NOTE 1: MATERIAL ACCOUNTING POLICIES
This note provides a list of the material accounting policies
adopted in the preparation of these financial statements
of EIH ASSOCIATED HOTELS LIMITED. These policies have
been consistently applied to all the periods presented,
unless otherwise stated.
a) Basis of preparation
(i) Compliance with Indian Accounting Standards (Ind AS)
The financial statements have been prepared in
accordance with Indian Accounting Standards
prescribed under Section 133 of the Companies
Act, 2013 ("the Act") and other accounting principles
generally accepted in India, as a going concern on
accrual basis.
Accounting policies have been consistently applied
except where a newly issued Accounting Standard is
initially adopted or a revision of an existing Accounting
Standard requires a change in the accounting policy
hitherto in use.
(ii) Historical cost convention
The financial statements have been prepared on a
historical cost basis, except for the following:
• Certain financial assets and liabilities which have
been measured at fair value;
• Defined benefit plans - plan assets measured at
fair value;
• Customer loyalty programmes.
(iii) Use of estimates
In preparing the financial statements in conformity
with accounting principles generally accepted in India,
management is required to make estimates and
assumptions that may affect the reported amounts
of assets and liabilities and the disclosure of contingent
liabilities as at the date of the financial statements
and the amounts of revenue and expenses during the
reported period. Actual results could differ from those
estimates. Any revision to such estimates is recognised
in the period the same is determined.
b) Revenue recognition
(i) Performance obligation in contracts with
customers is met throughout the stay of guest
in the hotel or on rendering of services and sale
of goods.
(ii) Revenue towards satisfaction of a performance
obligation is measured at the amount of
transaction price (net of variable consideration)
allocated to that performance obligation. The
transaction price of services rendered is net of
variable consideration on account of various trade
discounts and schemes offered by the Company
as part of the contract.
(iii) Interest income is accrued on a time proportion
basis using the effective interest rate method.
(iv) Interest income from debt instruments is
recognised using the effective interest method.
The effective interest rate is the rate that exactly
discounts estimated future cash receipts
through the expected life of the financial asset
to the gross carrying amount of a financial asset.
When calculating the effective interest rate, the
Company estimates the expected cash flows
by considering all the contractual terms of the
financial instrument (for example, prepayment,
extension, call and similar options) but does not
consider the expected credit losses.
(v) Dividends are recognised in the Statement of
Profit and Loss only when the right to receive
payment is established, it is probable that the
economic benefits associated with the dividend
will flow to the Company and the amount of the
dividend can be measured reliably.
(vi) Other incomes are recognised in the Statement of
Profit and Loss when the amount can be reliably
measured, it is probable that future economic
benefits will flow to the entity and specific criteria
have been met for the activities involved therein.
The Company recognises revenue when the amount
of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity
and specific criteria have been met for each of the
Company's activities as described below. The Company
bases its estimates on historical results, taking into
consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Timing of revenue recognition from major
business activities
• Hospitality services: Revenue from hospitality
services is recognised when the performance
obligation of the Company is completed i.e. services
are rendered and the same becomes chargeable or
when collectability is certain. This includes room
revenue and food and beverage revenue.
• Other services: Revenue from shop license fee
included under "Other services" is recognised on
accrual basis as per terms of the contract. Shop
license fees basically consists of license fees
earned from letting of spaces for retail and office
at the hotels.
• Loyalty Program: Revenue in respect of customer
loyalty is recognised when loyalty points are
redeemed by the customers or on its expiry.
c) Foreign currency translation
(i) Presentation currency:
The financial statements are presented in Indian
Rupee (Rs.) which is the Functional Currency of
the Company.
(ii) Transactions and balances
Effective April 1,2018, the Company had adopted
Appendix B to Ind AS 21, Foreign Currency
Transactions and Advance Consideration which
clarifies the date of transaction for the purpose
of determining the exchange rate to be used on
initial recognition of the related asset, expense
or income when an entity had received or paid
advance consideration in a foreign currency. The
effect on account of adoption of this amendment
had been insignificant.
