Note 1. Significant Accounting Policies
1.1 Corporate Information:
Tree House Education & Accessories Ltd is a public company domiciled in India and incorporated on July 10, 2006
under the provisions of the companies Act 1956. The company's principal business is providing education and
related services including leasing of education infrastructure.
1.2 Basis of preparation and summary of significant Accounting policies
(a) Basis of Preparation
(i) Compliance with 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 (‘Act') read with of the Companies (Indian Accounting Standards) Rules,2015 as
amended and other relevant provisions of the Act.
The accounting policies are applied consistently to all the periods presented in the financial statements,
including the preparation of the opening Ind AS Balance Sheet as at 1st April, 2015 being the date of
transition to Ind AS.
(ii) Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except for the following:
1) Certain financial assets and liabilities that are measured at fair value;
2) Assets held for sale - measured at lower of carrying amount or fair value less cost to sell;
3) Defined benefit plans - plan assets measured at fair value;
(iii) Current non-current classification
All assets and liabilities have been classified as current or non-current as per the Company's normal
operating cycle (twelve months) and other criteria set out in the Schedule III to the Act.
(iv) Rounding of Amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs as per
the requirement of Schedule III, unless otherwise stated.
(b) Use of Estimates and Judgments
The estimates and judgments used in the preparation of the financial statements are continuously evaluated by
the Company and are based on historical experience and various other assumptions and factors (including
expectations of future events) that the Company believes to be reasonable under the existing circumstances.
Differences between actual results and estimates are recognized in the period in which the results are known/
materialized. The said estimates are based on the facts and events, that existed as at the reporting date, or that
occurred after that date but provide additional evidence about conditions existing as at the reporting date.
(c) Property, Furniture and Fixtures:
The Company has applied for one time transition exemption of considering the carrying cost on the transition date
i.e. April 1,2015 as the deemed cost under IND AS. Hence it was regarded thereafter as historical cost.
The company does not own any Freehold land. All other items of property, furniture and fixtures equipment are
stated at cost less depreciation and impairment, if any. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognized 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 derecognized when replaced. All other repairs and maintenance are charged to the Statement of Profit
and Loss during the reporting period in which they are incurred.
Depreciation methods, estimated useful lives and residual value:
Depreciation on Buildings, Furniture & Fixture, is provided on a Straight Line Method.
Leasehold property is amortized over the period of lease. Leasehold improvements are amortized over the period
of lease or estimated useful life, whichever is lower.
The Company depreciates its property, furniture & fixture , equipment over the useful life in the manner prescribed
in Schedule II to the Act, and management believe that useful life of assets are same as those prescribed in
Schedule II to the Act,
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.
In case of pre-owned assets, the useful life is estimated on a case to case basis.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in the Statement of Profit and Loss.
(d) Investment Properties
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 at its cost, including related
transaction costs and where applicable borrowing costs less depreciation and impairment if any. Depreciation on
building is provided over its useful life using the written down value method. Useful life considered for calculation
of depreciation for assets class are as follows-
Non- Factory Building 60 years
(e) Intangible Assets
Goodwill
Goodwill is stated at cost, less impairments, if any.
Business Commercial Rights (BCR)
BCR is stated at cost, less accumulated amortization and impairments, if any.
Trademark
Goodwill is stated at cost, less accumulated amortization and impairments, if any.
Amortization method and useful life.
The Company amortizes BCR on the straight-line method over the period of 30 years, and trade mark is
amortized on the straight-line method over the period of 10 years.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in the Statement of Profit and Loss.
(f) Lease
Operating Lease
As a Lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company, as
lessee, are classified as operating leases. Payments made under operating leases are charged to the Statement
of Profit and Loss on a straight-line basis over the period of the lease unless the payments are structured to
increase in line with expected general inflation to compensate for the Company's expected inflationary cost
increases.
As a Lessor
Lease income from operating leases where the Company is a lessor is recognized 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 excepted inflationary costincreases. The respective leased assets are included in the balance
sheet based on their nature.
