3 Material Accounting Policies
3.1 Property, Plant and Equipment
a) Property, Plant and Equipment are carried at cost less accumulated
depreciation and accumulated impairment losses, if any. Cost includes
expenditure that is directly attributable to the acquisition of the items.
Borrowing Cost (if any) during the period of construction is added to the cost
of eligible tangible assets.
b) Depreciation is charged to the Statement of Profit and Loss so as to
expense the cost of assets (other than freehold land and properties under
construction) less their residual values over their useful lives, using the
straight line method, as per the useful life prescribed in Schedule II to
the Companies Act, 2013. Assets costing less then Rs. 5000/- are fully
depreciated in the year of purchase.
c) Freehold land is not depreciated.
d) The residual values, useful lives and methods of depreciation of property,
plant and equipment are reviewed at each financial year- end and adjusted
prospectively, if appropriate.
e) The gain or loss arising on the disposal or retirement of an item of property,
plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the
Statement of Profit and Loss on the date of disposal or retirement.
3.2 Intangible Assets
Identifiable intangible assets are recognised:
a) when the Company controls the asset,
b) it is probable that future economic benefits attributed to the asset will flow to
the Company and
c) the cost of the asset can be reliably measured.
Computer software's are capitalised at the amounts paid to acquire the respective
license for use and are amortised over the period of license, generally not
exceeding five years on straight line basis. The assets' useful lives are reviewed at
each financial year end.
3.3 Impairment
A. Financial Assets
The Company recognises loss allowances using the expected credit loss (ECL)
model for the financial assets which are not fair valued through Statement of
Profit and Loss. Loss allowance for trade receivables with no significant financing
component is measured at an amount equal to lifetime ECL. For all other
financial assets, expected credit losses are measured at an amount equal to the
12-month ECL, unless there has been a significant increase in credit risk from
initial recognition in which case those are measured at lifetime ECL. The amount of
expected credit losses (or reversal) that is required to adjust the loss allowance at
the reporting date to the amount that is required to be recognised is recognised as
an impairment gain or loss in the Statement of Profit and Loss.
B. Non Financial Assets
An asset is considered as impaired when at the date of Balance Sheet there are
indications of impairment and the carrying amount of the asset, or where applicable
the cash generating unit to which the asset belongs exceeds its recoverable
amount (i.e. the higher of the net asset selling price and value in use).The carrying
amount is reduced to the recoverable amount and the reduction is recognized
as an impairment loss in the Statement of Profit and Loss. The impairment loss
recognized in the prior accounting period is reversed if there has been a change
in the estimate of recoverable amount. Post impairment, depreciation is provided
on the revised carrying value of the impaired asset over its remaining useful
life.
3.4 Financial instruments - initial recognition, subsequent measurement and
impairment
A financial instrument is any contract that gives rise to a financial asset of one entity
and a financial liability or equity instrument of another entity.
Financial Assets
Financial Assets are measured at amortised cost or fair value through Other
Comprehensive Income or fair value through Profit or Loss, depending on its
business model for managing those financial assets and liabilities and the assets
and liabilities contractual cash flow characteristics.
Subsequent measurements of financial assets are dependent on initial
categorisation. For impairment purposes significant financial assets are tested on
an individual basis, other financial assets are assessed collectively in groups that
share similar credit risk characteristics.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method, less provision for impairment.
Impairment is made on the expected credit losses, which are the present value
of the cash shortfalls over the expected life of financial assets. The estimated
impairment losses are recognised in a separate provision for impairment and the
impairment losses are recognised in the Statement of Profit and Loss within other
expenses.
Subsequent changes in assessment of impairment are recognised in provision for
impairment and the change in impairment losses are recognised in the Statement
of Profit and Loss within other expenses.
For foreign currency trade receivable, impairment is assessed after reinstatement
at closing rates.
Individual receivables which are known to be uncollectible are written off by
reducing the carrying amount of trade receivable and the amount of the loss is
recognised in the Statement of Profit and Loss within other expenses.
Subsequent recoveries of amounts previously written off are credited to other
Income
Investment in equity shares
Investment in equity securities are initially measured at fair value and is recognised
through Profit and Loss account.
Financial Liabilities
Financial Liabilities
At initial recognition, all financial liabilities other than fair valued through profit and
loss are recognised initially at fair value less transaction costs that are attributable
to the issue of financial liability. Transaction costs of financial liability carried at
fair value through profit or loss is expensed in profit or loss. However, borrowings,
which is likely to be assigned or negotiated are initially measured at fair value
through profit and loss account. Other borrowings are measured at amortised cost
using the effective interest rate method. Amortised cost is calculated by taking
into account any discount or premium on acquisition and fee or costs that are an
integral part of the Effective rate of interest (EIR). The EIR amortisation is included
in finance costs in the Statement of Profit and Loss.
Trade and other payables
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.
3.5 Cash and cash equivalents
Cash and cash equivalents includes Cash on hand and at bank and other short¬
term highly liquid investments with original maturities of three months or less that
are readily convertible to a known amount of cash and are subject to an insignificant
risk of changes in value and are held for the purpose of meeting short-term cash
commitments.
For the purpose of the Statement of Cash Flows, cash and cash equivalents
consists of cash and short term deposits.
3.6 Inventories
Inventories (real estate) are valued at lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of business,
less estimated costs of completion and the estimated costs necessary to make the
sale. Stock of Food & Beverages and stores and operating supplies are carried at
cost or net realizable value whichever is lower.
3.7 Revenue recognition and Other income
Revenue is recognised at an amount that reflects the consideration to which the
Company expects to be entitled in exchange for transferring the goods or services
to a customer i.e. on transfer of control of the goods or service to the customer.