Sales made in any currency other than the
functional currency of the Company are converted
at the prevailing applicable exchange rate. Gain/
Loss arising out of fluctuations in exchange rate
is accounted for on realisation or translation into
the reporting currency of the corresponding
receivables at the year end.
Payments made in foreign currency are converted
at the applicable rate prevailing on the date
of remittance. Liability on account of foreign
currency is converted at the exchange rate
prevailing at the end of the year. Monetary items
denominated in foreign currency are converted at
the exchange rate prevailing at the end of the year.
d) Income tax
Current income tax is recognised based on the taxable
profit for the year using tax rates and tax laws that have
been enacted or substantially enacted on the date of
Balance Sheet.
Management periodically evaluates positions taken
in tax returns with respect to situations in which
applicable tax regulations are subject to interpretation.
It establishes provisions, where appropriate, on
the basis of amounts expected to be paid to the
tax authorities.
Effective April 1, 2019, the Company had adopted
Appendix C to Ind AS 12, "Income taxes", which clarifies
how to apply the recognition and measurement
requirements in Ind AS 12, "Income taxes" when there
is uncertainty over income tax treatments. The effect
on adoption of Appendix C to Ind AS 12, "Income taxes"
was insignificant.
e) Deferred tax
Deferred income tax is provided in full, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the financial statements,
using tax rates and tax laws that have been enacted
or substantially enacted on the date of Balance Sheet.
Deferred tax assets are recognised for all deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available
to utilise those temporary differences and losses.
Deferred tax assets are recognised for the future tax
consequences to the extent it is probable that future
taxable profits will be available against which the
deductible temporary differences can be utilised.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax
balances relate to the same taxation authority. Current
tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
Current and deferred tax are recognised in Statement
of Profit and Loss, except to the extent that it relates
to items recognised in other comprehensive income
or directly in equity, in which case, the taxes are also
recognised in other comprehensive income or directly
in equity, respectively.
f) Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting provided to
the chief operating decision maker, ("CODM").
The Board of Directors of the Company, which has been
identified as being the CODM, generally assesses the
financial performance and position of the Company
and makes strategic decisions.
g) Leases
The Company as a lessee:
The Company's right-of-use assets primarily consist
of leases for land, building and vehicle leases. The
Company assesses whether a contract contains
a lease, at inception of a contract. A contract is, or
contains, a lease if the contract conveys the right to
control the use of an identified asset for a period of
time in exchange for consideration. To assess whether
a contract conveys the right to control the use of an
identified asset, the Company assesses whether: (i)
the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease and (iii) the Company has the right to direct
the use of the asset.
At the date of commencement of the lease, the
Company recognises a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term
of twelve months or less (short-term leases) and low
value leases. For these short-term and low value
leases, the Company recognises the lease payments
as an operating expense on a straight-line basis over
the term of the lease.
Certain lease arrangements include the option to
extend or terminate the lease before the end of the
lease term. Right-of-use assets and lease liabilities
includes these options when it is reasonably certain
that they will be exercised.
The right-of-use assets are initially recognised at
cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
prior to the commencement date of the lease plus
any initial direct costs incurred by the lessee less
any lease incentives and estimated restoration costs
of the underlying asset where applicable. They are
subsequently measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. If the Company is reasonably certain
to exercise a purchase option, the right-of-use asset
is depreciated over the underlying assets useful life.
Right-of-use assets are evaluated for recoverability
whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable.
For the purpose of impairment testing, the recoverable
amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual
asset basis unless the asset does not generate cash
flows that are largely independent of those from
other assets. In such cases, the recoverable amount
is determined for the Cash Generating Unit (CGU) to
which the asset belongs.
The lease liability is initially measured at amortised
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country
of domicile of these leases. Lease liabilities are
remeasured with a corresponding adjustment to the
related right-of-use asset if the Company changes its
assessment if whether it will exercise an extension or
a termination option.
Lease payments are allocated between principal and
finance cost. The finance cost is charged to profit or
loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of
the liability for each period.
The Company remeasures the lease liability (and
makes a corresponding adjustment to the related
right-of-use asset) whenever:
• The lease term has changed or there is a significant
event or change in circumstances resulting in a
change in the assessment of exercise of a purchase
option, in which case the lease liability is remeasured
by discounting the revised lease payments using a
revised discount rate.
