Accounting Policies of Oriental Hotels Ltd. Company
Mar 31, 2022
Note 1: Corporate Information
Oriental Hotels Limited (the "Company"), is a listed public limited company incorporated and domiciled in India and has its registered
office at No,37 Taj Coromandel Mahatma Gandhi Road, Nungambakkam Chennai 600 034.The Company is primarily engaged in the
business of owning, operating & managing hotels and resorts.
The company''s business operation is mainly in India.
The Company has primary listing in BSE Ltd. and National Stock Exchange of India Ltd.
Note 2: Significant Accounting Policies
(a) Statement of compliance:
The financial statements of the Company comply in all material aspects with Indian Accounting Standards ("Ind AS") issued under Section 133 of the Companies Act, 2013 notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) with and other relevant provision of the Act. The accounting policies as set out below have been applied consistently to all years presented in these financial statements.
Recent Accounting Pronouncements:
a) New Accounting Standards/Amendments notified and adopted by the Company:
The following Accounting Standards have been modified on miscellaneous issues with effect from 18th June 2021.
Such changes include clarification/guidance on:
i) Ind AS 107 Financial Instruments: Disclosures - Additional disclosures relating to interest rate benchmark reform (IBOR reform) including nature and extent of risks to which the entity is exposed due to financial instruments subject to interest rate benchmark reform and how the Company manages those risks; the Company''s progress in completing the transition to alternative benchmark rates and how the Company is managing the transition.
ii) Ind AS 109 Financial Instruments - Guidance provided on accounting for modifications of contracts resulting from changes in the basis for determining the contractual cash flows as a result of the IBOR reform; various exceptions and relaxations have been provided in relation to the hedge accounting.
iii) Ind AS 116 Leases - Extension of optional practical expedient in case of rent concessions as a direct consequence of COVID-19 pandemic till 30th June, 2022 and guidance on accounting for modification of lease contracts resulting from the IBOR reform.
iv) Ind AS 102 Share based payments - Alignment of liabilities definition with the Conceptual Framework for F inancial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India.
v) Ind AS 103 Business Combination - Alignment of assets and liabilities definition with the Framework for Preparation and Presentation of Financial Statements with Indian Accounting Standards.
vi) Amendment of definition of term ''recoverable amount'' in Ind AS 105, Ind AS 16 and Ind AS 36 from ''fair value less cost to sell'' to ''fair value less cost of disposal''.
None of these amendments have any material impact on the financial statements for the current year.
b) Changes in Schedule III Division II of Companies Act, 2013 notified and adopted by the Company:
On 24th March 2021, the Ministry of Corporate Affairs ("MCA") through a notification, amended Schedule III of the
Companies Act, 2013 to be effective from 1st April 2021. Key amendments relating to Division II which relate to
companies whose financial statements are required to comply with Companies (Indian Accounting Standards) Rules
2015 are:
In Balance Sheet:
i) Lease liabilities should be separately disclosed under the head duly distinguished as current or non-current.
ii) Certain additional disclosures in the statement of changes in equity.
iii) Specified format for disclosure of shareholding of promoters.
iv) Specified format for ageing schedule of trade receivables, trade payables, capital work-in-progress and intangible asset under development.
v) If a company has not used funds for the specific purpose for which it was borrowed from banks and financial institutions, then disclosure of details of where it has been used.
vi) Specific disclosure under regulatory such as compliance with approved schemes of arrangements, compliance with number of layers of companies, title deeds of immovable property not held in name of company, loans and Advances to Promoters, Directors, Key Managerial Personnel (KMP) and related parties, details of benami property held, relationship with struck-off companies, financial ratios, etc.
In Statement of Profit and Loss:
i) Additional disclosures relating to Corporate Social Responsibility (CSR), undisclosed income and crypto or virtual currency specified under the head "additional information" in the notes forming part of standalone financial statements.
The amendments are extensive, and the Company has given effect to them as required by law in the current year financial statements to the extent applicable.
c) New Accounting Standards/Amendments notified but not yet effective:
The following Accounting Standards have been modified on miscellaneous issues with effect from 1st April 2022. Such
changes include clarification/guidance on:
i) Ind AS 103 Business Combination - Identified assets acquired and liabilities assumed (including contingent assets and contingent liabilities) must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Ind AS (Conceptual Framework) issued by the Institute of Chartered Accountants of India (ICAI).
ii) Ind AS 109 Financial Instruments - Guidance provided on identifying substantial modification of the terms of an existing financial liability basis difference in discounted present value of the cash flows between old and new terms.
iii) Ind AS 16 Property, Plant and Equipment (PPE) - Clarification provided on accounting for excess of net sale proceeds of items produced over the cost of testing as deduction from the directly attributable costs considered as part of cost of an item of PPE.
iv) Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets - Illustrative guidance provided on the cost of fulfilling a contract - incremental costs of fulfilling the contract and allocation of other costs that relate directly to fulfilling contracts and clarification provided on recognising impairment loss that has occurred on assets used in fulfilling the contract before a separate provision for onerous contract established.
None of these amendments are expected to have any material impact on the financial statements of the Company.
Basis of preparation and presentation:
These financial statements have been prepared on a historical cost basis, except for certain financial instruments and defined benefit plans that are measured at fair value at the end of each reporting period, as explained in the accounting policies below.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Company''s operating cycle and other criteria set out in Ind AS-1 ''Presentation of Financial Statements'' and Schedule III to the Companies Act, 2013.
The Financial Statements are presented in Indian Rupees Lakhs, and all values are rounded off to the nearest two decimals except when otherwise stated.
(b) Use of estimates and judgements
The preparation of the financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses for the years presented. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements pertain to:
⢠Useful lives of property, plant and equipment and intangible assets: The Company has estimated useful life of each class of assets based on the nature of assets, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, etc. The Company reviews the carrying amount of property, plant and equipment and Intangible assets at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
⢠Impairment testing: Property, plant and equipment and Intangible assets are tested for impairment when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost of disposal. The calculation involves use of significant estimates and assumptions which includes turnover and earnings multiples, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.
⢠Impairment of investments: The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
⢠Income Taxes: Deferred tax assets are recognized to the extent that it is regarded as probable that deductible temporary differences can be realized. The Company estimates deferred tax assets and liabilities based on current tax laws and rates and in certain cases, business plans, including management''s expectations regarding the manner and timing of recovery of the related assets. Changes in these estimates may affect the amount of deferred tax liabilities or the valuation of deferred tax assets and the tax charge in the statement of profit or loss.
Provision for tax liabilities require judgements on the interpretation of tax legislation, developments in case law and the potential outcomes of tax audits and appeals which may be subject to significant uncertainty. Therefore the actual results may vary from expectations resulting in adjustments to provisions, the valuation of deferred tax assets, cash tax settlements and therefore the tax charge in the statement of profit or loss.
⢠Fair value measurement of derivative and other financial instruments: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. This involves significant judgements to select a variety of methods and make assumptions that are mainly based on market conditions and performance of the entity existing at the end of each reporting period.
⢠Litigation: From time to time, the Company is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
⢠Defined benefit plans: The cost of the defined benefit plans and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed annually.
⢠Leases: Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and there by assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Company''s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
⢠Estimation uncertainty relating to the global health pandemic- Covid-19
The business has been impacted during the year on account of COVID-19. During the first three months of the year, the Company witnessed softer revenues due to the second wave of COVID-19 and consequent lockdowns in several states across the country. Also there was a third wave in the month of January 2022, resulting in restrictions in some states, which also adversely impacted the revenues. However, with increased vaccinations and consequent reduction in number of cases and easing of all restrictions, the company has witnessed recovery in both leisure and business segments in all the other months. The Company has considered internal and external sources of information and has performed sensitivity analysis on the assumptions used and based on current estimates, expects to recover the carrying amount of these assets. The impact of COVID-19 may be different from that estimated as at the date of approval of these standalone financial results and the Company will continue to closely monitor any material changes to future economic conditions.
The management has secured additional financing for the next 12 months to prevent disruption of the operating cash flows if any, and to enable the Company meet its debts and obligations as they fall due. Accordingly, the financial results of the Company have been prepared on a going concern basis.
(c) INDAS 27: Separate Financial Statements
These financial statements represent the separate financial statements of the Company. The Company has complied with INDAS 27; Separate Financial Statements whereby investments in subsidiaries, jointly controlled entity and associates are to be valued either at cost; or in accordance with INDAS 109.
The Company has elected to measure its investments in subsidiaries, associates and Jointly controlled entity at cost determined in accordance with INDAS 27at original cost of investment in subsidiaries and associates.
(d) Revenue recognition :
⢠Revenue from Services
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 retails and office at the properties. These contracts for rentals are generally of short term in nature. Revenue is recognized in the period in which services are being rendered.
Other Allied services: In relation to the laundry income, communication income, health club income, transfers income and other allied services, the revenue has been recognized by reference to the time of service rendered.
Management and Operating fees: Management fees earned from hotels managed by the Group are usually under long-term contracts with the hotel owner. Under Management and Operating Agreements, the company''s performance obligation is to provide hotel management services and a license to use the Company''s trademark and other intellectual property.
Management and incentive fee is earned as a percentage of revenue and profit and are recognized when earned in accordance with the terms of the contract based on the underlying revenue, when collectability is certain and when the performance criteria are met. Both are treated as variable consideration.
Interest: Interest income from financial asset is recognised when it is probable that the economic benefit will flow to the Company and the amount of income can be measured reliably.
Interest income is accrued on a time basis by reference to principal outstanding using the effective interest rate method. Dividend: Dividend income is recognized when the Company''s right to receive the amount is established.
(e) Employee Benefits (other than for persons engaged through contractors):
i. Provident Fund: The eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage ofthe covered employees'' salary (currently 12% of employees'' salary), which is recognised as an expense in the Statement of Profit and Loss during the year. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner.
ii. Gratuity Fund
The Company makes annual contributions to gratuity funds administered by the trustees for amounts notified by the funds. The Gratuity plan provides for lump sum payment to vested employees on retirement, death or termination of employment of an amount based on the respective employee''s last drawn salary and tenure of employment. The Company accounts for the net present value of its obligations for gratuity benefits, based on an independent actuarial valuation, determined on the basis of the projected unit credit method. Actuarial gains and losses are recognised immediately in the other comprehensive income and reflected in retained earnings and will not be reclassified to the statement of profit and loss.
iii. Post-Retirement Pension Scheme and Medical Benefits
The net present value of the Company''s obligation towards post retirement pension scheme for certain retired directors and their dependents and Post employment medical benefits to qualifying persons is actuarially determined, based on the projected unit credit method. Actuarial gains and losses are recognized immediately in the Other Comprehensive Income and reflected immediately in retained earnings and will not be reclassified to the statement of profit and loss.
iv. Compensated Absences
The Company has a scheme for compensated absences for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method.
v. Long Service Awards
The Company has a scheme for long service awards for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method.
vi. Other employee termination benefits
Payment to employees on termination along with the additional liability towards retirement benefits arising pursuant to termination are charged off in the Statement of Profit and Loss in the year it is incurred.
vii. Other Employee Benefits
Other benefits, comprising of Leave Travel Allowances, are determined on an undiscounted basis and recognised based on the entitlement thereof.
(f) Property, Plant and Equipment:
The Company had elected to continue with the carrying value of all of its Property, Plant and Equipment recognised as of April 1, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as of the transition date.
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
All property, plant and equipment are initially recorded at cost. Cost includes the acquisition cost or the cost of construction, including duties and taxes (other than those refundable), expenses directly related to the location of assets and making them operational for their intended use and, in the case of qualifying assets, the attributable borrowing costs. Initial estimate shall also include costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent expenditure relating to property, plant and equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
An assets'' carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Depreciation is charged to profit or loss so as to write off 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 except in respect of the following categories of assets, in whose case the life of the assets had been re-assessed as under based on technical evaluation made at the group level, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers'' warranties, maintenance support, etc..
The estimated useful lives, residual values and depreciation method are reviewed at the Balance Sheet date, with the effect of any changes in estimate accounted for on a prospective basis.
