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Accounting Policies of Speciality Restaurants Ltd. Company

Mar 31, 2015

A) Basis of preparation of finacial Statements

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the 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 ("the 2013 Act")

b) Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and differences between actual results and estimates are recognised in the periods in which the results are known / materialise.

c) fixed Assets and Depreciation/Amortisation

Tangible Assets are stated at their cost of acquisition less accumulated depreciation and impairment losses. Cost comprises of all costs incurred to bring the assets to their present location and working condition.

Assets acquired under finance leases are accounted for at the inception of the lease in accordance with Accounting Standard 19 on Leases at the lower of the fair value of the asset and present value of minimum lease payments. Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Pursuant to the enactment of the Companies Act, 2013, effective 1 April, 2014, the Company has reviewed and revised the estimated economic useful lives of its fixed assets generally in accordance with those provided in Schedule II to the Companies Act, 2013 except in case of furniture and fixtures. The Company has assessed the estimated useful life of furniture and fixtures as 10 years based on past experience and technical evaluation. (Refer note 9(3)) Leasehold improvements are depreciated over the lower of the lease period and the management''s estimate of the useful life of the asset.

Intangible assets are stated at their cost of acquisition, less accumulated amortisation and impairment losses. An intangible asset is recognised, where it is probable that the future economic benefits attributable to the asset will flow to the enterprise and where its cost can be reliably measured. The amortisable amount of intangible assets is allocated over the best estimate of its useful life on a straight-line basis.

The Company capitalises software costs where it is reasonably estimated that the software has an enduring useful life. Software is amortised over the management''s estimate of its useful life of five years. Trademarks are amortised uniformly over a period of five years.

d) Capital work-in-progress:

Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.

e) Impairment of Assets

An asset is considered as impaired in accordance with Accounting Standard 28 on Impairment of Assets when at the balance sheet date there are indications of impairment and the carrying amount of the asset, or where applicable the cash generating unit to which the asset belongs, exceeds its recoverable amount (i.e. the higher of the asset''s selling price and value in use). The carrying amount is reduced to the recoverable amount and the reduction is recognised as an impairment loss in the Statement of Profit and Loss.

f) Investments

Investments are classified as current or long term in accordance with Accounting Standard 13 on Accounting for Investments.

Current investments are stated at the lower of cost and fair value. Any reduction in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

Long term investments are stated at cost. Provision for diminution is made to recognise a decline, other than temporary, in the value of such investments.

g) Revenue Recognition

Revenue is recognised when it is earned and no significant uncertainty exists as to its realisation or collection. Revenue from restaurant and sweet shop sales (food and beverages) is recognised upon rendering of service. Sales are net of discounts. Value added tax is reduced from sales.

The Company also operates through franchise arrangements with third parties in terms of which the third parties are permitted to use the Company''s established trademarks :

* Initial Access Premium Fee charged to franchisees, in consideration of being considered as competent to open a restaurant under a Company owned trademark, is recognised on formalisation of the franchise agreement. The Initial Access Premium Fee is non - refundable, regardless of whether the restaurant outlet under the franchise agreement commences operations or not.

* Royalty and Management Fee charged to franchisees for the use of the trademarks is calculated as a percentage of monthly sales of the restaurant and accrued for in line with restaurant sales.

Revenue from displays and sponsorships are recognised based on the period for which the products or the sponsor''s advertisements are promoted/displayed.

In respect of gift vouchers and point awards scheme operated by the Company, sales are recognised when the gift vouchers or points are redeemed on sale of meals to customers.

h) Other income:

Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established.

i) Inventories:

Inventories are measured at the lower of cost and net realisable value.

Cost of inventories comprises of all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost of materials is determined by the FIFO method.

j) Employee Benefits

Compensation to employees for services rendered is measured and accounted for in accordance with Accounting Standard 15 on Employee Benefits.

Employee Benefits such as salaries, allowances, non-monetary benefits and employee benefits under defined contribution plans such as provident and other funds, which fall due for payment within a period of twelve months after rendering service, are charged as expense to the Statement of Profit and Loss in the period in which the service is rendered.

Employee Benefits under defined benefit plans such as gratuity which fall due for payment after completion of employment are measured by the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. The Company''s obligation recognised in the balance sheet represents the present value of obligations as reduced by the fair value of plan assets.