• The lease payments change due to changes in an
index or rate or a change in expected payment
under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting
the revised lease payments using an unchanged
discount rate (unless the lease payments change is
due to a change in a floating interest rate, in which
case a revised discount rate is used).
• A lease contract is modified and the lease
modification is not accounted for as a separate
lease, in which case the lease liability is remeasured
based on the lease term of the modified lease by
discounting the revised lease payments using
a revised discount rate at the effective date of
the modification.
In case of expiry/termination of lease contract the lease
liability and the corresponding Right-of-use asset is
derecognised and the resulting loss/gain recognised
in the statement of profit and loss account
Lease liabilities and right-of-use assets have been
separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows.
The Company applies the practical expedient provided
by the standard allowing not to separate the lease
component from other service components included
in its lease agreements. Accordingly, all fixed payments
provided for in the lease agreement, whatever their
nature, are included in the lease liability. The interest
cost on lease liability (computed using effective
interest method), is expensed in the Statement of
Profit and Loss.
Some leases for hotel properties contain variable lease
payments that are based on the hotel's performance,
as defined by the agreement. These payment terms are
common practice in the Hospitality Industry. Variable
lease payments are recognised in the Statement of
Profit and Loss on an accrual basis.
The Company as a lessor:
Leases for which the Company is a lessor is classified
as a finance or operating lease. Whenever the terms
of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract
is classified as a finance lease. All other leases are
classified as operating leases.
When the Company is an intermediate lessor, it
accounts for its interests in the head lease and the
sublease separately. The sublease is classified as a
finance or operating lease by reference to the right
of-use asset arising from the head lease.
For operating leases, rental income is recognised
on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in obtaining an
operating lease are added to the carrying amount of
the underlying asset and recognised as expense over
the lease term on the same basis as lease income.
For finance lease, finance income is recognised over
the lease term based on a pattern reflecting a constant
periodic rate of return on the lessor's net investment
in the lease.
Variable lease payments that do not depend on an
index or a rate are recognised as an income in the
period over which the event or condition that triggers
the payment occurs.
h) Impairment of assets
Assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's or
cash generating unit's carrying amount exceeds its
recoverable amount. Recoverable amount is higher of
an asset's net selling price and its value in use. Value
in use is the present value of estimated future cash
flows expected to arise from the continuing use of an
asset or cash generating unit and from its disposal at
the end of its useful life.
Impairment losses recognised in prior years
are reversed when there is an indicator that the
impairment losses recognised no longer exist or
have decreased. Such reversals are recognised as an
increase in carrying amounts of assets to the extent
that it does not exceed the carrying amounts that
would have been determined (net of amortisation or
depreciation) had no impairment loss been recognised
in previous years.
i) Cash and cash equivalents
For the purpose of presentation in the Statement of
Cash Flows, cash is defined to include cash on hand
and demand deposits with the banks. Cash equivalents
are defined as short-term balances, (with an original
maturity of three months or less from the date of
acquisition), highly liquid investments that are readily
convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value.
j) Trade receivables
Trade receivables are initially measured (initial
recognition amount) at their transaction price (in
accordance with Ind AS 115) unless those contain
a significant financing component determined in
accordance with Ind AS 115 or when the entity applies
the practical expedient in accordance with para 63 of
Ind AS 115 and subsequently measured at amortised
cost using the effective interest method, less provision
for impairment.
k) Contract liabilities
A contract liability is the obligation to transfer services
to a customer for which the Company has received
consideration from the customer. If a customer
pays consideration before the Company transfers
goods or services to the customer, a contract liability
is recognised when the payment is made. Contract
liabilities are recognised as revenue when the Company
performs under the contract.
l) Inventories
Inventories are valued at cost and net realisable value,
whichever is lower. Cost is determined based on
cumulative weighted average method. Cost comprises
expenditure incurred in the normal course of business
in bringing such inventories to its present location and
condition and includes, where applicable, appropriate
overheads based on normal level of activity. Net
realisable value is the estimated selling price in the
ordinary course of business less estimated costs
for completion and sale. Unserviceable/damaged/
discarded stocks and shortages are charged to the
Statement of Profit and Loss.
m) Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the
following measurement categories:
• those to be measured subsequently at fair
value (either through other comprehensive
income, or through profit or loss)
• those measured at amortised cost.
