Note: 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION AND PRESENTATION
i) Compliance with Indian Accounting Standards (Ind AS):
These financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter
referred to as the 'Ind AS') as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies
Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian
Accounting Standards) Amendment Rules, 2016.
ii) Basis of measurement
These financial statements are prepared under the historical cost convention except for the following assets and
liabilities which have been measured at fair value:
• Certain financial assets and liabilities (including derivative instruments) measured at fair value (refer accounting
policy regarding financial instruments),
• Defined benefit plans - plan assets measured at fair value
iii) Measurement of fair values
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. Normally at initial recognition, the transaction price is the
best evidence of fair value.
However, when the company determines that transaction price does not represent the fair value, it uses inter-alia
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 financial assets and financial liabilities for which fair value is measured or disclosed in the financial statements
are categorised within the fair value hierarchy. This categorisation is based on the lowest level input that is
significant to the fair value measurement as a whole:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability
Financial assets and financial liabilities that are recognised at fair value on a recurring basis, the company
determines whether transfers have occurred between levels in the hierarchy by re- assessing categorisation at the
end of each reporting period.
iv) Classification of Assets and Liabilities into Current/Non-Current:
The Company has ascertained its operating cycle as twelve months for the purpose of Current/ Non-Current
classification of its Assets and Liabilities.
For the purpose of Balance Sheet, an asset is classified as current if:
(i) It is expected to be realised, or is intended to be sold or consumed, in the normal operating cycle; or
(ii) It is held primarily for the purpose of trading; or
(iii) It is expected to realise the asset within twelve months after the reporting period; or
(iv) The asset is a cash or cash equivalent unless it is 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.
Similarly, a liability is classified as current if:
(i) It is expected to be settled in the normal operating cycle; or
(ii) It is held primarily for the purpose of trading; or
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) The Company does not have an unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period. Terms of a liability that could result in its settlement by the issue of equity
instruments at the option of the counterparty does not affect this classification.
All other liabilities are classified as non-current.
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Property, Plant and Equipment (PPE)
i) The company has elected to avail the exemption granted by Ind AS 101 'First Time Adoption of the Indian
Accounting Standards' to continue with the carrying value for all of its Property, Plant and Equipment as
recognised in the financial statements as at the date of transition to Ind ASs, measured as per the previous GAAP
and use that as its deemed cost as at the date of transition (i.e. as on April 1, 2016).
ii) Property, plant and equipment held for use in the production or supply of goods or services, or for administrative
purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment loss.
Cost includes all expenses directly incidental to acquisition, bringing the asset to the location and installation
including site restoration up to the time when the asset is ready for intended use. Such Costs also include
Borrowing Cost if the recognition criteria are met.
iii) The residual values, useful lives and method of depreciation of property, plant and equipment is reviewed at each
financial year end and adjusted prospectively.
iv) Depreciation
Depreciation on Property, Plant & Equipment is provided on Straight Line Method based on estimated useful life of
the assets which is same as envisaged in schedule II of the Companies Act, 2013. The residual values, useful lives
and method of depreciation of property, plant and equipment is reviewed at each financial year end and adjusted
prospectively, if appropriate
v) De-recognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any 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 profit or loss
b Intangible assets
i) The company has elected to avail the exemption granted by Ind AS 101 'First Time Adoption of the Indian
Accounting Standards' to continue with the carrying value for all of its Intangible Assets as recognised in the
financial statements as at the date of transition to Ind ASs, measured as per the previous GAAP and use that as its
deemed cost as at the date of transition (i.e. as on April 1, 2016).
ii) Intangible assets which is purchased are initially measured at cost. Subsequently, intangible assets are carried at
cost less any accumulated amortisation and accumulated impairment losses, if any
iii) An item of Intangible asset is derecognised upon disposal or when no future economic benefits are expected from
its use or disposal. 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.
iv) Amortisation
Finite-life intangible assets are amortised on a straight-line basis over the period of their expected useful lives.
Estimated useful life of computer software is estimated for 3 year
c Investment Property
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the
Company, is classified as investment property. Investment property is measured initially at its cost, including
related transaction costs. Subsequent expenditure is capitalised to the asset's carrying amount only when it is
probable that future economic benefits associated with the expenditure will flow to the Company and the cost of
the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
Depreciation on investment property is provided on a pro rata basis on straight line method over the estimated
useful lives.