Actuarial Gains and losses are recognised immediately in the Statement of Profit and Loss.

k) Foreign Currency Transactions

Transactions in foreign currencies are accounted for at the prevailing rates of exchange on the date of the transaction. Foreign currency monetary items of the Company are restated at the prevailing rates of exchange at the Balance Sheet date. All gains and losses arising out of fluctuations in exchange rates are accounted for in the Statement of Profit and Loss.

l) Borrowing costs

Borrowing costs attributable to the acquisition or construction of qualifying assets, as defined in Accounting Standard 16 on Borrowing Costs are capitalised as part of the cost of the asset up to the date when the asset is ready for its intended use. Other borrowing costs are expensed as incurred.

m) Income Tax

Income taxes are accounted for in accordance with Accounting Standard 22 on Accounting for Taxes on Income. Taxes comprise both current and deferred tax.

Current tax is measured at the amount expected to be paid to /recovered from the taxation authorities, using the applicable tax rates and tax laws.

The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantively enacted tax rates and tax regulations.

The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufficient future taxable income will be available against which the deferred tax asset can be realised.

Tax on distributed profits payable in accordance with the provisions of Section 115-O of the Income-Tax Act, 1961, is in accordance with the Guidance Note on Accounting for Corporate Dividend Tax, regarded as a tax on Distribution on profits and is not considered in determination of the profits of the Company.

n) Earnings per Share

The Company reports basic and diluted Earnings per Share (EPS) in accordance with Accounting Standard 20 on Earnings per Share. Basic EPS is computed by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted EPS is computed by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares, except where the results are anti-dilutive.

o) Leases

Assets leased by the Company in its capacity as a lessee, where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. Such leases are capitalised at the inception of the lease at the lower of the fair value and cost.

Operating lease payments are recognised as an expense in the Statement of Profit and Loss on the following basis, as applicable:

i) A percentage of restaurant sales as provided for in the lease agreement

ii) In the ratio of forecasted sales, over the balance lease period

p) Cash Flow Statement

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard 3 on Cash Flow Statements and presents the cash flows by operating, investing and financing activities of the Company.

Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and unencumbered bank balances.

q) Provisions and contingencies

Contingent Liabilities as defined in Accounting Standard 29 on Provisions, Contingent Liabilities and Contingent Assets are disclosed by way of notes to the accounts. Disclosure is not made if the possibility of an outflow of future economic benefits is remote. Provision is made if it becomes probable that an outflow of future economic benefits will be required to settle the obligation.

r) Employee share based payments

The Company has constituted an Employee Stock Option Plan under the ESOP 2012 scheme. Employee Stock Options granted are accounted under the ''Intrinsic Value Method'' stated in the Guidance Note on Employee Share Based Payments issued by the Institute of Chartered Accountants of India.

In accordance with the SEBI Guidelines, the excess, if any, of the closing market price on the day prior to the grant of the options over the exercise price is amortised on a straight-line basis over the vesting period.


Mar 31, 2014

A) Basis of Preparaton of Finacial Statements

The financial statements have been prepared under the historical cost conventon in accordance with Generally Accepted Accountng Principles in India (Indian GAAP) to comply with the Accountng Standards notfied under Secton 211(3C) of the Companies Act, 1956 ("the 1956 Act") (which continue to be applicable in respect of Secton 133 of the Companies Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated 13 September, 2013 of the Ministry of Corporate Afairs) and the relevant provisions of the 1956 Act/ 2013 Act, as applicable.

b) Use of estmates

The preparaton of financial statements in conformity with Generally Accepted Accountng Principles requires estmates and assumptons to be made that afect the reported amounts of assets and liabilites and disclosure of contngent liabilites on the date of the financial statements and the reported amounts of revenues and expenses during the reportng period. Actual results could difer from those estmates and diferences between actual results and estmates are recognized in the periods in which the results are known / materialize.

c) Fixed assets and depreciaton/amortzaton

Tangible Assets are stated at their cost of acquisiton less accumulated depreciaton and impairment losses.

Cost comprises of all costs incurred to bring the assets to their present locaton and working conditon.

Assets acquired under finance leases are accounted for at the incepton of the lease in accordance with Accountng

Standard 19 on Leases at the lower of the fair value of the asset and present value of minimum lease payments.

Depreciaton on assets is provided, pro-rata for the period of use, by the writen down value method at the rates prescribed in Schedule XIV to the Act. Assets costng less than Rs. 5,000 are depreciated at 100%.

Leasehold improvements are depreciated over the lower of the lease period and the management''s estmate of the useful life of the asset.

