retirement  Medical Scheme

a)   The post retirement medical benefits scheme to the existing employees is a defined benefit scheme and are determined based on actuarial valuation  as per Accounting Standard -15 on Employee Benefits using Projected Unit Credit method  which recognizes each period of service as giving rise to additional unit of employee benefit entitlement  and measures each unit separately to build up the final obligation. Actuarial gains and losses in respect of such benefits are recognised in the Statement of Profit and Loss.

b)   Post retirement medical benefits in the case of the super annuated employees are defined contribution schemes and brmium paid  to an Insurance company is charged to profit and loss of the year .

XII.      VARIATION IN FOREIGN EXCHANGE RATES :

(1) 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 transaction.

(2) Conversion 

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 exchange rate at the date of the transaction. Advances paid to foreign suppliers for material / services are treated as non-monetary assets and consequently are reported using exchange rate on the date of transaction.

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(3) Exchange Difference

Exchanges Differences arising on the settlement of monetary items or on reporting a company’s monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognized as income or as expenses in the year in which they arise.    XIII.      LICENCE FEE:

Licence Fee for manufacturing right for a specified period is amortised over the said specified period.

XIV.     RESEARCH AND DEVELOPMENT:

Capital expenditure on research and development is included in fixed assets and revenue expenditure on research and development is charged as expenditure in the year in which it is incurred.

XV.      MISCELLANEOUS :

i)     Loose Tools and Tackles :

a)   Loose Tools and Tackles are charged to revenue, on issue from stores, if the cost of the individual items does not exceed Rs. 5000/-.

b)   Cost of such tools & tackles individually costing over Rs. 5000/- is written off evenly over a period of five years commencing from the year of purchase.

    ii)   Materials with contractors :

Materials, if any, held by the contractors for processing are treated as part of work-in-progress.

    iii)  Liquidated Damages :

Provision for liquidated damages is made in the accounts separately as per the contractual provision/proportionate liability basis keeping in view the delay caused by the factors beyond the control of the Company.

iv)   Guarantee repair:

Provision for guarantee liability in respect of delivered ships is made on the basis of actuarial estimates. Such provision for all other products is made, as applicable, on the basis of management estimates.

Values of free supply items are not booked to job/work-in-progress except in the cases permitted by the contracts. However, value added thereon is taken to value of Production and in Sales.

vi)   Advance from customers:

Advances from customers are after adjusting dues, if any under sales accounts, and include advances received against placement of order and stage payments.

XVI.      CLAIMS:

Claims against the company are assessed on the basis of evaluation of facts and legal aspects of the matter involved. Where such assessment indicate probable obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation, adequate provision is made otherwise claims against the company are disclosed as claims not acknowledged as debts.

A Contingent Asset is neither recognised nor disclosed in the Financial Statements.

XVII.   SEGMENT REPORTING:

Segments are identified having regard to the dominant source and nature of risk and returns and the internal organization and management structure. The accounting policies adopted for segment reporting are in line with the accounting policies adopted for brparing and brsenting the Financial Statements of the Company as a whole.  Inter-segment revenue are accounted for on the basis of transfer price acceptable to the final customer. Assets pertaining to Corporate Office or not specific to segment activities are separately indicated.

XVIII.PROPOSED DIVIDEND:

Dividends (including income tax thereon) are provided as proposed by the Directors in the Books of Accounts on accrual basis pending approval at the Annual General Meeting.

XIX.  TRADE RECEIVABLES:

          Debts from Government / Government departments / Government Companies are generally not treated as doubtful. However, provisions are made in the Accounts on a case to case review basis excepting those which are not contractually due.

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XX.    CASH FLOW STATEMENT

`         Cash flows are reported using the indirect method, whereby profit/loss before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing flows. The cash flows from operating, investing and financing activities of the Company are segregated.

XXI.  CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand, cheques in hand, balance with banks in current accounts and short term, highly liquid investments with an original maturity of three months or less and which carry insignificant risk of changes in value.

XXII.  Provisions in the Accounts against Contingent liability 

(1)  In non-tax civil cases: In the case of non-tax civil cases, creation of accounting provisions will be considered on a review of status of each case as on the reporting date and provisions may be made in the Accounts on the basis given below:

(a) In the Arbitration cases where the Company has not contested or does not intend to contest the adverse outcome of arbitral award, the liability will not be treated as contingent and full provision may be considered.

(b) Where an adverse award / decision is given by the Arbitrator or by the trial court and an appeal is brferred by the Company or intended to be brferred, provision may be made as follows :

i)             After the claim is disposed of by the Arbitrator - 25% of the amount in dispute.

ii)           After the claim is disposed of by Higher Appeal Court - 50% of the amount in dispute, until disposal by the final appeal court. Revision petition, larger bench of the same court will be considered as part of the relevant appeal process in the said court.

(c) Full provision of the disputed claim may be considered in the case of an award / decision where the Company does not proceed to contest the appellate award.

(d) No provision may be made in case of demands raised by Govt Dept / Statutory Authority/ by Commissioner or Tribunal set up by such Govt Dept / Statutory Authority if the said demand is contested within the set-up of such Govt Dept / Statutory Authority.

(2)   In taxation cases: In the matter of taxation cases the claimed amount may be considered as contingent liability and no provision may be considered if the decision up to Appeal stage goes against the company and if the Company has contested or intends to contest such decision before the Appellate Tribunal.

However where the decision of Appellate Tribunal is against the Company, full provision of the amount in dispute may be made irrespective of whether the Company contests such decision at any higher forum.