Buildings on Lease hold land and Improvements to buildings are depreciated on the basis of their estimated useful lives or expected lease period, whichever is lower.
The estimated useful lives of the depreciable assets are as follows:
Class of Assets Estimated Useful Life
Buildings 60 to 80 years
Plant and Equipment 10 to 20 years
Electrical Installation and Equipment 20 years
Hotel Wooden Furniture 15 years
End User devices - Computers, Laptops etc 6 years
Operating supplies (issued on opening of a new hotel property) 2 to 3 years
Assets costing less than ?5000 4 years
An item of property, plant and equipment is derecognized 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 recognized in the Statement of Profit and Loss.
Capital work in progress represents projects under which the property, plant and equipment''s are not yet ready for their intended use and are carried at cost determined as aforesaid.
(g) Intangible Assets:
Intangible assets include cost of acquired software. Intangible assets are initially measured at acquisition cost including any directly attributable costs of preparing the asset for its intended use.
Intangible assets with finite lives are amortized over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation periods are reviewed and impairment is done only if indicators of impairment exist.
Class of Assets Estimated Useful Life
Software and Licences 6 years
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use of disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in the Statement of Profit and Loss when the asset is derecognized.
(h) Impairment of Property plant and equipment and intangible assets:
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed 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.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in Statement of Profit and Loss.
(i) Foreign Currency Translation:
The functional currency of the Company is Indian rupee ^).
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value
or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were the fair value measured.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period. Exchange differences on restatement of all monetary items are recognised in the Statement of Profit and Loss.
(j) Assets taken on lease:
On inception of a contract, the Company assesses whether it contains a lease. A contract is, or contains a lease when it 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 asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Lease contracts may contain both lease and non-lease components. The Company allocates payments in the contract to the lease and non-lease components based on their relative stand-alone prices and applies the lease accounting model only to lease components.
The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for initial direct costs incurred, lease payments made at or before the commencement date, any asset restoration obligation, and less any lease incentives received. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are also adjusted for any re-measurement of lease liabilities. Unless the Company is reasonably certain to obtain ownership of the leased assets or renewal of the leases at the end of the lease term, recognised right-of-use assets are depreciated to a residual value over the shorter of their estimated useful life or lease term.
The lease liability is initially measured at the present value of the lease payments to be made over the lease term. The lease payments include fixed payments (including ''in-substance fixed'' payments) and variable lease payments that depend on an index or a rate, less any lease incentives receivable. ''In-substance fixed'' payments are payments that may, in form, contain variability but that, in substance, are unavoidable. In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
The lease term includes periods subject to extension options which the Company is reasonably certain to exercise and excludes the effect of early termination options where the Company is not reasonably certain that it will exercise the option. Minimum lease payments include the cost of a purchase option if the Company is reasonably certain it will purchase the underlying asset after the lease term.
Lease liabilities are re-measured with a corresponding adjustment to the related right-of-use asset if the Company changes its assessment if whether it will exercise an extension or a termination option and any lease modification.
Variable lease payments that do not depend on an index or a rate are recognised as an expense in the period over which the event or condition that triggers the payment occurs. In respect of variable leases which guarantee a minimum amount of rent over the lease term, the guaranteed amount is considered to be an ''in-substance fixed'' lease payment and included in the initial calculation of the lease liability. Payments which are ''in-substance fixed'' are charged against the lease liability.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments are presented as follows in the Company''s statement of cash flows:
- short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease liabilities are presented within cash flows from operating activities;
- payments for the interest element of recognised lease liabilities are included in ''interest paid'' within cash flows from financing activities; and
- payments for the principal element of recognised lease liabilities are presented within cash flows from financing activities.
Company applies the practical expedient in Paragraph 46 A of Ind AS 116 (introduced vide MCA notification dated 24 July 2020) to all rent concessions occurring out of direct consequence of Covid-19 pandemic and accounts for any change in payment of lease rentals resulting from the rent concessions not as a lease modification but as income.
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 right-of-use 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) Inventories:
Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a Weighted Average basis) or net realisable value. Cost include the cost of purchase 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.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.
(l) Government Grants
Government grants are recognised in the period to which they relate when there is reasonable assurance that the grant will be received and that the Company will comply with the attached conditions.
Government grants are recognised in the Statement of Profit and Loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate.
(m) Income Taxes:
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
(i) Current tax:
Current Tax expenses are accounted in the same period to which the revenue and expenses relate. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the applicable tax rates and the prevailing tax laws.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.
(ii) Deferred tax :
Deferred income tax is recognised using the balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount in financial statements, except when the deferred income tax arises from the initial recognition of goodwill, an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profits or loss at the time of the transaction.
Deferred income 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.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax ("MAT") credit is recognized 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. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
(n) Accounting for Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognized, when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. If the effect of the time value of money is material, the provision is discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation and the unwinding of the discount is recognised as interest expense.
Contingent liabilities are recognized only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for.
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
(o) Borrowing Costs:
General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets that necessarily takes a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs consist of interest and other costs that the company incurs in connection with the borrowing of funds.
Interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing costs that are not directly attributable to a qualifying asset are recognised in the Statement of Profit or Loss using the effective interest method.
(p) Cash and Cash Equivalent (for the purpose of cash flow statements):
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
(q) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit/ (loss) before tax is adjusted for the effects of transactions of non cash nature and any deferrals or accruals of past or future cash receipts or payments. Cash flows for the year are classified by operating, investing and financing activities.
(r) Share capital:
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
(s) Dividends:
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
(t) Earnings Per Share:
Basic earnings per share are computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year including potential equity shares on compulsory convertible debentures. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
(u) Segment Reporting:
The Company identifies operating segments based on the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the committee that makes strategic decisions.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities"
(v) Exceptional items:
The Company discloses certain financial information both including and excluding exceptional items. The presentation of information excluding exceptional items allows a better understanding of the underlying operating performance of the Company and provides consistency with the Company''s internal management reporting. Exceptional items are identified by virtue of either their size or nature so as to facilitate comparison with prior periods and to assess underlying trends in the financial performance of the Company. Exceptional items can include, but are no restricted to, gains and losses on the disposal of assets/investments, impairment charges, exchange gain/(loss) on long term borrowings/ assets and changes in fair value of derivative contracts.
(w) Financial Instruments:
Financial Assets:
Classification:
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Initial Recognition and measurement:
All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Debt instruments at amortised cost:
A ''debt instrument is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to loans and advances, deposits, trade and other receivables.
Debt instruments included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments:
All equity investments in scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
For equity instruments classified as FVTOCI, all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI). There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition:
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either:
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets:
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance.
b) Trade receivables.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
Financial Liabilities
Classification:
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
Initial recognition and measurement:
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss:
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to the Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss. The Company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings:
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate(EIR) method. Gains and losses are recognised in the Statement of Profit and Loss when the liabilities are derecognised.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition:
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments:
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments:
The Company uses derivative financial instruments, such as cross currency swaps, interest rate swaps, etc. to manage its exposure to interest rate and foreign exchange risks. Although the company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss. Such derivative financial instrumentsare initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value through profit or loss and the resulting exchange gains or losses are included in Exceptional items. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
Equity instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Company''s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
(x) Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are measured at their fair values and recognised as income in the statement of profit and loss account.
Mar 31, 2019
(a) Statement of compliance:
The financial statements of the Company comply in all material aspects Indian Accounting Standards (âInd ASâ) issued under Section 133 of the Companies Act, 2013 notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) with and other relevant provision of the Act. The accounting policies as set out below have been applied consistently to all years presented in these financial statements.
Recent Accounting Pronouncements:
(i) New standards notified and adopted by the Company
MCA on 29 March 2018 notified the new standard for revenue recognition (effective from 1 April 2018) which overhauls the existing revenue recognition standards including Ind AS 18 - Revenue and Ind AS 11 - Construction contracts. The new standard provides a control-based revenue recognition model and provides a five-step application principle to be followed for revenue recognition:
i. Identification of the contracts with the customer
ii. Identification of the performance obligations in the contract
iii. Determination of the transaction price
iv. Allocation of transaction price to the performance obligations in the contract (as identified in step ii)
v. Recognition of revenue when the Company satisfies a performance obligation.
A number of other standards had been modified on miscellaneous issues with effect from 1st April 2018. Such changes include principle for transfer of asset to, or from, Investment Property (Amendment to Ind AS 40), determination of exchange rate for translation of foreign currency where a pre-payment asset or a deferred income liability is recognized (Amendment to Ind AS 21), segregation of deductible temporary differences in accordance with tax laws and assessing them on that basis to recognise deferred tax asset (Amendment to Ind AS 12), permitting election of fair value or equity method of accounting for investments in associates and jointly controlled entity by venture capital, mutual fund and other similar organisations (Amendment to Ind AS 28) and Applicability of disclosure requirements to interests classified as held for sale or as discontinued operation (Amendment to Ind AS 112).
None of these amendments have any material effect on the Companyâs financial statements.
(ii) New standards notified but not early adopted by the company Ind AS 116 Leases
On 30 March 2019, the Ministry of Corporate Affairs (MCA) notified Ind AS 116, âLeasesâ as part of the Companies (Indian Accounting Standards (Ind AS)) Amendment Rules, 2019. Ind AS 116 replaces existing standard on leases i.e. Ind AS 17, Leases with effect from accounting periods beginning on or after 1st April 2019.
It eliminates the classification of leases as either finance leases or operating leases for a lessee as required by Ind AS 17. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Requirements with regard to lessor accounting are substantially similar to accounting requirements contained in Ind AS 17. Accordingly, a lessor will continue to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.
The Companyâs operating leases mainly relate to real estate assets such as Land, Land & Building and fully fitted hotel properties which are on long term lease varying from 20 to 99 years.
The Company has completed its preliminary evaluation of the possible impact of Ind AS 116 and will adopt the standard using the âModified Retrospective Methodâ based on the principles in Ind AS 116. Accordingly, the cumulative effect of initially applying this standard will be recognised as an adjustment to the opening balance of retained earnings i.e. 1st April 2019, consequently, comparatives for the year ended 31st March 2018 will not be retrospectively adjusted.
The Company is currently evaluating the impact this standard will have on the financial statement.
Other Amendments to the existing standards but not effective
A number of other accounting standards have been modified on miscellaneous issues with effect from 1st April 2019. Such changes include clarification/guidance on:
a) business combination accounting in case of obtaining control of a joint operation;
b) accounting in case of obtaining joint control of an operation wherein there was no joint control earlier;
c) income tax consequences in case of dividends;
d) accounting for income tax when there is uncertainty over income tax treatment of an item by tax authorities;
e) accounting treatment for specific borrowings post capitalization of corresponding qualifying asset;
f) accounting for prepayment features with negative compensation in case of debt instruments;
g) accounting for plan amendment, curtailment or settlement occurring in-between the reporting periods in case of long-term employee benefit plans;
h) accounting for long-term interests in associates and jointly controlled entites to which the equity method is not applied but that in substance form part of the net investment in the associate or jointly controlled entity (long-term interests).
The above amendments will come into force from 1st April 2019. The Company does not expect the effect of this on the financial statements to be material based on preliminary evaluation.
(b) Basis of preparation and presentation:
These financial statements have been prepared on a historical cost basis, except for certain financial instruments and defined benefit plans that are measured at fair value at the end of each reporting period, as explained in the accounting policies below.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle and other criteria set out in Ind AS-1 âPresentation of Financial Statementsâ and Schedule III to the Companies Act, 2013.
The Financial Statements are presented in Indian Rupees Lakhs, and all values are rounded off to the nearest two decimals except when otherwise stated.
(c) Use of estimates and judgements
The preparation of the financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses for the years presented. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements pertain to:
- Useful lives of property, plant and equipment and intangible assets: The Company has estimated useful life of each class of assets based on the nature of assets, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, etc. The Company reviews the carrying amount of property, plant and equipment and Intangible assets at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
- Impairment testing: Property, plant and equipment and Intangible assets are tested for impairment when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to sell. The calculation involves use of significant estimates and assumptions which includes turnover and earnings multiples, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.