Intangible assets are stated at their cost of acquisiton, less accumulated amortzaton and impairment losses. An intangible asset is recognized, where it is probable that the future economic benefits atributable to the asset will fow to the enterprise and where its cost can be reliably measured. The depreciable amount of intangible assets is allocated over the best estmate of its useful life on a straight-line basis.

The company capitalizes sofware costs where it is reasonably estmated that the sofware has an enduring useful life.

Sofware is depreciated over the management''s estmate of its useful life of five years.

Trademarks are amortzed uniformly over a period of five years.

d) Impairment of Assets

An asset is considered as impaired in accordance with Accountng Standard 28 on Impairment of Assets when at the balance sheet date there are indicatons of impairment and the carrying amount of the asset, or where applicable the cash generatng unit to which the asset belongs, exceeds its recoverable amount (i.e. the higher of the asset''s net selling price and value in use). The carrying amount is reduced to the recoverable amount and the reducton is recognized as an impairment loss in the Statement of profit and Loss.

e) Investments

Investments are classifed as current or long term in accordance with Accountng Standard 13 on Accountng for Investments.

Current investments are stated at the lower of cost and fair value. Any reducton in the carrying amount and any reversals of such reductons are charged or credited to the Statement of profit and Loss.

Long term investments are stated at cost. Provision for diminuton is made to recognize a decline, other than temporary, in the value of such investments.

f) Revenue Recogniton

Revenue is recognized when it is earned and no significant uncertainty exists as to its realizaton or collecton.

Revenue from restaurant and sweet shop sales (food and beverages) is recognized upon rendering of service. Sales are net of discounts. Value added tax is reduced from sales.

The Company also operates through franchise arrangements with third partes in terms of which the third partes are permited to use the Company''s established trademarks :

- Inital Access Premium Fee charged to franchisees, in consideraton of being considered as competent to open a restaurant under a Company owned trademark, is recognized on formalizaton of the franchise agreement. The Inital

Access Premium Fee is non – refundable, regardless of whether the restaurant outlet under the franchise agreement commences operatons or not.

- Royalty and Management Fee charged to franchisees for the use of the trademarks is calculated as a percentage of monthly sales of the restaurant and accrued for in line with restaurant sales.

Revenue from displays and sponsorships are recognized based on the period for which the products or the sponsor''s advertsements are promoted/displayed.

In respect of gift vouchers and point awards scheme operated by the company, sales are recognized when the gif vouchers or points are redeemed on sale of meals to customers.

g) Inventories:

Inventories are measured at the lower of cost and net realizable value.

Cost of inventories comprises of all costs of purchase and other costs incurred in bringing the inventories to their present conditon and locaton. Cost of materials is determined by the FIFO method.

h) Employee benefits

Compensaton to employees for services rendered is measured and accounted for in accordance with Accountng Standard 15 on Employee benefits.

Employee benefits such as salaries, allowances, non-monetary benefits and employee benefits under Defined contributon plans such as provident and other funds, which fall due for payment within a period of twelve months afer rendering service, are charged as expense to the Statement of profit and Loss in the period in which the service is rendered.

Employee benefits under Defined benefit plans such as gratuity which fall due for payment afer completon of employment are measured by the projected unit credit method, on the basis of actuarial valuatons carried out by third party actuaries at each balance sheet date. The company''s obligaton recognized in the balance sheet represents the present value of obligatons as reduced by the fair value of plan assets.

Actuarial Gains and losses are recognized immediately in the Statement of profit and Loss.

i) Foreign Currency Transactons

Transactons in foreign currencies are accounted for at the prevailing rates of exchange on the date of the transacton. Foreign currency monetary items of the Company are restated at the prevailing rates of exchange at the Balance Sheet date. All gains and losses arising out of fuctuatons in exchange rates are accounted for in the Statement of profit and Loss.

Exchange diferences on forward exchange contracts, entered into for hedging foreign exchange fuctuaton risk in respect of an existng asset/liability, are recognized in the Statement of profit and Loss in the reportng period in which the exchange rate changes. Premium / Discount on forward exchange contracts is amortzed over the period of the contract.

j) Borrowing Costs

Borrowing costs atributable to the acquisiton or constructon of qualifying assets, as Defined in Accountng Standard 16 on Borrowing Costs are capitalized as part of the cost of the asset upto the date when the asset is ready for its intended use. Other borrowing costs are expensed as incurred.

k) Income Tax

Income taxes are accounted for in accordance with Accountng Standard 22 on Accountng for Taxes on Income. Taxes comprise both current and deferred tax.

