2.2 Material accounting policies
(a) Current versus non-current classification
The Company presents assets and liabilities in
the balance sheet based on current/ non-current
classification. An asset is treated as current when
it is:
• Expected to be realised or intended to be
sold or consumed in 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 period
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal
operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months
after the reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
The Company classifies all other liabilities as non¬
current.
Deferred tax assets and liabilities are classified
as non-current assets and liabilities.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.
(b) Foreign currencies
Functional and presentation currency
The Company's financial statements are presented
in INR, which is also the Company's functional
currency. Presentation currency is the currency
in which the Company's financial statements are
presented. Functional currency is the currency of
the primary economic environment in which an
entity operates and is normally the currency in
which the entity primarily generates and expends
cash. All the financial information presented
in Indian Rupees (INR) has been rounded to
the nearest of lakhs rupees, except where
otherwise stated.
Transactions and balances
Transactions in foreign currencies are initially
recorded by the Company's entities at their
respective functional currency spot rates at the
date the transaction first qualifies for recognition.
However, for practical reasons, the Company
uses an average rate if the average approximates
the actual rate at the date of the transaction.
Monetary assets and liabilities denominated
in foreign currencies are translated at the
functional currency spot rates of exchange at the
reporting date.
Exchange differences arising on settlement or
translation of monetary items are recognised in
profit or loss.
Non-monetary items that are measured in
terms of historical cost in a foreign currency are
translated using the exchange rates at the dates
of the initial transactions. Non-monetary items
measured at fair value in a foreign currency are
translated using the exchange rates at the date
when the fair value is determined. The gain or
loss arising on translation of non-monetary items
measured at fair value is treated in line with the
recognition of the gain or loss on the change in fair
value of the item (i.e., translation differences on
items whose fair value gain or loss is recognised
in OCI or profit or loss are also recognised in OCI
or profit or loss, respectively).
(c) Fair value measurement
The Company measures financial instruments
at fair value at each balance sheet date except
to certain instruments which are measured at
Amortized cost/ historic cost.
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement
is based on the presumption that the transaction
to sell the asset or transfer the liability takes
place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market
must be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is
measured or disclosed in the financial statements
are categorised within the fair value hierarchy,
described as follows, based on the lowest
level input that is significant to the fair value
measurement as a whole:
• Level 1 — Quoted (unadjusted) market
prices in active markets for identical assets
or liabilities
• Level 2 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable
• Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is unobservable.
For assets and liabilities that are recognised in
the financial statements on a recurring basis,
the Company determines whether transfers have
occurred between levels in the hierarchy by re¬
assessing categorisation (based on the lowest
level input that is significant to the fair value
measurement as a whole) at the end of each
reporting period.
The Company determines the policies and
procedures for both recurring fair value
measurement, such as derivative instruments and
unquoted financial assets measured at fair value.
External valuers are involved for valuation of
significant assets and liabilities. The management
selects external valuer on various criteria such as
market knowledge, reputation, independence and
whether professional standards are maintained
by valuer. The management decides, after
discussions with the Company's external valuers,
which valuation techniques and inputs to use for
each case.
At each reporting date, the management analyses
the movements in the values of assets and
liabilities which are required to be remeasured
or re-assessed as per the Company's accounting
policies. For this analysis, the management
verifies the major inputs applied in the latest
valuation by agreeing the information in the
valuation computation to contracts and other
relevant documents.
The management, in conjunction with the
Company's external valuers, also compares the
change in the fair value of each asset and liability
with relevant external sources to determine
whether the change is reasonable.
For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of
the fair value hierarchy.
This note summarises accounting policy for fair
value. Other fair value related disclosures are
given in the relevant notes:
• Disclosures for valuation methods, significant
estimates and assumptions (note 29)
• Quantitative disclosures of fair value
measurement hierarchy (note 34)
• Financial instruments (including those carried
at amortised cost) (note 34)
(d) Revenue recognition
The Company apply Ind AS 115 "Revenue from
Contracts with Customers" which establishes a
comprehensive framework to depict timing and
amount of revenue to be recognised.
In arrangements for room revenue and related
services, the Company has applied the guidance
in Ind AS 115 for recognition of Revenue from
contract with customer, by applying the revenue
recognition criteria for each distinct performance
obligation. The arrangements with customers
generally meet the criteria for considering
room revenue and related services as distinct
performance obligations. For allocating the
transaction price, the Company has measured
the revenue in respect of each performance
obligation of a contract at its relative standalone
selling price. The price that is regularly charged
for an item when sold separately is the best
evidence of its standalone selling price.