- Impairment of investments: The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
- Income Taxes: Deferred tax assets are recognized to the extent that it is regarded as probable that deductible temporary differences can be realized. The Company estimates deferred tax assets and liabilities based on current tax laws and rates and in certain cases, business plans, including managementâs expectations regarding the manner and timing of recovery of the related assets. Changes in these estimates may affect the amount of deferred tax liabilities or the valuation of deferred tax assets and the tax charge in the statement of profit or loss.
Provision for tax liabilities require judgements on the interpretation of tax legislation, developments in case law and the potential outcomes of tax audits and appeals which may be subject to significant uncertainty. Therefore the actual results may vary from expectations resulting in adjustments to provisions, the valuation of deferred tax assets, cash tax settlements and therefore the tax charge in the statement of profit or loss.
- Fair value measurement of derivative and other financial instruments: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. This involves significant judgements to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.
- Litigation: From time to time, the Company is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
- Defined benefit plans: The cost of the defined benefit plans and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
(d) INDAS 27: Separate Financial Statements
These financial statements represents the separate financial statements of the Company. The Company has complied with INDAS 27; Separate Financial Statements whereby investments in subsidiaries, jointly controlled entity and associates are to be valued either At cost; or
In accordance with INDAS 109.
The Company has elected to measure its investments in subsidiaries and associates at cost determined in accordance with INDAS 27 at original cost of investment in subsidiaries and associates.
(e) Revenue recognition :
- Revenue from Services
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 retails and office at the properties. These contracts for rentals are generally of short term in nature. Revenue is recognized in the period in which services are being rendered.
Other Allied services: In relation to the laundry income, communication income, health club income, transfers income and other allied services, the revenue has been recognized by reference to the time of service rendered.
Management and Operating fees: Management fees earned from hotels managed by the Group are usually under long-term contracts with the hotel owner. Under Management and Operating Agreements, the companyâs performance obligation is to provide hotel management services and a license to use the Companyâs trademark and other intellectual property.
Management and incentive fee is earned as a percentage of revenue and profit and are recognised when earned in accordance with the terms of the contract based on the underlying revenue, when collectability is certain and when the performance criteria are met. Both are treated as variable consideration.
Interest: Interest income from financial asset is recognised when it is probable that the economic benefit will flow to the Company and the amount of income can be measured reliably.
Interest income is accrued on a time basis by reference to principal outstanding using the effective interest rate method.
Dividend: Dividend income is recognized when the Companyâs right to receive the amount is established.
(f) Employee Benefits (other than for persons engaged through contractors):
i Provident Fund
The eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employeesâ salary (currently 12% of employeesâ salary), which is recognised as an expense in the Statement of Profit and Loss during the year. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner.
ii. Gratuity Fund
The Company makes annual contributions to gratuity funds administered by the trustees for amounts notified by the funds. The Gratuity plan provides for lump sum payment to vested employees on retirement, death or termination of employment of an amount based on the respective employeeâs last drawn salary and tenure of employment. The Company accounts for the net present value of its obligations for gratuity benefits, based on an independent actuarial valuation, determined on the basis of the projected unit credit method, carried out as at the Balance Sheet date. Actuarial gains and losses are recognised immediately in the other comprehensive income and reflected in retained earnings and will not be reclassified to the statement of profit and loss.
iii. Post-Retirement Pension Scheme and Medical Benefits
The net present value of the Companyâs obligation towards post retirement pension scheme for certain retired directors and their dependents and Post employment medical benefits to qualifying persons is actuarially determined, based on the projected unit credit method. Actuarial gains and losses are recognized immediately in the Other Comprehensive Income and reflected immediately in retained earnings and will not be reclassified to the statement of profit and loss.
iv. Compensated Absences
The Company has a scheme for compensated absences for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method, carried out at the Balance Sheet date.
v. Long Service Awards
The Company has a scheme for long service awards for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method, carried out at the Balance Sheet date.
vi. Other employee termination benefits
Payment to employees on termination along with the additional liability towards retirement benefits arising pursuant to termination are charged off in the Statement of Profit and Loss in the year it is incurred.
vii. Other Employee Benefits
Other benefits, comprising of Leave Travel Allowances, are determined on an undiscounted basis and recognised based on the entitlement thereof.
(g) Property, Plant and Equipment:
The Company had elected to continue with the carrying value of all of its Property, Plant and Equipment recognised as of April 1, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as of the transition date.
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
All property, plant and equipment are initially recorded at cost. Cost includes the acquisition cost or the cost of construction, including duties and taxes (other than those refundable), expenses directly related to the location of assets and making them operational for their intended use and, in the case of qualifying assets, the attributable borrowing costs. Initial estimate shall also include costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent expenditure relating to property, plant and equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably An assetsâ carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater that its estimated recoverable amount.
Depreciation is charged to profit or loss so as to write off 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 except in respect of the following categories of assets, in whose case the life of the assets had been re-assessed as under based on technical evaluation made at the group level, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturersâ warranties, maintenance support, etc.
The estimated useful lives, residual values and depreciation method are reviewed at the Balance Sheet date, with the effect of any changes in estimate accounted for on a prospective basis.
In respect of Leasehold Buildings, depreciation on buildings on leased properties is based on the tenure which is lower of the life of the buildings or the expected lease period. Improvements to buildings are depreciated on the basis of their estimated useful lives or expected lease period whichever is lower.
An item of property, plant and equipment is derecognized 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 recognized in the Statement of Profit and Loss.
Capital work in progress represents projects under which the property, plant and equipmentâs are not yet ready for their intended use and are carried at cost determined as aforesaid.
(h) Intangible Fixed Assets:
Intangible assets include cost of acquired software. Intangible assets are initially measured at acquisition cost including any directly attributable costs of preparing the asset for its intended use.
Intangible assets with finite lives are amortized over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation periods are reviewed and impairment is done only if indicators of impairment exist.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use of disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in the Statement of Profit and Loss when the asset is derecognized.
(i) Impairment of Property plant and equipment and intangible assets:
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed 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 assetâs carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in Statement of Profit and Loss.
(j) Foreign Currency Translation :
The functional currency of the Company is Indian rupee (Rs.).
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were the fair value measured.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period. Exchange differences on restatement of all monetary items are recognised in the Statement of Profit and Loss.
(k) Non-current assets held for sale:
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable and expected to be completed within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
(l) Assets taken on lease:
The Company applies Appendix C of Ind AS 17 âLeasesâ for determining whether an arrangement contains a Lease. Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risk and rewards of ownership to the lessee. All the other leases are classified as operating leases.
Operating lease payments are recognized as expenditure in the Statement of Profit and Loss on a straight-line basis, unless another basis is more representative of the time pattern of benefits received from the use of the assets taken on lease or the payments of lease rentals are in line with the expected general inflation compensating the lessor for expected inflationary cost. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
Assets held under finance lease are capitalised at the inception of the lease, with corresponding liability being recognised for the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease liability and finance charges in the statement of Profit or Loss so as to achieve a constant rate of interest on the remaining balance of the liability. Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term. For leases which include both land and building elements, basis of classification of each element was assessed on the date of transition, April 1, 2015, in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standard.
(m) Inventories:
Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a Weighted Average basis) or net realisable value. Cost include the cost of purchase 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.
(n) Government Grants:
Government grants are recognised in the period to which they relate when there is reasonable assurance that the grant will be received and that the Company will comply with the attached conditions.
Government grants are recognised in the Statement of Profit and Loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate.
(o) Income Taxes:
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
(i) Current tax:
Current Tax expenses are accounted in the same period to which the revenue and expenses relate. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the applicable tax rates and the prevailing tax laws.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.
(ii) Deferred tax :
Deferred income tax is recognised using the balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount in financial statements, except when the deferred income tax arises from the initial recognition of goodwill, an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profits or loss at the time of the transaction. Deferred income 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.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax ("MAT") credit is recognized 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. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
(p) Accounting for Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognized, when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. If the effect of the time value of money is material, the provision is discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation and the unwinding of the discount is recognised as interest expense.
Contingent liabilities are recognized only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for.
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
(q) Borrowing Costs:
General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets that necessarily takes a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs consist of interest and other costs that the company incurs in connection with the borrowing of funds. Interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing costs that are not directly attributable to a qualifying asset are recognised in the Statement of Profit or Loss using the effective interest method.
(r) Cash and Cash Equivalent (for the purpose of cash flow statements):
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
(s) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit/(loss) before tax is adjusted for the effects of transactions of non cash nature and any deferrals or accruals of past or future cash receipts or payments. Cash flows for the year are classified by operating, investing and financing activities.
(t) Share capital:
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
(u) Dividends:
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Companyâs Board of Directors.
(v) Earnings Per Share:
Basic earnings per share are computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year including potential equity shares on compulsory convertible debentures. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
(w) Segment Reporting:
The Company identifies operating segments based on the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the committee that makes strategic decisions.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market/ fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue / expenses / assets/ liabilitiesâ
(x) Exceptional items:
The Company discloses certain financial information both including and excluding exceptional items. The presentation of information excluding exceptional items allows a better understanding of the underlying operating performance of the Company and provides consistency with the Companyâs internal management reporting. Exceptional items are identified by virtue of either their size or nature so as to facilitate comparison with prior periods and to assess underlying trends in the financial performance of the Company. Exceptional items can include, but are no restricted to, gains and losses on the disposal of assets/investments, impairment charges, exchange gain/(loss) on long term borrowings/ assets and changes in fair value of derivative contracts.
(y) Financial Instruments:
Financial Assets:
Classification
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Initial Recognition and measurement:
All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Debt instruments at amortised cost
A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to loans and advances, deposits, trade and other receivables.
Debt instruments included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. For equity instruments classified as FVTOCI, all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI). There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either:
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance.
b) Trade receivables.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
Financial Liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to the Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss. The Company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Gains and losses are recognised in the Statement of Profit and Loss when the liabilities are derecognised.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments
The Company uses derivative financial instruments, such as cross currency swaps, interest rate swaps, etc. to manage its exposure to interest rate and foreign exchange risks. Although the company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value through profit or loss and the resulting exchange gains or losses are included in Exceptional items. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Assets/liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
(z) Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are measured at their fair values and recognised as income in the statement of profit and loss account.
Mar 31, 2018
Notes to Financial Statements for the year ended March 31, 2018 Note 1. Corporate Information
Oriental Hotels Limited (the âCompanyâ), is a listed public limited company incorporated and domiciled in India and has its registered office at No. 37 Taj Coromandel Mahatma Gandhi Road, Nungambakkam Chennai - 600 034. The Company is primarily engaged in the business of owning, operating & managing hotels, palaces and resorts.
The companyâs business operation is mainly in India.
The Company has primary listing in Bombay Stock Exchange and National Stock Exchange. The GDRâs are listed in Luxembourg Stock Exchange.
Note 2. Significant Accounting Policies
(a) Statement of compliance:
In accordance with the notification dated 16th February, 2015, issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as âInd ASâ) issued under Section 133 of the Companies Act, 2013 and notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) with effect from April 1, 2016.
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) issued under Section 133 of the Companies Act, 2013 notified under the Companies (Indian Accounting Standards) Rules, 2015 and amendment with Companies (Amendment rules) 2016. The accounting policies as set out below have been applied consistently to all years presented in these financial statements.
(b) Basis of preparation and presentation:
These financial statements have been prepared on a historical cost basis, except for certain financial instruments and defined benefit plans that are measured at fair value at the end of each reporting period, as explained in the accounting policies below.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle and other criteria set out in Ind AS-1 âPresentation of Financial Statementsâ and Schedule III to the Companies Act, 2013.
The Financial Statements are presented in Indian Rupees Lakhs, and all values are rounded off to the nearest two decimals except when otherwise stated.