Current tax is measured at the amount expected to be paid to /recovered from the taxaton authorites, using the applicable tax rates and tax laws.

The tax effect of the tming differences that result between taxable income and accountng income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantvely enacted tax rates and tax regulatons.

The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufcient future taxable income will be available against which the deferred tax asset can be realized.

l) Earnings per Share

The Company reports basic and diluted Earnings per Share (EPS) in accordance with Accountng Standard 20 on Earnings per Share. Basic EPS is computed by dividing the net profit or loss for the year atributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted EPS is computed by dividing the net profit or loss for the year atributable to equity shareholders by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutve potental equity shares, except where the results are ant-dilutve.

m) Leases

Assets leased by the Company in its capacity as a lessee, where substantally all the risks and rewards of ownership vest in the Company are classifed as finance leases. Such leases are capitalised at the incepton of the lease at the lower of the fair value and cost.

Operatng lease payments are recognized as an expense in the Statement of profit and Loss on the following basis, as applicable:

i) A percentage of restaurant sales as provided for in the lease agreement

ii) In the rato of forecasted sales, over the balance lease period

n) Cash flow statement

The Cash Flow Statement is prepared by the indirect method set out in Accountng Standard 3 on Cash Flow Statements and presents the cash flows by operatng, investng and fnancing actvites of the Company. Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and unencumbered bank balances.

o) Provisions and Contingencies

Contngent Liabilites as Defined in Accountng Standard 29 on Provisions, Contngent Liabilites and Contngent Assets are disclosed by way of notes to the accounts. Disclosure is not made if the possibility of an outlow of future economic benefits is remote. Provision is made if it becomes probable that an outlow of future economic benefits will be required to setle the obligaton.

p) Employee Share Based Payments

The Company has consttuted an Employee Stock Opton Plan under the ESOP 2012 scheme. Employee Stock Optons granted are accounted under the ''Intrinsic Value Method'' stated in the Guidance Note on Employee Share Based Payments issued by the Insttute of Chartered Accountants of India.

In accordance with the SEBI Guidelines, the excess, if any, of the closing market price on the day prior to the grant of the optons over the exercise price is amortsed on a straight-line basis over the vesting period.


Mar 31, 2013

A) Basis of preparation of finacial Statements.

The financial statements have been prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles and the provisions of the Companies Act, 1956.

b) Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and differences between actual results and estimates are recognized in the periods in which the results are known / materialize.

c) Fixed Assets and Depreciation/Amortization

Tangible Assets are stated at their cost of acquisition less accumulated depreciation and impairment losses. Cost comprises of all costs incurred to bring the assets to their present location and working condition.

Assets acquired under finance leases are accounted for at the inception of the lease in accordance with Accounting Standard 19 on Leases at the lower of the fair value of the asset and present value of minimum lease payments.

Depreciation on assets is provided, pro-rata for the period of use, by the written down value method at the rates prescribed in Schedule XIV to the Act. Assets costing less than Rs. 5,000 are depreciated at 100%.

Leasehold improvements are depreciated over the lower of the lease period and the management''s estimate of the useful life of the asset.

Intangible assets are stated at their cost of acquisition, less accumulated amortization and impairment losses. An intangible asset is recognized, where it is probable that the future economic benefits attributable to the asset will flow to the enterprise and where its cost can be reliably measured. The depreciable amount of intangible assets is allocated over the best estimate of its useful life on a straight-line basis.

The company capitalizes software costs where it is reasonably estimated that the software has an enduring useful life. Software is depreciated over the management''s estimate of its useful life of five years.

Trademarks are amortized uniformly over a period of five years.

d) Impairment of Assets

An asset is considered as impaired in accordance with Accounting Standard 28 on Impairment of Assets when at the balance sheet date there are indications of impairment and the carrying amount of the asset, or where applicable the cash generating unit to which the asset belongs, exceeds its recoverable amount (i.e. the higher of the asset''s net selling price and value in use). The carrying amount is reduced to the recoverable amount and the reduction is recognized as an impairment loss in the Statement of Profit and Loss.

e) Investments

Investments are classified as current or long term in accordance with Accounting Standard 13 on Accounting for Investments.

