3 Material accounting policies
3.1 Property, plant and equipment
Property, plant and equipment:
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and
estimated costs of dismantling and removing the item and restoring the site on which it is located.
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can
be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs
and maintenance are charged to profit or loss during the reporting period in which they are incurred.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major
components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
Significant estimates
The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected
residual value at the end of its life, if any. The useful lives and residual values of Company's assets are determined by management at the time the
asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as
well as anticipation of future events, which may impact their life, such as changes in technology.
Depreciation methods, estimated useful lives and residual value
Depreciation is provided on a Straight Line Method (‘SLM’) over estimated useful life of the fixed assets estimated by the Management. The
Management believes that the useful lives as given below best represent the period over which management expects to use these assets based on an
internal assessment and technical evaluation where necessary. Hence, the useful lives for these assets is different from the useful lives as
prescribed under Part C of Schedule II of the Companies Act 2013. Depreciation for assets purchased/ sold during a period is proportionately
charged. The Company estimates the useful lives for fixed assets as follows:
3.1 Property, plant and equipment (continued)
Intangible assets
The Company only has software as an intangible asset having a useful life of 3 years.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
3.2 Impairment of assets
The Company recognises loss allowances for expected credit losses on:
- financial assets measured at amortised cost; and
- financial assets measured at FVOCI- debt investments.
-Trade receivables
At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit- impaired.
A financial asset is ‘credit- impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial
asset have occurred.
Evidence that a financial asset is credit- impaired includes the following observable data:
- significant financial difficulty of the borrower or issuer;
- a breach of contract such as a default or being past due for 90 days or more;
- the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
- it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
- the disappearance of an active market for a security because of financial difficulties.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12
month expected credit losses:
- debt securities that are determined to have low credit risk at the reporting date; and
- other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument)
has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses.
Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial
instrument.
12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after
the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is
exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected
credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This
includes both quantitative and qualitative information and analysis, based on the Company's historical experience and informed credit assessment
and including forward- looking information.
The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.
The Company considers a financial asset to be in default when:
- the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realising security
(if any is held); or
- the financial asset is 90 days or more past due.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured at the present value of all cash shortfalls
(i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to
receive). Presentation of allowance for expected credit losses in the balance sheet, loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI.
Write-off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient
cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement
activities in order to comply with the Company's procedures for recovery of amounts due.
The Company's non-financial assets and inventories, are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units (CGUs). EachCGU
represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the
combination.
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less costs to sell. Value in use is based on
the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the CGU (or the asset)
3.3 Inventories
Inventories are valued at the lower of cost and net realizable value. ‘Cost’ comprises purchase cost and all expenses incurred in bringing the
inventory to its present location and condition. Cost has been determined as follows:
3.4 Revenue recognition
The Company derives its revenue primarily from running and/or managing hotels and resorts and providing consultancy services
The Company has initially applied Ind AS 115 - 'Revenue from contracts w'th Customers' from 1 April 2018. IndAs 115 establishes a comprehensive
framework for determining whether, how much and when revenue is recognized. It replaced Ind AS 18 - Revenue and Ind AS 11 Construction
Contracts and Guidance Notes.
Revenue is recognised when the entity satisfies a performance obligation by transferring a promised good or service to a customer. An asset is
transferred when the customer obtains control of an asset.
Service income is recognized when the related services are rendered unless significant future contingencies exist.
Income from resorts:
Sales are disclosed net of sales tax,goods and services tax, trade discount and quality claims.
Advances received from the customers are reported as liabilities until all conditions for revenue recognition are met and is recognized as revenue
once the related services are rendered.
Income from operations of resort primarily comprises of revenue from room rentals and sale of food and beverage charges. Such service income is
recognised when the related services are rendered unless significant future contingencies exist.
Revenue from sale of coffee beans is recognised when control is transferred to the buyer.
Dividend Income:
Dividend income is recognised when the Company's right to receive dividend is established.
Interest Income
Interest on the deployment of funds is recognised using the effective interest rate method.