(c) Use of estimates and judgments:
The preparation of the financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses for the years presented. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements pertain to:
- Useful lives of property, plant and equipment and intangible assets: The Company has estimated useful life of each class of assets based on the nature of assets, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, etc. The Company reviews the carrying amount of property, plant and equipment and Intangible assets at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
- Impairment testing: Property, plant and equipment and Intangible assets are tested for impairment when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to sell. The calculation involves use of significant estimates and assumptions which includes turnover and earnings multiples, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.
- Impairment of investments: The Company reviews its carrying value of investments carried at cost or amortized cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
- Income Taxes: Deferred tax assets are recognized to the extent that it is regarded as probable that deductible temporary differences can be realized. The Company estimates deferred tax assets and liabilities based on current tax laws and rates and in certain cases, business plans, including managementâs expectations regarding the manner and timing of recovery of the related assets. Changes in these estimates may affect the amount of deferred tax liabilities or the valuation of deferred tax assets and the tax charge in the statement of profit or loss.
Provision for tax liabilities require judgments on the interpretation of tax legislation, developments in case law and the potential outcomes of tax audits and appeals which may be subject to significant uncertainty. Therefore the actual results may vary from expectations resulting in adjustments to provisions, the valuation of deferred tax assets, cash tax settlements and therefore the tax charge in the statement of profit or loss.
- Loyalty program: The Company estimates the fair value of points awarded under the Loyalty Program by applying statistical techniques. Inputs include making assumptions about expected breakages, the mix of products that will be available for redemption in the future and customer preferences, redemption at own hotels and other participating hotels.
- Fair value measurement of derivative and other financial instruments: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. This involves significant judgments to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.
- Litigation: From time to time, the Company is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgment is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
- Defined benefit plans: The cost of the defined benefit plans and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
(d) Revenue recognition :
Revenue comprises sale of rooms, food and beverages and allied services relating to hotel operations, including management fees.
Revenue is recognized upon rendering of the service, provided pervasive evidence of an arrangement exists, tariff / rates are fixed or are determinable and collectability is reasonably certain. Revenue from sales of goods or rendering of services is net of Indirect taxes, allowances and discounts.
Management fees earned from hotels managed by the Company are usually under long-term contracts with the hotel owner and is recognized when earned in accordance with the terms of the contract.
Interest
Interest income from financial asset is recognized when it is probable that the economic benefit will flow to the Company and the amount of income can be measured reliably.
Interest income is accrued on a time basis by reference to principal outstanding using the effective interest rate method.
Dividend
Dividend income is recognized when the Companyâs right to receive the amount is established.
(e) Employee Benefits (other than for persons engaged through contractors):
i. Provident Fund
The eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employeesâ salary (currently 12% of employeesâ salary), which is recognized as an expense in the Statement of Profit and Loss during the year. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner.
ii. Gratuity Fund
The Company makes annual contributions to gratuity funds administered by the trustees for amounts notified by the funds. The Gratuity plan provides for lump sum payment to vested employees on retirement, death or termination of employment of an amount based on the respective employeeâs last drawn salary and tenure of employment. The Company accounts for the net present value of its obligations for gratuity benefits, based on an independent actuarial valuation, determined on the basis of the projected unit credit method, carried out as at the Balance Sheet date. Actuarial gains and losses are recognized immediately in the other comprehensive income and reflected in retained earnings and will not be reclassified to the statement of profit and loss.
iii. Post-Retirement Pension Scheme and Medical Benefits
The net present value of the Companyâs obligation towards post retirement pension scheme for certain retired directors and their dependents and Post employment medical benefits to qualifying persons is actuarially determined, based on the projected unit credit method. Actuarial gains and losses are recognized immediately in the Other Comprehensive Income and reflected immediately in retained earnings and will not be reclassified to the statement of profit and loss.
iv. Compensated Absences
The Company has a scheme for compensated absences for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method, carried out at the Balance Sheet date.
v. Long Service Awards
The Company has a scheme for long service awards for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method, carried out at the Balance Sheet date.
vi. Other employee termination benefits
Payment to employees on termination along with the additional liability towards retirement benefits arising pursuant to termination are charged off in the Statement of Profit and Loss in the year it is incurred.
vii. Other Employee Benefits
Other benefits, comprising of Leave Travel Allowances, are determined on an undiscounted basis and recognized based on the entitlement thereof.
(f) Property, Plant and Equipment:
The Company had elected to continue with the carrying value of all of its Property, Plant and Equipment recognized as of April 1, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as of the transition date.
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
All property, plant and equipment are initially recorded at cost. Cost includes the acquisition cost or the cost of construction, including duties and taxes (other than those refundable), expenses directly related to the location of assets and making them operational for their intended use and, in the case of qualifying assets, the attributable borrowing costs. Initial estimate shall also include costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
An assetsâ carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater that its estimated recoverable amount.
Depreciation is charged to profit or loss so as to write off 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 except in respect of the following categories of assets, in whose case the life of the assets had been re-assessed as under based on technical evaluation made at the group level, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturersâ warranties and maintenance support, etc.
The estimated useful lives, residual values and depreciation method are reviewed at the Balance Sheet date, with the effect of any changes in estimate accounted for on a prospective basis.
In respect of Leasehold Buildings, depreciation on buildings on leased properties is based on the tenure which is lower of the life of the buildings or the expected lease period. Improvements to buildings are depreciated on the basis of their estimated useful lives or expected lease period whichever is lower.
An item of property, plant and equipment is derecognized 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 recognized in the Statement of Profit and Loss.
For transition to Ind AS, the Company had elected to continue with carrying value of all of its tangible assets recognized as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Capital work in progress represents projects under which the property, plant and equipmentâs are not yet ready for their intended use and are carried at cost determined as aforesaid.
(g) Intangible Fixed Assets:
Intangible assets include cost of acquired software. Intangible assets are initially measured at acquisition cost including any directly attributable costs of preparing the asset for its intended use.
Intangible assets with finite lives are amortized over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization periods are reviewed and impairment is done only if indicators of impairment exist.
Class of Asset Estimated Useful Life
Software and Licences 6 years
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use of disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in the Statement of Profit and Loss when the asset is derecognized.
For transition to Ind AS, the Company had elected to continue with carrying value of all of its intangible assets recognized as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
(h) Impairment of Property plant and equipment and intangible assets:
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed 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 assetâs carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in Statement of Profit and Loss.
(i) Foreign Currency Translation :
The functional currency of the Company is Indian rupee (?).
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were the fair value measured.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period. Exchange differences on restatement of all monetary items are recognized in the Statement of Profit and Loss.
(j) Non-current assets held for sale:
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable and expected to be completed within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
(k) Assets taken on lease:
The Company applies Appendix C of Ind AS 17 âLeasesâ for determining whether an arrangement contains a Lease. Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risk and rewards of ownership to the lessee. All the other leases are classified as operating leases.
Operating lease payments are recognized as expenditure in the Statement of Profit and Loss on a straight-line basis, unless another basis is more representative of the time pattern of benefits received from the use of the assets taken on lease or the payments of lease rentals are in line with the expected general inflation compensating the lessor for expected inflationary cost. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
Assets held under finance lease are capitalized at the inception of the lease, with corresponding liability being recognized for the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease liability and finance charges in the statement of Profit or Loss so as to achieve a constant rate of interest on the remaining balance of the liability. Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
For leases which include both land and building elements, basis of classification of each element was assessed on the date of transition, April 1, 2015, in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standard.
(l) Inventories:
Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a Weighted Average basis) or net realizable value. Cost include the cost of purchase 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.
(m) Government Grants:
Government grants are recognized in the period to which they relate when there is reasonable assurance that the grant will be received and that the Company will comply with the attached conditions.
Government grants are recognized in the Statement of Profit and Loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.
(n) Income Taxes:
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.
(i) Current tax:
Current Tax expenses are accounted in the same period to which the revenue and expenses relate. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances,
deductions and exemptions determined in accordance with the applicable tax rates and the prevailing tax laws.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis.
(ii) Deferred tax:
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount in financial statements, except when the deferred income tax arises from the initial recognition of goodwill, an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profits or loss at the time of the transaction.
Deferred income tax assets are recognized 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 utilized.
Deferred tax liabilities are generally recognized for all taxable temporary differences except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax (âMATâ) credit is recognized 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. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
(o) Accounting for Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognized, when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. If the effect of the time value of money is material, the provision is discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation and the unwinding of the discount is recognized as interest expense.
Contingent liabilities are recognized only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for.
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
(p) Borrowing Costs:
General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets that necessarily takes a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs consist of interest and other costs that the company incurs in connection with the borrowing of funds.
Interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing costs that are not directly attributable to a qualifying asset are recognized in the Statement of Profit or Loss using the effective interest method.
(q) Cash and Cash Equivalent (for the purpose of cash flow statements):
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
(r) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit/ (loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. Cash flows for the year are classified by operating, investing and financing activities.
(s) Share capital:
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
(t) Dividends:
Final dividends on shares are recorded as a liabil
a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
(u) Earnings Per Share:
Basic earnings per share are computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year including potential equity shares on compulsory convertible debentures. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
(v) Segment Reporting:
The Company identifies operating segments based on the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the committee that makes strategic decisions.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market/ fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue/expenses/assets/ liabilitiesâ.
(w) Financial Instruments:
Financial Assets:
Classification
The Company classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Initial Recognition and measurement
All financial assets (not measured subsequently at fair value through profit or loss) are recognized initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Debt instruments at amortized cost
A âdebt instrumentâ is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are Solely Payments of Principal and Interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the Effective Interest Rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss. This category generally applies to loans and advances, deposits, trade and other receivables.
Debt instruments included within the Fair Value Through Profit and Loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at Fair Value Through Other Comprehensive Income (FVTOCI) or FVTPL. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
For equity instruments classified as FVTOCI, all fair value changes on the instrument, excluding dividends, are recognized in Other Comprehensive Income (OCI). There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either:
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortized cost e.g., loans, debt securities, deposits, and bank balance.
b) Trade receivables.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
Financial Liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortized cost, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL,
fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to the Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the Statement of Profit and Loss. The Company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the Effective Interest Rate (EIR) method. Gains and losses are recognized in the Statement of Profit and Loss when the liabilities are derecognised.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments
The Company uses derivative financial instruments, such as cross currency swaps, interest rate swaps, etc. to manage its exposure to interest rate and foreign exchange risks. Although the company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind-AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind-AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value through profit or loss and the resulting exchange gains or losses are included in Exceptional items. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Company''s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
(x) Financial guarantee contracts:
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are measured at their fair values and recognized as income in the statement of profit and loss account.
(y) Recent Accounting Pronouncements:
Standards issued but not yet effective
Ministry of Corporate Affairs (âMCAâ), on March 28, 2018, through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the new standard for revenue recognition and amended certain existing Ind-ASs which are effective for annual periods beginning on or after April 1, 2018.
Ind-AS 115- Revenue from Contract with Customers:
Ind-AS115 will supersede the existing revenue recognition standard âInd-AS18 - Revenueâ. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
The Company has completed its preliminary evaluation of the possible impact of Ind-AS 115 and will adopt it retrospectively with the cumulative effect of initially applying this standard recognized as an adjustment to the opening balance of retained earnings at the date of initial application i.e. April 1, 2018 and accordingly comparatives for the year ended March 31, 2018 will not be retrospectively adjusted. This standard is applied retrospectively only to the contracts that are not completed contracts at the date of initial application. The Company does not expect the impact of the adoption of new standard to be material on its retained earnings and to its net income on an ongoing basis.
Ind-AS 21 - The effect of changes in Foreign Exchange rates (Appendix B)
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
The amendment will come into force from April 1, 2018. The Company does not expect the effect of this on the financial statements to be material based on preliminary evaluation.
Other changes include principle for transfer of asset to, or from, Investment Property (Amendment to Ind-AS 40), segregation of deductible temporary differences in accordance with tax laws and assessing them on that basis to recognize deferred tax asset (Amendment to Ind-AS 12), and Applicability of disclosure requirements to interests classified as held for sale or as discontinued operation (Amendment to Ind-AS 112).
None of these amendments are expected to have any material effect on the companyâs financial statements.