Current investments are stated at the lower of cost and fair value. Any reduction in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

Long term investments are stated at cost. Provision for diminution is made to recognize a decline, other than temporary, in the value of such investments.

f) Revenue Recognition

Revenue is recognized when it is earned and no significant uncertainty exists as to its realization or collection. Revenue from restaurant and sweet shop sales (food and beverages) is recognized upon rendering of service. Sales are net of discounts. Value added tax is reduced from sales.

The Company also operates through franchise arrangements with third parties in terms of which the third parties are permitted to use the Company''s established trademarks :

- Initial Access Premium Fee charged to franchisees, in consideration of being considered as competent to open a restaurant under a Company owned trademark, is recognized on formalization of the franchise agreement. The Initial Access Premium Fee is non - refundable, regardless of whether the restaurant outlet under the franchise agreement commences operations or not.

- Royalty and Management Fee charged to franchisees for the use of the trademarks is calculated as a percentage of monthly sales of the restaurant and accrued for in line with restaurant sales.

Revenue from displays and sponsorships are recognized based on the period for which the products or the sponsor''s advertisements are promoted/displayed.

In respect of gift vouchers and point awards scheme operated by the company, sales are recognized when the gift vouchers or points are redeemed and on sale of meals to customers.

g) Inventories:

Inventories are measured at the lower of cost and net realizable value.

Cost of inventories comprises of all costs of purchase and other costs incurred in bringing the inventories to their present condition and location. Cost of materials is determined by the FIFO method.

h) Employee Benefits

Compensation to employees for services rendered is measured and accounted for in accordance with Accounting Standard 15 on Employee Benefits.

Employee Benefits such as salaries, allowances, non-monetary benefits and employee benefits under defined contribution plans such as provident and other funds, which fall due for payment within a period of twelve months after rendering service, are charged as expense to the Statement of Profit and Loss in the period in which the service is rendered.

Employee Benefits under defined benefit plans such as gratuity which fall due for payment after completion of employment are measured by the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. The company''s obligations recognized in the balance sheet represent the present value of obligations as reduced by the fair value of plan assets, where applicable. Actuarial Gains and losses are recognized immediately in the Statement of Profit and Loss.

i) Foreign Currency Transactions

Transactions in foreign currencies are accounted for at the prevailing rates of exchange on the date of the transaction.

Monetary items denominated in foreign currencies, are restated at the prevailing rates of exchange at the Balance Sheet date. All gains and losses arising out of fluctuations in exchange rates are accounted for in the Statement of Profit and Loss.

Exchange differences on forward exchange contracts, entered into for hedging foreign exchange fluctuation risk in respect of an existing asset/liability, are recognized in the Statement of Profit and Loss in the reporting period in which the exchange rate changes. Premium / Discount on forward exchange contracts is amortized over the period of the contract.

j) Borrowing costs

Borrowing costs attributable to the acquisition or construction of qualifying assets, as defined in Accounting Standard 16 on Borrowing Costs are capitalized as part of the cost of the asset up to the date when the asset is ready for its intended use. Other borrowing costs are expensed as incurred.

k) Income Tax

Income taxes are accounted for in accordance with Accounting Standard 22 on Accounting for Taxes on Income. Taxes comprise both current and deferred tax.

Current tax is measured at the amount expected to be paid to /recovered from the taxation authorities, using the applicable tax rates and tax laws.

The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantively enacted tax rates and tax regulations.

The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufficient future taxable income will be available against which the deferred tax asset can be realized.

l) Earnings Per Share

The Company reports basic and diluted Earnings per Share (EPS) in accordance with Accounting Standard 20 on Earnings per Share. Basic EPS is computed by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted EPS is computed by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares, except where the results are anti-dilutive.

m) Operating leases

Operating lease payments are recognized as an expense in the Statement of Profit and Loss on the following basis, as applicable:

i) A percentage of restaurant sales as provided for in the lease agreement

ii) In the ratio of forecasted sales over the balance lease period

n) Securities Expenses

Expenses on issue of securities are written off to the securities premium account in accordance with Section 78 of the Act.

o) Cash Flow Statement

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard 3 on Cash Flow Statements and presents the cash flows by operating, investing and financing activities of the Company.

Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and unencumbered bank balances.

p) Contingent liabilities

Contingent Liabilities as defined in Accounting Standard 29 on Provisions, Contingent Liabilities and Contingent Assets are disclosed by way of notes to the accounts. Disclosure is not made if the possibility of an outflow of future economic benefits is remote. Provision is made if it becomes probable that an outflow of future economic benefits will be required to settle the obligation.


