Notes to Account_Infrastructure Industry
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Transcript of Notes to Account_Infrastructure Industry
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8/4/2019 Notes to Account_Infrastructure Industry
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Revenue Recognition
Applicable AS: AS-7
The company follows percentage completion method, based on the stage of completion at the balance
sheet date, taking into account the contractual price and revision thereto by estimating total revenue
and total cost till completion of the contract and the profit so determined has been accounted for
proportionate to the percentage of the actual work done. Revenue is recognised as follows:
a. In case of item rate contracts, on the basis of physical measurement of work actually
completed, at the balance sheet date.
b. In case of lumpsum contracts, revenue is recognized on the completion of milestones as
specified in the contract or as identified by the Management
This is in accordance with matching principle.
Capital Work in Progress
Applicable AS: AS-10
In infrastructure industries, this forms a major part of assets. These are uncompleted assets.
Construction and development expenses includes cost of acquisition of development rights, all direct
and indirect expenditure incurred on development of land and / or construction including attributable
interest and financial charges, overheads relating to site management and administration, less incidental
revenues arising from said construction. On completion of construction of building and commissioning
of Plant & Machinery, such assets are capitalized leaving the incomplete work as capital work in
progress.
Depreciation
Applicable AS: AS-6
Rate: As per Schedule XIV of Companies Act, 1956.
Computers: Pro rata 3 years
Software and implementation costs including users license fees of the Enterprise Resource Planning
(ERP): Over 5 years
Other assets: Different assets different methods. Some follow WDV while other SLM.
Unbilled Revenue
Work done remaining to be billed is recognized in accounts and valued at realizable value.
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8/4/2019 Notes to Account_Infrastructure Industry
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Inventories
Applicable AS: AS-2
The stock of stores, spares and embedded goods and fuel is valued at cost (weighted average basis), or
net realisable value whichever is lower. This is done across the industries and companies studied.
Borrowing cost
Applicable AS: AS-16
Borrowing costs (less any income on the temporary investments of those borrowings) that are
attributable to the acquisition, construction or production of a qualifying assets are capitalized.
Retention money
Since in this industry, money is to be deposited with clients as an assurance for project quality and its
completion in form of earnest money deposit etc.
They are recognized as receivables and whenever monies are released are adjusted against the same.