Revenue is recognized to the extent that it is
probable that the economic benefits will flow to
the Company and the revenue can be reliably
measured, regardless of when the payment is
being made. 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 goods sold and
services rendered is net of variable consideration
on account ofvarious discounts and schemes
offered by the Company as part of the contract.
The Company assesses its revenue arrangements
against specific criteria to determine if it is acting
as principal or agent. The Company has concluded
that it is acting as a principal in all of its revenue
arrangements. The specific recognition criteria
described below must also be met before revenue
is recognized.
Value Added Tax (VAT)/Goods and Service
Tax(GST) is not received by the Company on its
own account. Rather, it is tax collected on value
added to the commodity by the seller on behalf
of the government. Accordingly, it is excluded
from revenue.
Rooms, Restaurant, Banquets and Other
Services
Income from guest accommodation is recognized
on a day to day basis after the guest checks
into the Hotels and are stated net of allowances.
Incomes from other services are recognized as
and when services are rendered. Sales are stated
exclusive of Value Added Taxes (VAT), Goods and
Service Tax(GST)and Luxury Tax. Difference
of revenue over the billed as at the year-end
is carried in financial statement as unbilled
revenue separately.
Sale of goods
Revenue from the sale of goods is recognised
when the significant risks and rewards of
ownership of the goods have passed to the buyer,
sale of food and beverage are recognized at the
points of serving these items to the guests. Sales
are stated exclusive of VAT/ Goods and Service
Tax (GST).
Interest income
For all financial instruments measured at
amortized cost, interest income is recorded
using the effective interest rate (EIR). EIR is the
rate that exactly discounts the estimated future
cash payments or receipts over the expected
life of the financial instrument or a shorter
period, where appropriate, to the net carrying
amount of the financial asset or liability. Interest
income is included in finance income in the
income statement.
Dividends
Revenue is recognized when the Company's
right to receive the payment is established,
which is generally when shareholders approve
the dividend.
Management and other related fee
Revenue from the management services
comprises fixed and variable income. An entity
recognizes revenue relating to the fixed income
over time by measuring the progress towards
complete satisfaction of the performance
obligation. In respect of variable income, revenue
is recognized is on an accrual basis in accordance
with the terms of the relevant agreement.
(e) Taxes
Tax expense represents Current tax and
Deferred tax.
Current tax
The tax currently payable is based on taxable
profit for theyear. Taxable profit differs from 'profit
before tax' as reported in the statement of profit
and loss because of items of income or expense
that are taxable or deductible in other years and
items that are never taxable or deductible. The
current tax is calculated using tax rates that have
been enacted or substantively enacted by the
end of the reporting period.
Current tax assets and liabilities are measured
at the amount expected to be recovered from or
paid to the taxation authorities.
Current 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 provided using the balance sheet
approach 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
associated with investments in subsidiaries,
and associates, when the timing of the
reversal of the temporary differences can
be controlled 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 (including MAT credit)
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 associated with investments in
subsidiariesand associates, 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
(including MAT credit available) 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 at
the reporting date.
Deferred tax relating to items recognised outside
profit or loss is recognised outside profit or loss
(either in other comprehensive income or in
equity). Deferred tax items are recognised in
correlation to the underlying transaction either in
OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities
and the deferred taxes relate to the same taxable
entity and the same taxation authority.
Tax benefits acquired as part of a business
combination, but not satisfying the criteria for
separate recognition at that date, are recognised
subsequently if new information about facts and
circumstances change. Acquired deferred tax
benefits recognised within the measurement
period reduce goodwill related to that acquisition
if they result from new information obtained
about facts and circumstances existing at the
acquisition date.
If the carrying amount of goodwill is zero, any
remaining deferred tax benefits are recognised in
OCI/ capital reserve depending on the principle
explained for bargain purchase gains. All other
acquired tax benefits realised are recognised in
profit or loss.
(f) Property, plant and equipment (including
Capital work in progress)
Property, Plant and equipment is stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the
cost of replacing part of the plant and equipment
and borrowing costs for long-term construction
projects if the recognition criteria are met. Such
properties are classified to the appropriate
categories of property, plant and equipment
when completed and ready for intended use.