Footnote:
(i) The company had a property in Coimbatore whose title was found to be defective by a Court order. The Company sued the original seller of the property and obtained partial settlement. The balance unrecovered amount amounting to ''374.93 lakhs (Previous Year ''374.93 lakhs) has been provided in the books of account as on 31st March 2016. The company is however pursuing the legal process for recovery.
(ii) The company entered into a long term agreement for development of hotel at Bannerghatta in Bengaluru in the year 2007. During the year 2013-14, the Company decided to terminate the lease agreement and recover the amount spent on the project along with the deposit made. As per the lease agreement the termination will take effect when the lessor fulfills the conditions laid in the termination agreement and hence an amount of ''777.65 lakhs (Previous Year ''777.65 lakhs) that was lying in long term deposits placed for hotel properties and in capital work in progress have been transferred to amounts recoverable. The company has taken adequate steps for recovery of amounts.
(iii) As per the benefits granted to investors in specified categories in the Tourism sector, the Kerala Department of Tourism will pay the difference between the commercial tariff and the industrial tariff on electricity as subsidy for the first 5 years of commencement of business. The claim by the Company, in this regard, has been lodged for ''141.73 lakhs, out of which ''35.49 lakhs was received during 2015-16. The Company is confident of receiving the balance receivable of ''106.24 lakhs (Previous Year ''106.24 lakhs) from the Department.
i. Risk management framework
The Oriental Hotels Limited is exposed primarily to fluctuations in foreign currency exchange rates, credit, liquidity and interest rate risks, which may adversely impact the fair value of its financial instruments. The Group has a risk management policy which covers risks associated with the financial assets and liabilities. The risk management policy is approved by the Board of Directors. The focus of the risk management committee is to assess the unpredictability of the financial environment and to mitigate potential adverse effects on the financial performance of the Group.
i. Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Group''s exposure to market risk is primarily on account of foreign currency exchange rate risk.
ii. Credit Risk
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks.
Financial instruments that are subject to concentrations of credit risk principally consist of investments classified as loans and receivables, trade receivables, loans and advances, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the other financial instruments of the Group result in material concentration of credit risk.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs, 2,662.20 lakhs and Rs,3,184.50 lakhs as of March 31, 2018 and March 31, 2017, respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, unbilled revenue, other financial assets and investments excluding equity and preference investments.
Oriental Hotels Limited exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2018 and March 31, 2017.
Trade and other receivables:-
The CompanyRs,s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.
The Company does not require collateral in respect of trade and other receivables.
The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables.
Cash and bank balance:
The Company held cash and bank balance of Rs,642.27 Lakhs at March 31, 2018 (March 31, 2017: Rs,1295.80 lakhs). The cash and bank balances are held with bank and financial institution counterparties.
Derivatives
The derivatives are entered into with bank and financial institution counterparties.
iii. Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
The Company''s Cash and bank balance and Trade receivable as at March 31, 2018 aggregating ''2,105.46 lakhs. The balance exposure will be met by asset held for sale, internal accruals and overdraft facilities available with the banks. Accordingly, Company does not perceive any non-managable liquidity risk.
The Company''s Cash and bank balance and Trade receivable as at March 31, 2017 aggregating ''2,567.19 lakhs. The balance exposure will be met by asset held for sale, internal accruals and overdraft facilities available with the banks. Accordingly, Company does not perceive any non-manageable liquidity risk.
iv. Market Risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of our investments. Thus Company''s exposure to market risk is a fund, on of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.
v. Currency Risk
The Company is exposed to currency risk on account of its borrowings and other payables in foreign currency. The functional currency of the Company is Indian Rupee. The foreign exchange loan is covered by a derivative and the amount of other payables is not material and hence Company does not perceive any major foreign currency risk.
Mar 31, 2017
Note 1. Corporate Information
Oriental Hotels Limited (the âCompanyâ), is a listed public limited company incorporated and domiciles in India and has its registered office at No. 37, Taj Coromandel Mahatma Gandhi Road, Nungambakkam, Chennai-600 034. The Company is primarily engaged in the business of owning, operating & managing hotels, palaces and resorts.
The company business operation is mainly in India.
The Company has primary listing in Bombay Stock Exchange and National Stock Exchange. The GDR are listed in Luxembourg Stock Exchange.
Note 2. Significant Accounting Policies
(a) Statement of compliance :
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 and amendment with Companies (Amendment rules) 2016. The accounting policies as set out below have been applied consistently to all years presented in these financial statements.
Up to the year ended March 31, 2016, the Company prepared its financial statements in accordance with the requirements of previous GAAP which includes accounting standards notified under the Accounting Standard rules, 2006.These financial statements for the year ended March 31, 2017 are the first financial statements under Ind AS. The date of transition to Ind AS is April 1, 2015.
The Company has adopted all issued Ind AS standards, as applicable, and the adoption was carried out in accordance with Ind AS 101 - First time adoption of Indian Accounting Standards, the transition was carried out from the Indian GAAP which was the previous GAAP. An explanation of how the transition to Ind AS has affected the reported financial position and financial performance of the Company is provided in Note 28. This note includes reconciliations of equity and total comprehensive income for comparative years under Indian GAAP to those reported for those years under Ind AS.
All amounts included in financial statements are reported in Indian Rupees Lakhs and have been rounded of to nearest decimal of Rs. lakhs.
Refer Note 28. B for the details of first-time adoption exemptions availed by the Company.
(b) Basis of preparation and presentation:
These financial statements have been prepared on a historical cost convention on accrual basis unless otherwise stated.
The Companyâs financial statements are prepared in Indian Rupees, which is also Companyâs functional currency.
(c) Use of estimates and judgments
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses for the years presented. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements pertain to:
- Useful lives of property, plant and equipment and intangible assets: The Company has estimated useful life of each class of assets based on the nature of assets, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, etc. The Company reviews the carrying amount of property, plant and equipment and Intangible assets at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
- Impairment testing: Property, plant and equipment and Intangible assets are tested for impairment when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The recoverable amount of cash generating units is higher of value-in-use and fair value less cost to sell. The calculation involves use of significant estimates and assumptions which includes turnover and earnings multiples, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions.
- Income Taxes: Deferred tax assets are recognized to the extent that it is regarded as probable that deductible temporary differences can be realized. The Company estimates deferred tax assets and liabilities based on current tax laws and rates and in certain cases, business plans, including managementâs expectations regarding the manner and timing of recovery of the related assets. Changes in these estimates may affect the amount of deferred tax liabilities or the valuation of deferred tax assets and there the tax charge in the statement of profit or loss.
Provision for tax liabilities require judgments on the interpretation of tax legislation, developments in case law and the potential outcomes of tax audits and appeals which may be subject to significant uncertainty. Therefore the actual results may vary from expectations resulting in adjustments to provisions, the valuation of deferred tax assets, cash tax settlements and therefore the tax charge in the statement of profit or loss.
- Loyalty program: The Company estimates the fair value of points awarded under the Loyalty Program by applying statistical techniques. Inputs include making assumptions about expected breakages, the mix of products that will be available for redemption in the future and customer preferences, redemption at own hotels and other participating hotels.
- Fair value measurement of derivative and other financial instruments: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. This involves significant judgments to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.
- Litigation: From time to time, the Company is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgment is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
- Defined benefit plans: The cost of the defined benefit plans and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
All assets and liabilities are classified into current and non-current generally on the criteria of realization /settlement within 12 months period from balance sheet date.
(d) Revenue recognition :
Revenue comprises sale of rooms, food and beverages and allied services relating to hotel operations, including management fees.
Revenue is recognized upon rendering of the service, provided pervasive evidence of an arrangement exists, tariff / rates are fixed or are determinable and collectability is reasonably certain. Revenue from sales of goods or rendering of services is net of Indirect taxes, allowances and discounts.
Management fees earned from hotels managed by the Company are usually under long-term contracts with the hotel owner and is recognized when earned in accordance with the terms of the contract.
Interest
Interest income from financial asset is recognized when it is probable that the economic benefit will flow to the Company and the amount of income can be measure reliably
Interest income is accrued on a time basis by reference to principle outstanding using the effective interest rate method.
Dividend
Dividend income is recognized when the Companyâs right to receive the amount is established.
(e) Employee Benefits (other than for persons engaged through contractors):
i. Provident Fund: The eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employeesâ salary (currently 12% of employeesâ salary), which is recognized as an expense in the Statement of Profit and Loss during the year. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner.
ii. Gratuity Fund
The Company makes annual contributions to gratuity funds administered by the trustees for amounts notified by the funds. The Gratuity plan provides for lump sum payment to vested employees on retirement, death or termination of employment of an amount based on the respective employeeâs last drawn salary and tenure of employment. The Company accounts for the net present value of its obligations for gratuity benefits, based on an independent actuarial valuation, determined on the basis of the projected unit credit method, carried out as at the Balance Sheet date. Actuarial gains and losses are recognized immediately in the other comprehensive income and reflected in retained earnings and will not be reclassified to the statement of profit and loss.
iii. Post-Retirement Pension Scheme and Medical Benefits
The net present value of the Companyâs obligation towards post retirement pension scheme for certain retired directors and their dependents and Post employment medical benefits to qualifying persons is actuarially determined, based on the projected unit credit method. Actuarial gains and losses are recognized immediately in the Other Comprehensive Income and reflected immediately in retained earnings and will not be reclassified to the statement of profit and loss.
iv. Compensated Absences
The Company has a scheme for compensated absences for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method, carried out at the Balance Sheet date.
v. Long Service Awards
The Company has a scheme for long service awards for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method, carried out at the Balance Sheet date.
vi. Other employee termination benefits
Payment to employees on termination along with the additional liability towards retirement benefits arising pursuant to termination are charged off in the Statement of Profit and Loss in the year it is incurred.
vii. Other Employee Benefits
Other benefits, comprising of Leave Travel Allowances, are determined on an undiscounted basis and recognized based on the entitlement thereof.
(f) Property, Plant and Equipment:
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.
All property, plant and equipment are initially recorded at cost. Cost includes the acquisition cost or the cost of construction, including duties and taxes (other than those refundable), expenses directly related to the location of assets and making them operational for their intended use and, in the case of qualifying assets, the attributable borrowing costs. Initial estimate shall also include costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
An assetsâ carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount.
Depreciation is charged to profit or loss so as to write off 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. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
In respect of Leasehold Buildings, depreciation on buildings on leased properties is based on the tenure which is lower of the life of the buildings or the expected lease period. Improvements to buildings are depreciated on the basis of their estimated useful lives or expected lease period whichever is lower.
An item of property, plant and equipment is derecognized 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 recognized in the Statement of Profit and Loss.
For transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as of April 1, 2015 (transition date ) measured as per the pervious GAAP and use that carrying value as its deemed cost as of the transition date.
Capital work in progress represents projects under which the property, plant and equipmentâs are not yet ready for their intended use and are carried at cost determined as aforesaid.
(g) Intangible Fixed Assets:
Intangible assets include cost of acquired software. Intangible assets are initially measured at acquisition cost including any directly attributable costs of preparing the asset for its intended use.
Intangible assets with finite lives are amortized over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization periods are reviewed and impairment is done only if indicators of impairment exist.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use of disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in the Statement of Profit and Loss when the asset is derecognized.
For transition to Ind AS, the Company has elected to continue with carrying value of all of its intangible assets recognized as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
(h) Impairment of Property plant and equipment and intangible assets:
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed 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 assetâs carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount so that, the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in Statement of Profit and Loss.
(i) Foreign Currency Translation :
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were the fair value measured.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period. Exchange differences on restatement of other monetary items are recognized in the Statement of Profit and Loss.
(j) Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable and expected to be completed within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
(k) Assets taken on lease:
Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risk and rewards of ownership to the lessee. All the other leases are classified as operating leases.
