MATERIAL ACCOUNTING POLICIES
1. Corporate information
Howard Hotels Limited ('the Company') is a public company domiciled in India and incorporated under the provisions of the Companies
Act, 1956. Its equity shares are listed on the BSE Limited. The registered office of the Company is located at 20, Maurya Complex, B-28
Subhash Chowk, Laxmi Nagar, New Delhi-110092.
The Company is primarily engaged in the business of owning, operating & managing hotels, palaces and resorts.
2. Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the
Companies (Indian Accounting Standards) Rules, 2015, Companies (Indian Accounting Standards) (Amendment) Rules, 2016 as amended
and the relevant provisions of the Companies Act, 2013.
The financial statements have been prepared on a going concern basis using historical cost convention and on an accrual method of
accounting, except for certain financial assets and financial liabilities which are measured at fair value/ amortized cost (Refer accounting
policy regarding financial instruments).
The financial statements are presented in Indian Rupees Lakhs and all values have been rounded to the nearest Lakh with two decimal
places, unless stated otherwise.
3. Material accounting policies
The Company has applied the following accounting policies to all periods presented in the financial statements.
a) Functional and presentation currency
The financial statements are prepared in Indian Rupees, which is the Company's presentation currency and the functional currency
for all its operations.
b) Current and non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is classified as
current when it is:
• expected to be realised or intended to sold or consumed in the normal operating cycle;
• held primarily for the purpose of trading;
• expected to be realised within twelve months after the reporting period; or
• cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the
reporting date.
All other assets are classified as non-current.
A liability is classified as current when:
• it is expected to be settled in the normal operating cycle;
• it is held primarily for the purpose of trading;
• it is due to be settled within twelve months after the reporting date; or
• there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting date.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current only.
Operating cycle of the Company is the time between the acquisition of assets for processing and their realisation in cash or cash
equivalents.
c) Revenue recognition
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.
Income from Operations:
Rooms, Food and Beverage & Banquets: Revenue is recognised at the transaction price that is allocated to the performance obligation.
Revenue includes room revenue, food and beverage sale and banquet services which is recognised once the rooms are occupied,
food and beverages are sold and banquet services have been provided as per the contract with the customer.
Space and shop rentals: Rentals basically consist of rental revenue earned from letting of spaces for retail shops at the properties.
Revenue is recognized in the period in which services are being rendered.
Other allied services: In relation to laundry income, communication income, and other allied services, the revenue has been recognized
by reference to the time of service rendered.
Effective 01 April 2018, the Company has adopted Indian Accounting Standard 115 (Ind AS 115) -'Revenue from contracts with
customers' using the cumulative catch-up transition method, applied to contracts that were not completed as on the transition date
i.e. 01 April 2018. Accordingly, the comparative amounts of revenue and the corresponding contract assets / liabilities have not been
retrospectively adjusted. The effect on adoption of Ind-AS 115 was insignificant.
d) Other Income
i. Interest Income
Interest income is accrued on time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Interest income is included in finance income in the statement of profit and loss.
ii. Dividends
Dividend income is 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.
e) Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions
will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods
that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as
income in equal amounts over the expected useful life of the related asset.
f) Property, plant and equipment
All property, plant and equipment are stated at historical cost, net of accumulated depreciation (other than freehold land) and
accumulated impairment losses, if any.
The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase
taxes, and any directly attributable costs of bringing an asset to working condition and location for its intended use. It also includes
the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Items such as
spares are capitalized when they meet the definition of property, plant and equipment.
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. Likewise, expenditure towards major inspections and overhauls are
identified as a separate component and depreciated over the expected period till the next overhaul expenditure.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future
economic benefits from the existing asset beyond its previously assessed standard of performance/life. All other expenses on existing
property, plant and equipment, including day-today repair and maintenance expenditure and cost of replacing parts, are charged to
the statement of profit and loss for the period during which such expenses are incurred.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its
estimated recoverable amount.
Depreciation on property, plant and equipment is calculated using the straight-line method (SLM) to allocate their cost, net of their
residual values, over their estimated useful lives, as per the useful life prescribed in Schedule II to the Companies Act, 2013.
The assets' residual values and useful lives are reviewed and adjusted if appropriate, at the end of each reporting period.
Freehold land is not depreciated.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use. Any gain or loss arising on the disposal or retirement or derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the
statement of profit and loss.
Capital work-in-progress represents cost of property, plant and equipment that are not yet ready for their intended use and are
carried at cost determined as aforesaid.
g) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are
carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets are
not capitalised and the expenditure is recognised in the statement of profit and loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite useful lives are amortised over their useful economic lives and assessed for impairment whenever there
is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation
period or method, as appropriate, and are treated as changes in accounting estimates to be adjusted prospectively. The amortisation
expense on intangible assets with finite lives is recognised in the statement of profit and loss.
The Company does not have any intangible assets with indefinite useful lives.
Softwares are amortized on a straight line basis over a period of 4 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 and loss when the asset is derecognised.
h) Inventories
Stock of food and beverages and stores and operating supplies are carried at the lower of cost [computed on a first-in, first-out (FIFO)
basis] or net realisable value. Cost includes fair value of consideration paid including duties and taxes (other than those refundable),
inward freight, and other expenditure directly attributable to the purchase. Trade discounts and rebates are deducted in determining
the cost of purchase.
i) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. Borrowing costs consist of
interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing costs also include exchange
differences to the extent regarded as an adjustment to the borrowing costs.
All other borrowing costs are expensed in the period in which they occur and are recognised in the statement of profit and loss using
the effective interest method.
j) Leases
The Company as a lessee
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 recognizes a right-of-use (ROU) asset and a corresponding lease liability for
all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low value
leases. For these short-term and low-value leases, the Company recognizes the lease payments as an operating expense on a straight¬
line basis over the term of the lease. Certain lease arrangements includes the options to extend or terminate the lease before the end
of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The
ROU assets are initially recognized 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 less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and impairment losses. ROU 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. ROU 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 amortized 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 ROU asset if the
Company changes its assessment of whether it will exercise an extension or a termination option. Lease liability and ROU assets have
been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
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 ROU asset arising from the head
lease. For operating leases, rental income is recognized on a straight-line basis over the term of the relevant lease.
k) Income 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.
Current income tax relating to items recognized outside of profit or loss is recognized outside of profit or loss [either in other
comprehensive income (OCI) or in equity]. Current tax items are recognized 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 on the basis of amounts expected to be
paid to the tax authorities.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
• when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
• in respect of taxable temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches,
associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled by the
Company and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
• when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss;
• In respect of deductible temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches,
associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax
assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as at the reporting date.
Current tax and deferred tax relating to items recognised outside profit or loss are recognised outside profit or loss (either in other
comprehensive income or in equity).
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and tax liabilities on a net basis.
l) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of
the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented
as current employee benefit obligations in the balance sheet.
Post-employment obligations
The Company operates the following post-employment schemes:
a. Defined benefit plans in the nature of gratuity, and
b. Defined contribution plans such as provident fund.
Gratuity obligations
The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated
annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in Indian Rupees is determined by discounting the estimated future
cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating
to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value
of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the
period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of
changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised
immediately in profit or loss as past service cost.
Defined contribution plans
The company pays provident fund contributions to publicly administered provident funds as per local regulations. The company has
no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution
plans and the contributions are recognised as employee benefit expense when they are due.
m) Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired. Other 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 carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other
assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for
possible reversal of the impairment at the end of each reporting period.
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