The classification depends on the entity's business
model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses
will be recorded in the Statement of Profit and
Loss. For investments in debt instruments, this
will depend on the business model in which the
investment is held. For investments in equity
instruments, this will depend on whether the
Company has made an irrevocable election at
the time of initial recognition to account for the
equity investment at fair value through other
comprehensive income.
(ii) Measurement
At initial recognition, the Company measures a
financial asset at its fair value, plus in the case
of a financial asset not recorded at fair value
through profit or loss (FVTPL), 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 the Statement of Profit and Loss.
However, trade receivables that do not contain a
significant financing component are measured at
transaction price.
(a) Debt instruments
Subsequent measuremen t of debt
instruments depends on the Company's
business model for managing the asset and
the cash flow characteristics of the asset.
There are three measurement categories
into which the Company classifies its
debt instruments:
Amortised cost: Assets that are held for
collection of contractual cash flows where
those cash flows represent solely payments
of principal and interest are measured at
amortised cost.
Fair value through other comprehensive
income (FVTOCI): Assets that are held for
collection of contractual cash flows and
for selling the financial assets, where the
assets cash flows represent solely payments
of principal and interest, are measured at
fair value through other comprehensive
income (FVOCI). Movements in the
carrying amount are taken through OCI,
except for the recognition of impairment
gains or losses, interest revenue and
foreign exchange gains and losses which
are recognised in the Statement of Profit
and Loss. When the financial asset is
derecognised, the cumulative gain or loss
previously recognised in OCI is reclassified
from equity to the Statement of Profit and
Loss and recognised in other gains/(losses).
Interest income from these financial assets is
included in other income using the effective
interest rate method.
Fair value through profit or loss (FVTPL):
Assets that do not meet the criteria for
amortised cost or FVTOCI are measured at
fair value through profit or loss.
(b) Equity instruments
The Company subsequently measures all
equity investments at fair value. Changes
in the fair value of financial assets at fair
value through profit or loss are recognised
in other gain/ (losses) in the Statement of
Profit and Loss.
(iii) Impairment of financial assets
The Company assesses at each reporting date
whether a financial asset (or a group of financial
assets) such as investments, advances and
security deposits held at amortised cost and
financial assets that are measured at fair value
through other comprehensive income are tested
for impairment based on evidence or information
that is available without undue cost or effort.
The Company assesses on a forward looking basis
the expected credit losses associated with its
assets carried at amortised cost. The impairment
methodology applied depends on whether there
has been a significant increase in credit risk.
For trade receivables only, the Company applies
the simplified approach permitted by Ind AS 109
Financial Instruments, which requires expected
lifetime losses to be recognised from initial
recognition of the receivables.
(iv) Derecognition of financial assets
A financial asset is derecognised only when
• The Company has transferred the rights to
receive cash flows from the financial asset or
• Retains the contractual rights to receive the
cash flows of the financial asset, but assumes
a contractual obligation to pay the cash flows
to one or more recipients.
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is derecognised. Where the entity has not
transferred substantially all risks and rewards
of ownership of the financial asset, the financial
asset is not derecognised.
Where the entity has neither transferred a
financial asset nor retains substantially all risks
and rewards of ownership of the financial asset,
the financial asset is derecognised if the Company
has not retained control of the financial asset.
Where the Company retains control of the financial
asset, the asset is continued to be recognised
to the extent of continuing involvement in the
financial asset.
(v) Income recognition
Interest income: Interest income from debt
instruments is recognised using the effective
interest rate method. The effective interest rate
is the rate that exactly discounts estimated future
cash receipts through the expected life of the
financial asset to the gross carrying amount of
a financial asset. When calculating the effective
interest rate, the Company estimates the expected
cash flows by considering all the contractual
terms of the financial instrument (for example,
prepayment, extension, call and similar options)
but does not consider the expected credit losses.