Operating lease payments are recognized as expenditure in the Statement of Profit and Loss on a straight-line basis, unless another basis is more representative of the time pattern of benefits received from the use of the assets taken on lease or the payments of lease rentals are in line with the expected general inflation compensating the lessor for expected inflationary cost. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
Assets held under finance lease are capitalized at the inception of the lease, with corresponding liability being recognized for the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease liability and finance charges in the statement of Profit or Loss so as to achieve a constant rate of interest on the remaining balance of the liability. Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
For leases which include both land and building elements, basis of classification of each element is assessed on the date of transition, April 1, 2015, in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standard.
(l) Inventories:
Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a Weighted Average basis) or net realizable value. Cost include the cost of purchase 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.
(m) Government Grants
Government grants are recognized in the period to which they relate when there is reasonable assurance that the grant will be received and that the Company will comply with the attached conditions.
Government grants are recognized in the Statement of Profit and Loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.
(n) Income Taxes:
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.
(i) Current tax:
Current Tax expenses are accounted in the same period to which the revenue and expenses relate. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the applicable tax rates and the prevailing tax laws.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis.
(ii) Deferred tax :
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount in financial statements, except when the deferred income tax arises from the initial recognition of goodwill, an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profits or loss at the time of the transaction.
Deferred income tax assets are recognized 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 utilized.
Deferred tax liabilities are generally recognized for all taxable temporary differences except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Minimum Alternative Tax ("MAT") credit is recognized 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. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
(o) Accounting for Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognized, when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. If the effect of the time value of money is material, the provision is discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation and the unwinding of the discount is recognized as interest expense.
Contingent liabilities are recognized only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for.
Contingent assets are not recognized in the financial statements.
(p) Borrowing Costs:
General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets that necessarily takes a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs consist of interest and other costs that the company incurs in connection with the borrowing of funds.
Interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing costs that are not directly attributable to a qualifying asset are recognized in the Statement of Profit or Loss using the effective interest method.
(q) Cash and Cash Equivalent (for the purpose of cash flow statements):
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
(r) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit/ (loss) before tax is adjusted for the effects of transactions of no cash nature and any deferrals or accruals of past or future cash receipts or payments. Cash flow for the year are classified by operating, investing and financing activities.
(s) Share capital
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
(t) Dividends
Final dividends on shares are recorded as a liability on the date of approval by the share holders and interim dividends are recorded as a liability on the date of declaration by the company''s Board of Directors.
(u) Earnings Per Share:
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year including potential equity shares on compulsory convertible debentures. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
(v) Segment Reporting:
The Company identifies operating segments based on the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the committee that makes strategic decisions.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue / expenses / assets/liabilitiesâ.
(w) Financial Instruments:
Financial Assets:
Classification
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Initial Recognition and measurement:
All financial assets (not measured subsequently at fair value through profit or loss) are recognized initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Debt instruments at amortized cost
A âdebt instrumentâ is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss. This category generally applies to loans and advances, deposits, trade and other receivables.
Debt instruments included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
For equity instruments classified as FVTOCI, all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI). There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either:
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance.
b) Trade receivables.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
Financial Liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to the Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the Statement of Profit and Loss. The Company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the Effective Interest Rate(EIR) method. Gains and losses are recognized in the Statement of Profit and Loss when the liabilities are derecognized.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
Derivative financial instruments
The Company uses derivative financial instruments, such as cross currency swaps, interest rate swaps, etc. to manage its exposure to interest rate and foreign exchange risks. Although the company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value through profit or loss and the resulting exchange gains or losses are included in Exceptional items. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Company''s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
(x) Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are measured at their fair values and recognised as income in the statement of profit and loss account.
Mar 31, 2015
The Financial Statements have been prepared on the basis of historical
cost convention on the basis of a going con- cern following the accrual
system of accounting and comply with the applicable mandatory
accounting standards specified under Section 133 of the Companies Act,
2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the
relevant provisions of the Companies Act, 2013.
Use of Estimates:
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities as on the
date of the financial statements and the reported amounts of revenues
and expenses during the period reported. Although, these estimates are
based upon management's knowledge of current events and actions, actual
results could differ from those estimates and revisions, if any, are
recognized in the current and future periods.
a) Revenue Recognition
Revenue comprises sale of rooms, food and beverages, allied services
relating to hotel operations, including net income from
telecommunication services and management and operating fees. Revenue
is recognised upon rendering of the service.
b) Export Benefit Entitlement
Benefits arising in the nature of Duty Free Scrips are recognised upon
the actual utilisation of Duty credit Scrips for the purchase of Fixed
Assets and Inventories and are adjusted against the cost of the related
assets.
c) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation/
amortisation. Costs include all expenses directly attributable to bring
the assets to its present location and condition. None of the Assets
were revalued during the course of the year.
d) Depreciation/Amortisation
Depreciable amount for assets is the cost of an asset, or other amount
substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the
straight-line method as per the useful life pre- scribed in Schedule II
to the Companies Act, 2013 except in respect of the following
categories of assets, in whose case the life of the assets has been
re-assessed as under based on technical evaluation, taking into account
the nature of the asset, the estimated usage of the asset, the
operating conditions of the asset, past history of replace- ment,
anticipated technological changes, manufacturers warranties and
maintenance support, etc.
Asset description Useful life
Plant and machinery 10- 20 Years
Electrical installations and equipment 20 years
Hotel Wooden Furniture 15 years
EndUser devices-Computers,Laptops,etc 6 years
Asset costing less than Rs 5000 4 years
In respect of improvements to leasehold premises depreciation is
provided at the rates arrived at based on the number of years of the
total lease or at the rates arrived at based on useful life whichever
is earlier.
Intangible assets - computer software including licenced software is
being amortised over a period of 6 years.
e) Investments
Long Term Investments are carried at cost. Provision for decline in the
value, other than temporary, has been made wherever necessary.
Current Investments are carried at lower of cost and market value / net
asset value.
f) Inventories
Inventories are valued at cost on weighted average basis.
g) Transactions in Foreign Exchange
Foreign Currency transactions are recorded at the exchange rate
prevailing on the date of the transactions. Monetary items denominated
in foreign currency and outstanding at the Balance Sheet date are
translated at the exchange rate prevailing on the date of balance sheet
date. Exchange differences arising on settlement and conversion of
foreign currency transactions are recognised as income or expense in
the period in which they arise, except in cases where they relate to
long term monetary items utilized for acquisition of qualifying assets.
Consequent to the notification No.F.No.17/133/2008 - CL V dated 29th
December, 2011 revising Accounting Standard (AS) 11 "The Effects of
Changes in Foreign Exchange Rates", the company has exercised the
option in terms of paragraph 46A. Accordingly the exchange differences
arising on settlement / translation of long term monetary items
utilised for acquisition of depreciable fixed assets are adjusted to
the carrying cost of fixed assets
Non-monetary items denominated in foreign currency are carried at the
exchange rate in force at the date of the transaction.
h) Employee Benefits
In respect of defined contributions schemes, contributions to Provident
Fund and Family Pension are charged to profit and loss account as
incurred.
In respect of defined benefit schemes, the post - retirement benefits
such as gratuity, leave encashment and other retirement benefits are
accounted for based on valuations, as at the balance sheet date, made
by an independent actuary. Gratuity in respect of certain employees is
covered by Group Gratuity scheme with the Life Insurance Corporation of
India and the balance employees contribution is made to a recognised
fund and is managed by the TATA AIA Life Insurance.
In respect of other employee benefits, provision for such benefits are
provided in terms of Accounting Standard - 15 (Revised) - "Employee
Benefits".
i) Borrowing Cost
Borrowing costs incurred on acquiring qualifying assets (i.e. assets
that necessarily take a substantial period of time to get ready for
their intended use) are capitalised at the weighted average rate at
which the funds have been borrowed for such acquisition. Other
borrowing costs are recognised as an expense in the year in which they
are incurred. Debenture issue costs and the premium on redemption of
debentures are adjusted against the available Securities Premium
Account in accordance with the provisions of Section 52 of the
Companies Act 2013.All other borrowing costs are charged to Statement
of Profit and Loss over the tenure of the borrowing
j) Taxes on Income :
Income Tax including minimum alternate tax is computed in accordance
with Accounting Standard 22 (AS-22) 'Accounting for Taxes on Income'.
Tax expenses are accrued in the same period as the revenue and expenses
to which they relate.
Provision for current income tax is made on the tax liability payable
on taxable income after considering tax al- lowances, deductions and
exemptions determined in accordance with the prevailing tax laws. The
differences between taxable income and the net profit /loss before tax
for the year as per the financial statements are identi- fied and the
tax effect of the deferred tax asset or deferred tax liability is
recorded for timing differences , i.e. differences that originate in
one accounting period and reversed in another. The tax effect is
calculated on accu- mulated timing differences at the end of the
accounting year based on applicable tax rates. Deferred tax assets/
liabilities are reviewed as at each Balance Sheet date.
Deferred tax assets, other than on unabsorbed depreciation and carried
forward losses, are recognised only if there is reasonable certainty
that they will be realised in future and are reviewed for the
appropriateness of their respective carrying values at each balance
sheet date. In situations, where the company has unabsorbed depre-
ciation and carried forward losses, deferred tax assets are recognised
only if there is virtual certainty supported by convincing evidence
that the same can be realised against future taxable profits.
k) Impairment of Assets:
Impairment is ascertained at each balance sheet date in respect of the
Company's fixed assets. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value based on an appropriate discount
factor.
l) Accounting for Provisions, Contingent Liabilities and Contingent
Assets:
Provisions are recognised in terms of Accounting Standard 29 -
'Provisions, Contingent Liabilities and Contingent Assets', when there
is a present legal or statutory obligation as a result of past events
where it is probable that there will be outflow of resources to settle
the obligation and when a reliable estimate of the amount of the
obliga- tion can be made.
Contingent Liabilities are recognised only when there is a possible
obligation arising from past events due to oc- currence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company or where any present obligation cannot be
made. Obligations are assessed on an ongoing basis and only those
having a largely probable outflow of resources are provided for.
Contingent Assets are not recognised in the financial statements.
m) Assets taken on lease:
In respect of lease transactions, which are in nature of finance
leases, Assets taken on lease after 1st April, 2001 are accounted as
fixed assets at fair value in accordance with Accounting Standard 19
(AS-19) - "Leases". Lease payments are apportioned between finance
charges and reduction of the lease liability based on the implicit rate
of return.
Assets taken on lease/licence under which all the risks and rewards of
ownership are effectively retained by the lessor are classified as
operating lease. Lease payments under operating leases are recognised
as expenses in accordance with the respective lease/licence agreements.
(a) The Company has one class of equity shares having a par value of Rs.
1/- share. Each shareholder is eligible for one vote per share held.
The Board of Directors in their meeting on 15th May, 2015 proposed a
dividend of Rs.0.40 per equity share, which is subject to approval of
shareholders in the ensuing Annual General Meeting. In the event of
liquidation, the equity shareholders are eligible to receive remaining
assets of the Company after distribution of all preferential amounts,
in proportion to their shareholding.
(b) Reconciliation of Equity shares
iii) Includes Exchange Loss in currency swap of the term loan Rs.1,740.07
lakhs ( Previous Year Rs.2037.36 lakhs)
Footnote : Deferred tax asset on loss U/s 35AD of the Income Tax Act,
1961 has been recognised as equivalent deferred tax liability has been
created on Depreciation on Fixed Assets.
(i) Secured loans from banks represents short term loan secured by way
of mortgage by deposit of title deed in respect of immovable properties
of Fisherman's Cove and Coonoor Hotel & additionally secured by way of
exclusive first charge of credit card receivables of the Company.
(ii) Short term loan from related parties consisted of inter corporate
deposits for a period of 90 days with an option of prepayment carrying
interest @ 11%.
Footnote : Amounts due to Micro, Small and Medium Enterprises:
The amount due to Micro and Small Enterprises as defined in the "The
Micro, Small and Medium Enterprises Development Act, 2006" has been
determined to the extent of such parties have been identified on the
basis of information available with the Company. No amount is
outstanding over a period of 45 days.
(i) The amount reflects the position as on 31st March 2015, the actual
amount to be transferred to the "Investor Education & Protection Fund"
shall be determined and paid to the credit of the fund on due dates.