Depreciation of these assets, on the same basis
as other property assets, commences when the
assets are ready for their intended use. Freehold
land is not depreciated.Capital work in progress
is stated at cost.
When significant parts of plant and equipment
are required to be replaced at intervals, the
Company depreciates them separately based on
their specific useful lives. Likewise, when a major
inspection is performed, its cost is recognised in
the carrying amount of the plant and equipment
as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs
are recognised in profit or loss as incurred.
The present value of the expected cost for the
decommissioning of an asset after its use is
included in the cost of the respective asset if the
recognition criteria for a provision are met.
Depreciation on PPE is provided as per Schedule
II of Companies Act, 2013 on Straight Line Method
over its economic useful life of PPE as follows:
The Company, based on management estimates,
depreciates certain items of building, plant and
equipment over estimated useful lives which are
lower than the useful life prescribed in Schedule
II to the Companies Act, 2013. The management
believes that these estimated useful lives are
realistic and reflect fair approximation of the
period over which the assets are likely to be used.
An item of property, plant and equipment and any
significant part initially recognized is derecognized
upon disposal or when no future economic
benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the
asset (calculated as the difference between the
net disposal proceeds and the carrying amount
of the asset) is included in the income statement
when the asset is derecognized.
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.
(g) Intangible assets
Intangible assets acquired separately are
measured on initial recognition at cost. The
cost of intangible assets acquired in a business
combination is their fair value at the date of
acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated
amortization and accumulated impairment losses.
Internally generated intangibles, excluding
capitalised development costs, are not capitalised
and the related expenditure is reflected in profit
or loss in the period in which the expenditure
is incurred.
The useful lives of intangible assets are assessed
as 10 years for Brand (Keys Hotels) and 3 years for
other intangible assets which shall be amortised
on Straight line basis over its useful life.
Intangible assets with indefinite useful lives are
not amortized, but are tested for impairment at
each year end and whenever there is an indication
that the intangible assets may be impaired, either
individually or at the cash generating unit level.
The assessment of indefinite life is reviewed at
each period to determine whether the indefinite
life continues to be supportable. If not, the change
in useful life from indefinite to finite is made on a
prospective basis.
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 recognized
in the income statement when the asset
is derecognized.
(h) Investment properties
Investment properties are properties held to earn
rentals and/or for capital appreciation (including
property under construction for such purposes).
Investment properties are measured initially at
cost, including transaction costs. Subsequent
to initial recognition, investment properties are
stated at cost less accumulated depreciation and
accumulated impairment loss, if any.
The Company depreciates building component
of investment property over the remaining
estimated useful life on the date of purchase after
considering total economic useful life of 60 years.
Though the Company measures investment
property usingdeemedcost based measurement,
the fair value of investment property is disclosed
in the notes. Fair values are determined based
on an evaluation performed by an accredited
external independent valuer.
Investment properties are derecognised either
when they have been disposed of or when they
are permanently withdrawn from use and no
future economic benefit is expected from their
disposal. The difference between the net disposal
proceeds and the carrying amount of the asset
is recognised in profit or loss in the period
of derecognition.
(i) Borrowing costs
Borrowing cost includes interest expense as per
Effective Interest Rate (EIR).
Borrowing costs directly attributable to the
acquisition or construction of an asset that
necessarily takes a substantial period of time to
get ready for its intended use are capitalised as
part of the cost of the asset until such time that the
assets are substantially ready for their intended
use. Where funds are borrowed specifically
to finance a project, the amount capitalised
represents the actual borrowing costs incurred.
Where surplus funds are available out of money
borrowed specifically to finance a project, the
income generated from such current investments
is deducted from the total capitalized borrowing
cost. Where the funds used to finance a project
form part of general borrowings, the amount
capitalised is calculated using a weighted average
of rates applicable to relevant general borrowings
of the Company during the year. Capitalisation
of borrowing costs is suspended and charged to
profit and loss during the extended periods when
the active development on the qualifying assets
is interrupted.
EIR is the rate that exactly discounts the estimated
future cash payments or receipts over the
expected life of the financial liability or a shorter
period, where appropriate, to the amortised cost
of a financial liability after considering all the
contractual terms of the financial instrument.
(j) Leases
The Company assesses that the 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:
(1) The contract involves the use of an identified
asset,
(2) The Company has substantially all of the
economic benefits from use of the identified
asset, and
(3) The Company has the right to direct the use
of the identified asset.
