Opinion of Expert Advisory Committee of ICAI not followed regarding treatment of dredger spares

Dredging Corporation of India Ltd. — (31-3-2008)

On a reference made by DCI regarding accounting treatment of
spares issued to dredgers, the Expert Advisory Committee of Institute of the
Chartered Accountants of India gave its opinion on 27th May 2008, which was
received by the Company on 31st May 2008. As per the opinion, if the spares are
of capital nature and purchased subsequent to the acquisition of particular
dredger, these need to be capitalised and depreciated systematically over the
remaining useful life of the particular dredger. In case where the useful life
of the particular dredger has been completed, the same is to be charged to
Profit & Loss A/c through depreciation. Since the opinion has come after the
close of the accounting period and several complexities are involved, no
adjustments have been made in the accounts for the year in this regard. The
Company proposes to implement the same from Financial Year 2008-09 onwards after
examining all the issues involved.

Reference is invited to Note 9(g) of Notes on Accounts. As
per the Expert Advisory Committee of ICAI’s opinion, the accounting practice of
charging off spares to expenditure as when issued to dredgers is not in
accordance with the provisions of AS- 10 and its effect on current year’s profit
is not quantifiable.