Useful life of assets, as assessed by the Management, corresponds to those prescribed by Schedule II
d Goodwill
No self-generated goodwill is recognized. Goodwill arises during the course of acquisition of an entity in terms of
accounting treatment provided in IND AS-103 dealing with 'Business Combination'. Goodwill represents the excess
of consideration money over the fair value of net assets of the entity under acquisition. Such goodwill is construed
to have indefi nite life and as such is not subject to annual amortization but annual test of impairment under IND AS
- 36. Any shortfall in consideration money vis-a-vis fair value of net assets on account of bargain purchase is
recognized in OCI at acquisition point and subsequently transferred to capital reserve
e Impairment of non financial assets
At the end of each reporting period, the Company determines whether there is any indication that its assets
(property, plant and equipment, intangible assets carried at cost) have suffered an impairment loss with reference
to their carrying amounts. If any indication of impairment exists, the recoverable amount (i.e. higher of the fair
value less costs of disposal and value in use) of such assets is estimated and impairment is recognised, if the
carrying amount exceeds the 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
f Financial Assets
i) Initial Recognition and Measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value
through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Financial
assets are classified, at initial recognition, as financial assets measured at fair value or as financial assets measured
at amortized cost.
ii) Subsequent Measurement
For purpose of subsequent measurement financial assets are classified in two broad categories:-
(i) Financial assets at amortized cost
(ii) Financial Assets at fair value through profit or loss
(iii) Financial Assets at fair value through other comprehensive income (OCI)
A financial asset that meets the following two conditions is measured at amortized cost:
Business Model Test: The objective of the company's business model is to hold the financial asset to collect the
contractual cash flows
Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payment of principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through OCI:-
• Business Model Test: The financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets.
• Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payment of principal and interest on the principal amount outstanding.
All equity investments are measured at fair value in the balance sheet, with value changes recognized in the
statement of profit and loss, except for those equity investments for which the entity has elected irrevocable
option to present value changes in OCI
All other financial assets are measured at fair value through profit and loss
Where assets are measured at fair value through profit of loss, gains and losses are recognized in the statement of
profit and loss , or recognized in other comprehensive income
Where assets are measured at fair value through other comprehensive income, gains and losses are recognized in
other comprehensive income
iii) Impairment of financial assets
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 and if so, assess the need to provide for the same in the Statement of Profit and Loss.
iv) Derecognition of financial assets
A financial asset is derecognised only when Company has transferred the rights to receive cash flows from the
financial asset. 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
g Financial Liabilities
i) Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
instrument. Financial liabilities are initially measured at the amortised cost unless at initial recognition, they are
classified as fair value through profit and loss. In case of trade payables, they are initially recognised at fair value
and subsequently, these liabilities are held at amortised cost, using the effective interest method.
ii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial liabilities carried at
fair value through profit or loss are measured at fair value with all changes in fair value recognised in the Statement
of Profit and Loss.
Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
h Leases
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to
ownership of the leased asset, are capitalized at the lower of the fair value and present value of the minimum lease
payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned
between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance
charges are recognized as finance costs in the statement of profit and loss.
A leased asset is depreciated on a straightline basis over the lower of the lease term or the estimated useful life of
the asset unless there is reasonable certainty that the Company will obtain ownership, wherein such assets are
depreciated over the estimated useful life of the asset.
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term,
are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit
and loss on a straight-line basis over the lease term.
i Inventory
Inventories are valued at the lower of cost or net realisable value
Inventories are valued at the lower of cost and net realisable value. Inventories of Foods, Beverages, Crockery &
Cutlery, and Engineering & Maintenance, House-keeping and Stationary items are valued at cost whereas Crockery
& Cutlery, House Keeping items in circulation are valued at net estimated value. Residuals (wastage) are valued at
net realizable value
j Income Tax
Provision for tax is made for the current accounting period (reporting period) on the basis of the taxable profits
computed in accordance with the Income-tax Act, 1961 and the Income Computation and Disclosure Standards
prescribed therein
Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities
for financial reporting purposes and the corresponding amounts used for taxation purposes
A deferred tax liability is recognised based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted, or substantively enacted, by the end of the reporting
period. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and
reduced to the extent that it is no longer probable that the related tax benefit will be realised
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the
recognised amounts. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable
right to set off current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax
liabilities relate to income taxes levied by the same taxation authority
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