Company as a lessee
The Company recognizes right-of-use asset
representing its right to use the underlying asset
for the lease term at the lease commencement
date. The cost of the right-of-use asset measured
at inception 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 asset is
depreciated from the commencement date over
the shorter of the lease term and useful life of
the underlying asset. Right-of-use assets are
tested for impairment whenever there is any
indication that their carrying amounts may
not be recoverable. Impairment loss, if any, is
recognised in the statement of profit and loss.
The Company measures the lease liability at the
present value of the lease payments over the
lease term. 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 leases with
reasonably similar characteristics, the Company
adopts the incremental borrowing rate for the
entire portfolio of leases as a whole. The lease
payments shall include fixed payments, variable
lease payments, exercise price of a purchase
option and payments of penalties for terminating
the lease. The lease liability is subsequently
remeasured by increasing the carrying amount
to reflect interest on the lease liability, reducing
the carrying amount to reflect the lease
payments made and remeasuring the carrying
amount to reflect any reassessment or lease
modifications or to reflect revised in-substance
fixed lease payments.
The Company recognises the amount of the re¬
measurement of lease liability as an adjustment
to the right-of-use asset. Where the carrying
amount of the right-of-use asset is reduced
to zero and there is a further reduction in the
measurement of the lease liability, the Company
recognizes any remaining amount of the re¬
measurement in statement of profit and loss.
The Company has elected not to apply the
requirements of Ind AS 116 to leases for which
the underlying asset is of low value. The lease
payments associated with these low value leases
are recognized as an expense on a straight-line
basis over the lease term.
Company as a lessor
Leases where the Company does not transfer
substantially all the risks and rewards incidental
to ownership of the asset are classified as
operating leases. Lease rentals under operating
l eases are recogni zed as income on a straight¬
line basis over the lease term.
(k) Inventories
Stock of food and beverages, stores and
operating supplies are valued at lower of cost
and net realisable Value. Cost includes cost of
purchase and other costs incurred in bringing
the inventories to their present location and
condition. Cost is determined on a first in first
out basis.Net realisable value is the estimated
selling price in the ordinary course of business
less estimated costs necessary to make sale.
(l) Impairment of non-financial assets
The Company assesses at each reporting date
whether there is an indication that an asset may
be impaired. If any indication exists, or when
annual impairment testing for an asset is required,
the Company estimates the asset's recoverable
amount. An asset's recoverable amount is the
higher of an asset's or cash-generating unit's
(CGU) fair valueless costs of disposal and its value
in use. The recoverable amount is determined for
an individual asset, unless the asset does not
generate cash inflows that are largely independent
of those from other assets or Company's of
assets. Where the carrying amount of an asset or
CGU exceeds its recoverable amount, the asset
is considered impaired and is written down to its
recoverable amount. In assessing value in use,
the estimated future cash flows are 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 asset. In determining net selling price, recent
market transactions are taken into account,
if available. If no such transactions can be
identified, an appropriate valuation model is used.
These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded
companies or other available fair value indicators.
The Company bases its impairment calculation on
detailed budgets and forecast calculations, which
are prepared separately for each of the Company's
CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally
cover a period of five/six years. For longer periods,
a long-term growth rate is calculated and applied
to project future cash flows after the fifth year.
To estimate cash flow projections beyond periods
covered by the most recent budgets/forecasts,
the Company extrapolates cash flow projections
in the budget using a steady or declining growth
rate for subsequent years, unless an increasing
rate can be justified. In any case, this growth rate
does not exceed the long-term average growth
rate for the products, industries, or country in
which the entity operates, or for the market in
which the asset is used.
Impairment losses including impairment on
inventories, are recognised in the statement of
profit and loss.
An assessment is made at each reporting date
to determine whether there is an indication that
previously recognised impairment losses no longer
exist or have decreased. If such indication exists,
the Company estimates the asset's or CGU's
recoverable amount. A previously recognised
impairment loss is reversed only if there has been
a change in the assumptions used to determine
the asset's recoverable amount since the last
impairment loss was recognised. The reversal
is limited so that the carrying amount of the
asset does not exceed its recoverable amount,
nor exceed the carrying amount that would have
been determined, net of depreciation, had no
impairment loss been recognised for the asset
in prior years. Such reversal is recognised in the
statement of profit or loss unless the asset is
carried at a revalued amount, in which case, the
reversal is treated as a revaluation increase.
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