Revenue from sales of goods or rendering of services is net of Indirect taxes,
returns and discounts as per Ind AS 115.
a) Revenue from Hotel operations viz room rent, food & beverages and other
allied services is recognised upon rendering of services.
b) Other allied services:- In relation to laundry income, communication income,
health club income, airport transfers income and other allied services, the
revenue has been recognized by reference to the time of service rendered.
c) Interest income is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
d) The rentals from leased premises are considered as revenue income on
accrual basis. In case of sale of leased premises, rental income is accounted
for up to the date of flat buyer agreement.
3.8 Employee benefits
a) Short term employee benefits are recognized as an expense in the
Statement of Profit and Loss of the year in which the related services are
rendered.
b) Leave encashment being a short term benefit is accounted for using the
Projected Unit Credit Method, on the basis of actuarial valuations carried
out by third party actuaries at each Balance Sheet date. Actuarial gains
and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to profit and loss in the period in which
they arise.
c) Contribution to Provident Fund, a defined contribution plan, is made in
accordance with the statute, and is recognised as an expense in the year in
which employees have rendered services.
d) The cost of providing gratuity, a defined benefit plans, is determined using
the Projected Unit Credit Method, on the basis of actuarial valuations carried
out by third party actuaries at each Balance Sheet date. Actuarial gains
and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to Other Comprehensive Income in the
period in which they arise. Other costs are accounted in statement of profit
and loss.
3.9 Foreign currencies
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at
rates prevailing at the date of the transaction. Subsequently monetary items are
translated at closing exchange rates of balance sheet date and the resulting
exchange difference recognised in profit or loss. Differences arising on settlement
of monetary items are also recognised in profit or loss.
3.10 Borrowing costs
Borrowing costs specifically relating to the acquisition or construction of qualifying
assets that necessarily takes a substantial period of time to get ready for its
intended use are capitalized (net of income on temporarily deployment of funds) as
part of the cost of such assets. Borrowing costs consist of interest and other costs
that the Company incurs in connection with the borrowing of funds.
For general borrowing used for the purpose of obtaining a qualifying asset, the
amount of borrowing costs eligible for capitalization is determined by applying
a capitalization rate to the expenditures on that asset. The capitalization rate is
the weighted average of the borrowing costs applicable to the borrowings of the
Company that are outstanding during the period, other than borrowings made
specifically for the purpose of obtaining a qualifying asset. The amount of borrowing
costs capitalized during a period does not exceed the amount of borrowing cost
incurred during that period.
All other borrowing costs are expensed in the period in which they occur.
3.11 Taxation
Income tax expense represents the sum of current and deferred tax (including
MAT). Tax is recognised in the Statement of Profit and Loss, except to the extent
that it relates to items recognised directly in equity or other comprehensive income,
in such cases the tax is also recognised directly in equity or in other comprehensive
income. Any subsequent change in direct tax on items initially recognised in equity
or other comprehensive income is also recognised in equity or other comprehensive
income, such change could be for change in tax rate.
Current tax provision is computed for Income calculated after considering
allowances and exemptions under the provisions of the applicable Income Tax
Laws. Current tax assets and current tax liabilities are off set, and presented as net.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the Balance sheet and the corresponding tax bases
used in the computation of taxable profit and are accounted for using the liability
method. Deferred tax liabilities are generally recognised for all taxable temporary
differences, and deferred tax assets are generally recognised for all deductible
temporary differences, carry forward tax losses and allowances to the extent
that it is probable that future taxable profits will be available against which those
deductible temporary differences, carry forward tax losses and allowances can be
utilised. Deferred tax assets and liabilities are measured at the applicable tax rates.
Deferred tax assets and deferred tax liabilities are off set, and presented as net.
The carrying amount of deferred tax assets is reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that sufficient taxable profits
will be available against which the temporary differences can be utilised.
Minimum Alternative Tax (MAT) is applicable to the Company. Credit of MAT is
recognised as an asset only when and to the extent there is convincing evidence
that the Company will pay normal income tax during the specified period, i.e., the
period for which MAT credit is allowed to be carried forward. In the year in which
the MAT credit becomes eligible to be recognised as an asset, the said asset is
created by way of a credit to the profit and lossaccount and shown as MAT credit
entitlement. The Company reviews the same at each balance sheet date and writes
down the carrying amount of MAT credit entitlement to the extent there is no longer
convincing evidence to the effect that the Company will pay normal income tax
during the specified period.
3.12 Lease
Effective from 1 April 2019, the Company has applied Ind AS 116, which replaces
the existing lease standard, Ind AS 17 Leases and other interpretations. The
company has applied Ind AS 116 using the modified retrospective approach and
therefore the comparative information has not been restated and continues to be
reported under Ind AS 17.
As a lessee
The company recognises a right-of use asset representing its right to use the
underlying asset and a lease liability representing its obligation to make lease
payments.The right-of-use asset is subsequently depreciated using the straight
line method from the commencement date to the earlier of the end of the useful life
or the end of the lease term.
The lease liability is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the Company's
incremental borrowing rate. Subsequent to initial measurement, the liability will be
reduced for payments made and increased for interest.
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.
As a lessor
Lease income from operating leases, where the Company is a lessor, is recognised
in income on a straight-line basis over the lease term unless the receipts are
structured to increase in line with expected general inflation to compensate for the
expected inflation.
3.13 Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the
year attributable to equity shareholders (after deducting preference dividends and
attributable taxes) by the weighted average number of equity shares outstanding
during the year. Partly paid equity shares are treated as a fraction of an equity
share to the extent that they were entitled to participate in dividends relative to a
fully paid equity share during the reporting year.
For the purpose of calculating diluted earnings per share, the net profit or loss
for the year attributable to equity shareholders and the weighted average number
of shares outstanding during the year are adjusted for the effects of all dilutive
potential equity shares, if any.
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