(g) Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
bank overdraft, deposits held at call with financial institutions, other short-term highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
(h) Inventories
Inventories of books, school kits and, Stores are stated ‘at cost or net realizable value, whichever is lower'. Goods-
in-Transit are stated ‘at cost'. Cost comprises all cost of purchase, cost of conversion and other costs incurred in
bringing the inventories to their present location and condition. The excise duty in respect of closing inventory of
finished goods is included as part of finished goods. Cost formulae used are ‘First-in-First-out', Due allowance is
estimated and made for defective and obsolete items, wherever necessary.
(i) Investments in subsidiaries, joint ventures and associates
Investments in subsidiaries, joint ventures and associates are recognized at cost as per Ind AS 27. Except where
investments accounted for at cost shall be accounted for in accordance with Ind AS 105, Non-current Assets Held
or Sale and Discontinued Operations, when they are classified as held for sale.
Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
(1) Those to be measured subsequently at fair value (either through other comprehensive income, or through
the Statement of Profit and Loss) and
(2) Those measured at amortized cost. The classification depends on the Company's business model for
managing the financial assets and the contractual terms of the cash flows.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value.
Transaction costs of financial assets carried at fair value through the Profit and Loss are expensed in the
Statement of Profit and Loss.
(iii) Debt Instruments:
Subsequent measurement of debt instruments depends on the Company's business model for managing the
asset and the cash flow characteristics of the asset. The Company classifies its debt instruments into
following categories:
(1) Amortized 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 amortized cost. Interest income from
these financial assets is included in other income using the effective interest rate method.
(2) Fair value through profit and loss: Assets that do not meet the criteria for amortized cost are measured
at fair value through Profit and Loss. Interest income from these financial assets is included in other income.
Impairment of Financial Assets
The Company measures the expected credit loss associated with its assets based on historical trend, industry practices
and the business environment in which the entity operates or any other appropriate basis. The impairment methodology
applied depends on whether there has been a significant increase in credit risk.
Income Recognition
Revenue is measured at the value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances, rebates, discounts, loyalty discount.
Income from Services
Revenue is recognized on rendering of services and is recognized when there are no significant uncertainties as to its
measurability or collect ability.
In instances where fees are received during a term, revenue is recognized on a proportionate basis for the period which
falls under the current reporting period and the balance is shown as advance fees received.
Revenue from consultancy services is recognized on rendering of services, as evidenced from the customers'
acknowledgment of services received. In respect of non-refundable fees for consultancy services rendered to franchisee
for setting up of its operations, the rendering of service generally coincides with signing of the franchisee service
agreement.
Royalty Income
Royalty income is recognized as per the franchise agreement at specified percentage of gross revenue earned by the
franchisee or as per the agreement.
Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate
applicable.
Sale of goods
The revenue from sale of education aids is recognized on transfer of property in goods which generally coincides with
dispatch /delivery to the customer.
Interest income
Interest income from debt instruments is recognized using the effective interest rate method.
Dividends
Dividends are recognized in the Statement of Profit and Loss only when the right to receive payment is established.
Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization 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 recognized 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 purpose 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 group 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.
Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower
of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from
employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from
this requirement.
Non-current assets are not depreciated or amortized while they are classified as held for sale. Interest and other
expenses attributable to the liabilities of a disposal Company classified as held for sale continue to be recognized.
Derivative Financial Instruments
Derivative financial instruments such as forward contracts, option contracts and cross currency swaps, to hedge its
foreign currency risks are initially recognized at fair value on the date a derivative contract is entered into and are
subsequently re-measured at their fair value with changes in fair value recognized in the Statement of Profit and Loss in
the period when they arise.
Segment Reporting:
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker.
Borrowings:
Borrowings are initially recognized at net of transaction costs incurred and measured at amortized cost. Any difference
between the proceeds (net of transaction costs) and the redemption amount is recognized in the Statement of Profit and
Loss over the period of the borrowings using the effective interest method.
Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividend on
these preference shares is recognized in Statement of Profit and Loss as finance costs.
Borrowing Costs:
Interest and other borrowing costs attributable to qualifying assets are capitalized. Other interest and borrowing costs are
charged to Statement of Profit and Loss.
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