Guarantee Comission :
Revenue is recognised on straight line basis taking into the present value of the gurantee amount and premium rate as considered in accordance
with Ind AS 109
3.5 Leases
The Company, as a lessee, recognises a right-of-use asset and a lease liability for its leasing arrangements,if the contract conveys the right to
control the use of an identified asset.
The contract conveys the right to control the use of an identified asset, if it involves the use of an identified asset and the Company has
substantially all of the economic benefits from use of the asset and has right to direct the use of the identified asset.
The cost of the right-of-use asset shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments
made at or before the commencement date plus any initial direct costs incurred.
The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted
for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date
over the shorter of lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The
lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily
determined,the Company uses incremental borrowing rate.
For short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the lease
term
The company has applied Ind AS 116 on 1st April 2019, using the modified retrospective approach. Therefore the cumulative effect of adopting Ind
AS 116 is recognised as an adjustment to opening balance of retained earnings at 1st April 2019, with no restatement of comparitive information.
The following is the summary of practical expedients elected on initial application :
1. Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to
contracts that were previously identified as leases under Ind AS 17.
2. Applied the exemption not to recognize ROU assets and liabilities for leases with less than 12 months of lease term on the date of initial
application
3. Excluded the initial direct costs from the measurement of the ROU asset at the date of initial application.
4. Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment.
3.6 Investments and other financial assets
a) Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are
initially recognised when the Company becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable to its acquisition or issue.
b) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at
- amortised cost;
- FVOCI - debt investment;
- FVOCI - equity investment; or
-FVTPL
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for
managing financial assets.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
- the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the
investment’s fair value in OCI (designated as FVOCI - equity investment). This election is made on an investment- by- investment basis. All
financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative
financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be
measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise
arise.
Financial assets: Business model assessment
The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best
reflects the way the business is managed and information is provided to management. The information considered includes:
- the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy
focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the
duration of any related liabilities or expected cash outflows or realising cash flows through the
sale of the assets;
- how the performance of the portfolio is evaluated and reported to the Company's management;
- the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are
managed;
- how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual
cash flows collected; and
- the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales
activity.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose,
consistent with the Company's continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as
consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of
time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual
cash flows such that it would not meet this condition. In making this assessment, the Company considers:
- contingent events that would change the amount or timing of cash flows;
- terms that may adjust the contractual coupon rate, including variable interest rate features;
- prepayment and extension features; and
- terms that limit the Company's claim to cash flows from specified assets (e.g. non- recourse features).
A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents
unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early
termination of the contract. Additionally, for a financial asset acquired at a significant discount or premium to its contractual par amount, a
feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid)
contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if
the fair value of the prepayment feature is insignificant at initial recognition.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held -
for- trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised
cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
c) Derecognition of financial assets
Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights
to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are
transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control
of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the
risks and rewards of the transferred assets, the transferred assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially
different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying
amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
3.7 Employee benefits
Defined benefit plans
The Company's gratuity plan is a defined benefit plan. The present value of gratuity obligation under such defined benefit plans is determined
based on actuarial valuations carried out by an independent actuary using the Projected Unit Credit Method, which recognises each period of
service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. The
obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation
under defined benefit plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods
approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the balance sheet with a corresponding
debit or credit to retained earnings through OCI in the period in which they occur.
3.8 Foreign currency transactions
a) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the
functional currency’). The financial statements are presented in Indian rupee (INR).
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are generally recognised in profit or loss. A monetary item for which settlement is neither planned
nor likely to occur in the foreseeable future is considered as a part of the entity’s net investment in that foreign operation.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and loss, within finance costs.
All other foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value
was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
3.9 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default,
insolvency or bankruptcy of the Company or the counterparty.
3.10 Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where
the Company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or
in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management
periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognised in respect of carried forward tax losses and
tax credits. Deferred tax is not recognised for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control
the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they can be used.
The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of a history of recent
losses, the Company recognises a deferred tax asset only to the extent that it has sufficient taxable temporary
differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be
realised. Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date and are recognised/ reduced to the extent that it is
probable/ no longer probable respectively that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on
the laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
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