Dividend income: Dividends are recognised
in profit or loss only when the right to receive
payment is established, it is probable that the
economic benefits associated with the dividend
will flow to the Company and the amount of the
dividend can be measured reliably.
n) Financial liabilities
(i) Measurement
Borrowings, trade payables and other financial
liabilities are initially recognised at the value of
the respective contractual obligations. They are
subsequently measured at amortised cost. Any
discount or premium on redemption/settlement
is recognised in the Statement of Profit and Loss
as finance cost over the life of the liability using
the effective interest method and adjusted to the
liability figure disclosed in the Balance Sheet.
(ii) Derecognition of financial liabilities
Financial liabilities are derecognised when
the liability is extinguished, that is, when the
contractual obligation is discharged, cancelled and
on expiry. The difference between the carrying
amount of the financial liability derecognised and
the consideration paid and payable is recognised
in the profit and loss account.
o) Property, plant and equipment
Freehold land is carried at historical cost. All other
items of property, plant and equipment are stated
at historical cost less accumulated depreciation.
Historical cost represents direct expenses incurred
on acquisition or construction of the assets to bring
the asset to the location and condition necessary for
it to be capable of operating in the manner intended
by management and the share of indirect expenses
directly attributable to construction allocated in
proportion to the direct cost involved.
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
upon disposal or when no future economic benefits
are expected to arise from the continued use of the
asset. All other repairs and maintenance are charged
to profit or loss during the reporting period in which
they are incurred.
Capital work-in-progress comprises the cost of
property, plant and equipment that are not yet ready
for their intended use on the reporting date and
materials at site.
Transition to Ind AS
On transition to Ind AS, the Company had elected to
continue with the carrying value of all of its property,
plant and equipment recognised as at April 1, 2015
measured as per the previous GAAP and used that
carrying value as the deemed cost of the property,
plant and equipment.
Depreciation methods, estimated useful lives
and residual value
Depreciation on property, plant and equipment other
than land and hotel buildings and certain buildings on
leasehold land is provided on 'Straight Line Method'
based on useful life as prescribed under Schedule II
of the Companies Act, 2013. Buildings on leasehold
land (other than perpetual lease) are depreciated
over the useful life or over the remaining lease period
whichever is shorter.
The hotel buildings are depreciated equally over the
balance useful life ascertained by an independent
technical expert. As at March 31, 2025, the balance
useful life ranges between 7 years and 50 years and
are higher than those specified by Schedule II to the
Companies Act, 2013. The management believes that
the balance useful lives so assessed best represent the
periods over which the hotel buildings are expected
to be in use. The residual values are not more than 5%
of the original cost of the asset. The assets residual
values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
Improvements to owned/leased buildings are
depreciated based on their estimated useful lives/
expected lease period.
Freehold land is not depreciated.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
are included in profit or loss within other gains/(losses).
p) Intangible assets
Intangible assets with finite useful life are stated
at cost less accumulated amortisation and net of
accumulated impairment losses, if any. An intangible
asset is recognised if it is probable that the expected
future economic benefits that are attributable to the
asset will flow to the Company and its cost can be
measured reliably. Intangible assets are amortised
on straight line basis over their estimated useful lives.
The estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for
on a prospective basis
Transition to Ind AS
On transition to Ind AS, the Company had elected to
continue with the carrying value of all of its intangible
assets recognised as at April 1, 2015 measured as per
the previous GAAP and used that carrying value as
the deemed cost of the intangible assets.
q) Trade and other payables
These amounts represent liabilities for goods and
services provided to the Company prior to the end
of financial year which are unpaid. The amounts are
unsecured and are usually paid within 30 days of
recognition. Trade and other payables are presented as
current liabilities unless payment is not due within 12
months after the reporting period. They are recognised
initially at their fair value and subsequently measured
at amortised cost using the effective interest method.
r) Borrowing costs
General and specific borrowing costs that are directly
attributable to the acquisition, construction or
production of a qualifying asset are capitalised as
part of the cost of respective assets until such time as
the asset is substantially ready for their intended use
or sale. Qualifying assets are assets that necessarily
take a substantial period of time to get ready for
their intended use or sale. Other borrowing costs are
expensed in the period in which they are incurred.
Borrowing costs is measured at amortised cost using
effective interest rate method.
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