(ii) Includes Rs.90 lakhs due to Directors(Previous Year Rs.60 lakhs).
(i) The related party under Long Term Deposits placed for hotel
properties represent enterprises influenced by relatives of key
management personnel.
(ii) Advance Tax and Tax deducted at Source is net of Provision for
Income tax amounting to Rs.16,833.79 lakhs (previous year Rs.16,833.79
lakhs).
(iii) Provision for income tax considered above is net of MAT credit
utilised of Rs.114.79 lakhs (Previous year Rs.65.88 lakhs).
Footnote : The inventories have been classified as per the nomenclature
used in the hotel industry.
Footnote : (i) Include amounts in unpaid dividend accounts Rs.74.52 lakhs
(Previous year Rs.68.11 lakhs).
(i) Based on the orders of the Division Bench of the Hon'be High Court
of Madras in an earlier year, the value of Freehold Land amounting to
Rs.749.86 lakhs has been classified as recoverables. The Company has
initiated appropriate legal action to recover the amount together with
interest and obtained interim stay order to protect and secure the
amount. The Company has received part amount under a compromise
settlement. The company has already obtained the court order for
recovery of the balance amount of Rs.374.25 lakhs.
(ii) The company entered into a long term agreement for development of
hotel at Bannerghatta in Bengaluru in the year 2007. During the year
2013-14, the Company decided to terminate the lease agreement and
recover the amount spent on the project along with the deposit made.
As per the agreement the termination will take effect when the lessor
fulfills the conditions laid in the termination agreement. In view of
the above agreement an amount of Rs.777.65 lakhs lying in long term
deposits placed for hotel properties and capital work in progress have
been transferred to amounts recoverable.
Note : On account of foreclosure of loan the entire amount is amortised
during the year. Note 21 : Rooms, restaurants, banquets and other
income
Mar 31, 2013
A) Fixed Assets
Fixed Assets are carried at cost less depreciation.
b) Depreciation
Depreciation on Assets is provided on straight line basis at rates
which are in conformity with the requirements of the Companies Act,
1956. Assets given to the employees under the Company''s white good
scheme are depreciated as per the terms of the scheme. Buildings
constructed and capital expenditure incurred on leasehold rights are
depreciated at the rates arrived at based on the number of years of
total lease or the rates applicable as per the Companies Act,1956
whichever is higher.
c) Investments
Long Term Investments are carried at cost. Provision for decline in the
value, other than temporary, has been made wherever necessary.
Current Investments are carried at lower of cost and market value / net
asset value.
d) Inventories
Inventories are valued at cost on weighted average basis.
e) Transactions in Foreign Exchange
Foreign Currency transactions are recorded at the exchange rate
prevailing on the date of the transactions. Monetary items denominated
in foreign currency and outstanding at the Balance Sheet date are
translated at the exchange rate prevailing on the date of balance
sheet. Exchange differences arising on settlement and conversion of
foreign currency transactions are recognised as income or expense in
the period in which they arise, except in cases where they relate to
long term monetary items utilized for acquisition of qualifying assets.
Consequent to the notification No.F.No.17/133/2008 Â CL V dated 29th
December, 2011 revising Accounting Standard (AS) 11 ÂThe Effects of
Changes in Foreign Exchange RatesÂ, the Company has exercised the
option in terms of paragraph 46A. Accordingly the exchange differences
arising on settlement / translation of long term monetary items
utilised for acquisition of depreciable fixed assets are adjusted to
the carrying cost of fixed assets. Non-monetary items denominated in
foreign currency are carried at the exchange rate in force at the date
of the transaction.
f) Employee Benefits
In respect of defined contributions schemes, contributions to Provident
Fund and Family Pension are charged to profit and loss account as
incurred.
In respect of defined benefit schemes, the post - retirement benefits
such as gratuity, leave encashment and other retirement benifits are
accounted for based on valuations, as at the balance sheet date, made
by an independent actuary. Gratuity in respect of certain employees is
covered by Group Gratuity scheme with the Life Insurance Corporation of
India and the balance employees contribution is made to a recognised
fund and is managed by the Company.
In respect of other employee benefits, provision for such benefits are
provided in terms of Accounting Standard - 15 (Revised) - "Employee
Benefits".
g) Borrowing Cost:
Borrowing costs incurred on acquiring qualifying assets (i.e assets
that necessarily take a substantial period of time to get ready for
their intended use) are capitalised at the weighted average rate at
which the funds have been borrowed for such acquisition. Other
borrowing costs are recognised as an expense in the year in which they
are incurred.
h) Taxes on Income :
Income Tax including minimum alternate tax is computed in accordance
with Accounting Standard 22 (AS-22) ''Accounting for Taxes on Income'' .
Tax expenses are accrued in the same period as the revenue and expenses
to which they relate.
Provision for current income tax is made on the tax liability payable
on taxable income after considering tax al- lowances, deductions and
exemptions determined in accordance with the prevailing tax laws. The
differences between taxable income and the net profit /loss before tax
for the year as per the financial statements are identi- fied and the
tax effect of the deferred tax asset or deferred tax liability is
recorded for timing differences , i.e. differences that originate in
one accounting period and reversed in another. The tax effect is
calculated on accu- mulated timing differences at the end of the
accounting year based on applicable tax rates. Deferred tax assets/
liabilities are reviewed as at each Balance Sheet date.
Deferred tax assets, other than on unabsorbed depreciation and carried
forward losses, are recognised only if there is reasonable certainty
that they will be realised in future and are reviewed for the
appropriateness of their respective carrying values at each balance
sheet date. In situations, where the Company has unabsorbed
depreciation and carried forward losses, deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that the same can be realised against future taxable profits.
i) Impairment of Assets:
Impairment is ascertained at each Balance Sheet date in respect of the
Company''s fixed assets. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value based on an appropriate discount
factor.
j) Accounting for Provisions, Contingent Liabilities and Contingent
Assets:
Provisions are recognised in terms of Accounting Standard 29 -
''Provisions, Contingent Liabilities and Contingent Assets'', when there
is a present legal or statutory obligation as a result of past events
where it is probable that there will be outflow of resources to settle
the obligation and when a reliable estimate of the amount of the
obligation can be made.
Contingent Liabilities are recognised only when there is a possible
obligation arising from past events due to occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of
the Company or where any present obligation cannot be made. Obligations
are assessed on an ongoing basis and only those having a largely
probable outflow of resources are provided for.
Contingent Assets are not recognised in the financial statements.
k) Assets taken on lease:
In respect of lease transactions, which are in nature of finance
leases, Assets taken on lease after 1st April, 2001 are accounted as
fixed assets at fair value in accordance with Accounting Standard 19
(AS-19) - "Leases". Lease payments are apportioned between finance
charges and reduction of the lease liability based on the implicit rate
of return.
Assets taken on lease/licence under which all the risks and rewards of
ownership are effectively retained by the lessor are classified as
operating lease. Lease payments under operating leases are recognised
as expenses in accordance with the respective lease/licence agreements.
Mar 31, 2012
A) Fixed Assets
Fixed Assets are carried at cost less depreciation.
b) Depreciation
Depreciation on Assets is provided on straight line basis at rates
which are in conformity with the requirements of the Companies Act,
1956. Assets given to the employees under the company's white good
scheme are depreciated as per the terms of the scheme. Buildings
constructed and capital expenditure incurred on leasehold rights are
depreciated at the rates arrived at based on the number of years of
total lease or the rates applicable as per the Companies Act,1956
whichever is higher.
c) Investments
Long Term Investments are carried at cost. Provision for decline in the
value, other than temporary, has been made wherever necessary.
Current Investments are carried at lower of cost and market value / net
asset value.
d) Inventories
Inventories are valued at cost on weighted average basis.
e) Transactions in Foreign Exchange
Foreign Currency transactions are recorded at the exchange rate
prevailing on the date of the transactions. Monetary items denominated
in foreign currency and outstanding at the Balance Sheet date are
translated at the exchange rate prevailing on the date of balance sheet
date. Exchange differences arising on settlement and conversion of
foreign currency transactions are recognized as income or expense in
the period in which they arise, except in cases where they relate to
long term monetary items utilized for acquisition of qualifying assets.
During the year, consequent to the notification No.F.No.17/133/2008 -
CL V dated 29th December, 2011 revising Accounting Standard (AS) 11
"The Effects of Changes in Foreign Exchange Rates, the company has
exercised the option in terms of paragraph 46A. Accordingly the
exchange differences arising on settlement / translation of long term
monetary items utilized for acquisition of fixed assets are adjusted to
the carrying cost of fixed assets excluding the value of fluctuations
to the extent considered as part of interest cost in accordance with
Accounting Stadard-16 " Borrowing Costs.
Non-monetary items denominated in foreign currency are carried at the
exchange rate in force at the date of the transaction.
f) Employee Benefits
In respect of defined contributions schemes, contributions to Provident
Fund and Family Pension are charged to profit and loss account as
incurred.
In respect of defined benefit schemes, the post - retirement benefits
such as gratuity, leave encashment and other retirement benefits are
accounted for based on valuations, as at the balance sheet date, made
by an independent actuary. Gratuity in respect of certain employees is
covered by Group Gratuity scheme with the Life Insurance Corporation of
India and the balance employees contribution is made to a recognized
fund and is managed by the company.
In respect of other employee benefits, provision for such benefits are
provided in terms of Accounting Standard - 15 (Revised) - "Employee
Benefits".
g) Borrowing Cost
Borrowing costs incurred on acquiring qualifying assets (i.e assets
that necessarily take a substantial period of time to get ready for
their intended use) are capitalized at the weighted average rate at
which the funds have been borrowed for such acquisition. Other
borrowing costs are recognized as an expense in the year in which they
are incurred. Exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment to
interest costs.
h) Taxes on Income
Income Tax including minimum alternate tax is computed in accordance
with Accounting Standard 22 (AS-22) 'Accounting for Taxes on Income'.
Tax expenses are accrued in the same period as the revenue and expenses
to which they relate.
Provision for current income tax is made on the tax liability payable
on taxable income after considering tax allowances, deductions and
exemptions determined in accordance with the prevailing tax laws. The
differences between taxable income and the net profit /loss before tax
for the year as per the financial statements are identified and the tax
effect of the deferred tax asset or deferred tax liability is recorded
for timing differences , i.e. differences that originate in one
accounting period and reversed in another. The tax effect is calculated
on accumulated timing differences at the end of the accounting year
based on applicable tax rates. Deferred tax assets/ liabilities are
reviewed as at each Balance Sheet date.
Deferred tax assets, other than on unabsorbed depreciation and carried
forward losses, are recognized only if there is reasonable certainty
that they will be realized in future and are reviewed for the
appropriateness of their respective carrying values at each balance
sheet date. In situations, where the company has unabsorbed
depreciation and carried forward losses, deferred tax assets are
recognized only if there is virtual certainty supported by convincing
evidence that the same can be realized against future taxable profits.
i) Impairment of Assets
Impairment is ascertained at each balance sheet date in respect of the
Company's fixed assets. An impairment loss is recognized whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value based on an appropriate discount
factor.
j) Accounting for Provisions, Contingent Liabilities and Contingent
Assets
Provisions are recognized in terms of Accounting Standard 29 -
'Provisions, Contingent Liabilities and Contingent Assets', when there
is a present legal or statutory obligation as a result of past events
where it is probable that there will be outflow of resources to settle
the obligation and when a reliable estimate of the amount of the
obligation can be made.
Contingent Liabilities are recognized only when there is a possible
obligation arising from past events due to occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of
the Company or where any present obligation cannot be made. Obligations
are assessed on an ongoing basis and only those having a largely
probable outflow of resources are provided for.
Contingent Assets are not recognized in the financial statements.
k) Assets taken on lease
In respect of lease transactions, which are in nature of finance
leases, Assets taken on lease after 1st April, 2001 are accounted as
fixed assets at fair value in accordance with Accounting Standard 19
(AS-19) - "Leases". Lease payments are apportioned between finance
charges and reduction of the lease liability based on the implicit rate
of return.
Assets taken on lease/license under which all the risks and rewards of
ownership are effectively retained by the lessor are classified as
operating lease. Lease payments under operating leases are recognized
as expenses in accordance with the respective lease/license agreements.
(i) 10.40% Secured Non-convertible Redeemble Debentures Secured by
Mortgage of Buildings and other fixed assets of Vivanta by Taj Surya,
Coimbatore, and repayable in single installment on maturity , viz 10th
January 2015.
(ii) Term Loan of Rs7,692.31 lakhs are secured by way of mortgage by
deposit of title deeds in respect of immovable properties of
Fisherman's Cove and Connor hotels & additionally secured by way of
exclusive first charge of credit card receivables of the Company and
repayable in 13 quarterly installments commencing, July 2011.
(iii) Term Loan of Rs7,000 lakhs are secured by way of mortgage by
deposit of title deeds in respect of immovable properties of
Fisherman's Cove and Connor hotels & additionally secured by way of
exclusive first charge of credit card receivables of the Company and
repayable in 19 quarterly installments commencing, April 2013.
(iv) Term Loan of Rs3,286 lakhs is secured by first paripassu mortgage
by deposit of title deeds of Taj Coromandel hotel and repayable in 3
yearly installments commencing from June 2011.
(v) The Company has entered into currency swap transactions with a view
to convert its rupee borrowing into foreign currency borrowing.
Accordingly, the underlying borrowing are translated at the exchange
rate prevailing at the Balance sheet date.
i) Amounts due to Micro, Small and Medium Enterprises:
The amount due to Micro and Small Enterprises as defined in the "The
Micro, Small and Medium Enterprises Development Act, 2006" has been
determined to the extent of such parties have been identified on the
basis of information available with the Company. No amount is
outstanding over a period of 30 days.
iii) Stated at the exchange rate prevailing on the date of Initial
deposit of loan which was converted into Shares.
iv) In terms of Share Retention Agreement with International Finance
Corporation (IFC) for the loans availed by TAL Hotel and Resorts
Limited (THRL), transfer of shareholding in this company is restricted
during the subsistence of the loan agreement of THRL.
v) In terms of an undertaking, transfer of this shareholding is
restricted to Taj / TATA group Companies.
vi) Acquired during the year
vii) Equity Shares of Rs 10/- each have been reduced to Rs 1 /- each as
confirmed by the order of the court and provision for diminution in
value has been made in the earlier years.
viii) Redeemed during the year
Note:
i) The related party under Long Term Deposits placed for hotel
properties represent enterprises influenced by relatives of key
management personnel.
ii) The shareholders deposit represents advance for investments.
Note1: Based on the orders of the Division Bench of the Hon'ble High
Court of Madras in an earlier year, the value of Freehold Land
amounting to Rs 749.86 Lakhs has been classified as recoverable. The
Company has initiated appropriate legal action to recover the amount
together with interest and obtained interim stay order to protect and
secure the amount. The Company has received part amount under a
compromise settlement. The company has already obtained the court order
for recovery of the balance amount of Rs 385.57 Lakhs
Mar 31, 2011
The financial statements are prepared under historical cost convention
on accrual basis and comply with Accounting Standards (AS) referred to
in Section 211(3C) of the Companies Act, 1956. The preparation of
financial statements requires the management to make estimates and
assumptions considered in the reported amounts of assests and
liabilities(including contingent liabilities) as of the date of the
financial statements and the reported income and expenses. The
management believes that the estimates used in the preparation of the
finanfial statements are prudent and reasonable. Future results could
differ from the estimates. Significant accounting policies adopted in
the presentation of the accounts are as under:
a) Fixed Assets
Fixed Assets are carried at cost less depreciation.
b) Depreciation
Depreciation on Assets is provided on straight line basis at rates
which are in conformity with the requirements of the Companies Act,
1956. Assets given to the employees under the Companys white good
scheme are depreciated as per the terms of the scheme. Buildings
constructed and capital expenditure incurred on leasehold rights are
depreciated at the rates arrived at based on the number of years of
total lease or the rates applicable as per the Companies Act, 1956
whichever is higher.
c) Investments
Long Term Investments are carried at cost. Provision for decline in the
value, other than temporary, has been made wherever necessary.
Current Investments are carried at lower of cost and market value / net
asset value.
d) Inventories
Inventories are valued at cost on weighted average basis.
e) Transactions in Foreign Exchange
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transactions. Monetary
items denominated in foreign currency and outstanding at the Balance
Sheet date are translated at the exchange rate ruling at the year end.
Exchange differences arising on foreign currency transactions are
recognised as income or expense in the period in which they arise.
Non-monetary items denominated in foreign currency are carried at the
exchange rate in force at the date of the transaction.
f) Derivative Instuments
Exchange defference arising on repayment/revaluation of derivative
contracts, entered in to in respect of some of the companys undelying
borrowings, are recognised as income or expense, as the case may be, in
the period in which arise. Interest rate derivatives are accounted
based on the underlying benchmark for the relevant period.
g) Employee Benefits
In respect of defined contributions schemes, contributions to Provident
Fund and Family Pension are charged to profit and loss account as
incurred.
In respect of defined benefit schemes, the post - retirement benefits
such as gratuity, leave encashment and other
retirement benefits are accounted for based on valuations, as at the
balance sheet date, made by an independent actuary.
Gratuity in respect of certain employees is covered by Group Gratuity
scheme with the Life Insurance Corporation of India
and the balance employees contribution is made to a recognised fund and
is managed by the company.
In respect of other employee benefits, provision for such benefits are
provided in terms of Accounting Standard - 15 (Revised) - "Employee
Benefits".
h) Borrowing Cost
Borrowing costs incurred on acquiring qualifying assets (i.e. assets
that necessarily take a substantial period of time to get ready for
their intended use) are capitalised at the weighted average rate at
which the funds have been borrowed for such acquisition.Other borrowing
cost are recognised as an expense in the year in which they are
incurred.
i) Taxes on Income :
Income Tax is computed in accordance with Accounting Standard 22
(AS-22) Accounting for Taxes on Income. Tax
expenses are accrued in the same period as the revenue and expenses to
which they relate.
Provision for current income tax is made on the tax liability payable
on taxable income after considering tax allowances, deductions and
exemptions determined in accordance with the prevailing tax laws. The
differences between taxable income and the net profit /loss before tax
for the year as per the financial statements are identified and the tax
effect of the deferred tax asset or deferred tax liability is recorded
for timing differences, i.e. differences that originate in one
accounting period and reversed in another. The tax effect is calculated
on accumulated timing differences at the end of
the accounting year based on applicable tax rates. Deferred tax assets/
liabilities are reviewed as at each Balance Sheet date.
Deferred tax assets, other than on unabsorbed depreciation and carried
forward losses, are recognised only if there is reasonable certainty
that they will be realised in future and are reviewed for the
appropriateness of their respective carrying values at each balance
sheet date. In situations, where the company has unabsorbed
depreciation and carried forward losses, deferrred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that the same can be realised against future taxable profits.
j) Impairment of Assets:
Impairment is ascertained at each balance sheet date in respect of the
Companys fixed assets. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value based on an appropriate discount
factor.
k) Accounting for Provisions, Contingent Liabilities and Contingent
Assets:
Provisions are recognised in terms of Accounting Standard 29 -
Provisions, Contingent Liabilities and Contingent Assets, when there
is a present legal or statutory obligation as a result of past events
where it is probable that there will be outflow of resources to settle
the obligation and when a reliable estimate of the amount of the
obligation can be made. Contingent Liabilities are recognised only
when there is a possible obligation arising from past events due to
occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the Company or where any present
obligation cannot be made. Obligations are assessed on an ongoing basis
and only those having a largely probable outflow of resources are
provided for. Contingent Assets are not recognised in the financial
statements.
Mar 31, 2010
1. ACCOUNTING POLICIES
The financial statements are prepared under historical cost convention
on accrual basis and comply with Accounting Standards (AS) referred to
in Section 211(3C) of the Companies Act, 1956. Significant accounting
policies adopted in the presentation of the accounts are as under:
a) Fixed Assets
Fixed Assets are carried at cost less depreciation.
b) Depreciation
Depreciation on Assets is provided on straight line basis at rates
which are in conformity with the requirements of the Companies Act,
1956. Assets given to the employees under the Companys white good
scheme are depreciated as per the terms of the scheme. Buildings
constructed and capital expenditure incurred on leasehold rights are
depreciated at the rates arrived at based on the number of years of
total lease or the rates applicable as per the Companies Act, 1956
whichever is higher.
c) Investments
Long Term Investments are carried at cost. Provision for decline in the
value, other than temporary, has been made wherever necessary.
Current Investments are carried at lower of cost and market value / net
asset value.
d) Inventories
Inventories are valued at cost on weighted average basis.
e) Transactions in Foreign Exchange
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transactions. Monetary items denominated
in foreign currency and outstanding at the Balance Sheet date are
translated at the exchange rate ruling at the year end. Exchange
differences arising on foreign currency transactions are recognised as
income or expense in the period in which they arise. Non-monetary
items denominated in foreign currency are carried at the exchange rate
in force at the date of the transaction.
f) Employee Benefits
In respect of defined contribution schemes, contributions to Provident
Fund and Family Pension are charged to profit and loss account as
incurred.
In respect of defined benefit schemes, the post - retirement benefits
such as gratuity, leave encashment and other retirement benefits are
accounted for based on valuations, as at the balance sheet date, made
by an independent actuary. Gratuity in respect of certain employees is
covered by Group Gratuity scheme with the Life Insurance Corporation
of India.
In respect of other employee benefits, provision for such benefits are
provided in terms of Accounting Standard - 15
(Revised) - "Employee Benefits".
g) Borrowing Cost
Borrowing costs incurred on acquiring qualifying assets (i.e. assets
that necessarily take a substantial period of time to get ready for
their intended use) are capitalised at the weighted average rate at
which the funds have been borrowed for such acquisition.Other borrowing
cost are regognised as an expense in the year in which they are
incurred.
h) Taxes on Income :
Income Tax is computed in accordance with Accounting Standard 22
(AS-22) Accounting for Taxes on Income. Tax expenses are accrued in
the same period as the revenue and expenses to which they relate.
Provision for current income tax is made on the tax liability payable
on taxable income after considering tax allowances, deductions and
exemptions determined in accordance with the prevailing tax laws. The
differences between taxable income and the net profit /loss before tax
for the year as per the financial statements are identified and the tax
effect of the deferred tax asset or deferred tax liability is recorded
for timing differences, i.e. differences that originate in one
accounting period and reversed in another. The tax effect is calculated
on accumulated timing differences at the end of the accounting year
based on applicable tax rates. Deferred tax assets/ liabilities are
reviewed as at each Balance Sheet date. i) Impairment of Assets:
Impairment is ascertained at each balance sheet date in respect of the
Companys fixed assets. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value based on an appropriate discount
factor.
j) Accounting for Provisions, Contingent Liabilities and Contingent
Assets:
Provisions are recognised in terms of Accounting Standard 29 -
Provisions, Contingent Liabilities and Contingent Assets when there
is a present legal or statutory obligation as a result of past events
where it is probable that there will be outflow of resources to settle
the obligation and when a reliable estimate of the amount of the
obligation can be made.
Contingent Liabilities are recognised only when there is a possible
obligation arising from past events due to occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of
the Company or where any present obligation cannot be made. Obligations
are assessed on an ongoing basis and only those having a largely
probable outflow of resources are provided for.
Contingent Assets are not recognised in the financial statements.
k) Assets taken on lease:
In respect of lease transactions, which are in nature of finance
leases, Assets taken on lease after April, 2001 are accounted as fixed
assets at fair value in accordance with Accounding Standard 19 (AS-19)
- "Leases". Lease payments are apportioned between finance charges and
reduction of the lease liability based on the implicit rate of return.
Assets taken on lease / licence under which all the risks and rewards
of ownership are effectively retained by the lessor are classified as
operating lease. Lease payments under operating leases are recognised
as expenses in accordance with the respective lease / licence
agreements.
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