Mar 31, 2012

A) Basis of preparation of financial Statements.

The financial statements have been prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles and the provisions of the Companies Act, 1956.

The Ministry of Corporate Affairs revised Schedule VI to the Act for financial years commencing on or after 1 April 2011. The Balance Sheet, Statement of Profit and Loss and the comparative financial information for the previous year have accordingly been prepared and presented with disclosures as required under the Revised Schedule VI.

b) Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and differences between actual results and estimates are recognized in the periods in which the results are known / materialize.

c) Fixed Assets and Depreciation/Amortization

Tangible Assets are stated at their cost of acquisition less accumulated depreciation and impairment losses.

Cost comprises of all costs incurred to bring the assets to their location and working condition.

Assets acquired under finance leases are accounted for at the inception of the lease in accordance with Accounting Standard 19 on Leases at the lower of the fair value of the asset and present value of minimum lease payments.

Depreciation on assets is provided, pro-rata for the period of use, by the written down value method at the rates prescribed in Schedule XIV to the Act. Assets costing less than Rs. 5,000 are depreciated at 100%

Leasehold improvements are depreciated over the lower of the lease period and the management's estimate of the useful life of the asset.

Intangible assets are stated at their cost of acquisition, less accumulated amortization and impairment losses. An intangible asset is recognized, where it is probable that the future economic benefits attributable to the asset will flow to the enterprise and where its cost can be reliably measured. The depreciable amount of intangible assets is allocated over the best estimate of its useful life on a straight-line basis.

The company capitalizes software costs where it is reasonably estimated that the software has an enduring useful life. Software is depreciated over the management's estimate of its useful life of five years.

Trademarks are amortized uniformly over a period of five years.

d) Impairment of Assets

An asset is considered as impaired in accordance with Accounting Standard 28 on Impairment of Assets when at the balance sheet date there are indications of impairment and the carrying amount of the asset, or where applicable the cash generating unit to which the asset belongs, exceeds its recoverable amount (i.e. the higher of the asset's net selling price and value in use). The carrying amount is reduced to the recoverable amount and the reduction is recognized as an impairment loss in the Statement of Profit and Loss.

e) Investments

Investments are classified as current or long term in accordance with Accounting Standard 13 on Accounting for Investments.

Current investments are stated at the lower of cost and fair value. Any reduction in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

Long term investments are stated at cost. Provision for diminution is made to recognize a decline, other than temporary, in the value of such investments.

f) Revenue Recognition

Revenue is recognized when it is earned and no significant uncertainty exists as to its realization or collection.

Revenue from restaurant and sweet shop sales (food and beverages) is recognized upon rendering of service. Sales are net of discounts. Value added tax is reduced from sales.

The Company also operates through franchise arrangements with third parties in terms of which the third parties are permitted to use the Company's established trademarks :

Initial Access Premium Fee charged to franchisees, in consideration of being considered as competent to open a restaurant under a Company owned trademark, is recognized on formalization of the franchise agreement. The Initial Access Premium Fee is non - refundable, regardless of whether the restaurant outlet under the franchise agreement commences operations or not.

Royalty and Management Fee charged to franchisees for the use of the trademarks is calculated as a percentage of monthly sales of the restaurant and accrued for in line with restaurant sales.

Revenue from displays and sponsorships are recognized based on the period for which the products or the sponsor's advertisements are promoted/displayed.

In respect of gift vouchers and point awards scheme operated by the company, sales are recognized when the gift vouchers or points are redeemed and on sale of meals to customers.

g) Inventories

Inventories are measured at the lower of cost and net realizable value.

Cost of inventories comprises of all costs of purchase and other costs incurred in bringing the inventories to their present condition and location. Cost of materials is determined by the FIFO method.

h) Employee Benefits

Compensation to employees for services rendered is measured and accounted for in accordance with Accounting Standard 15 on Employee Benefits.

Employee Benefits such as salaries, allowances, non-monetary benefits and employee benefits under defined contribution plans such as provident and other funds, which fall due for payment within a period of twelve months after rendering service, are charged as expense to the Statement of Profit and Loss in the period in which the service is rendered.

Employee Benefits under defined benefit plans such as gratuity which fall due for payment after completion of employment are measured by the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. The company's obligations recognized in the balance sheet represent the present value of obligations as reduced by the fair value of plan assets, where applicable.

Actuarial Gains and losses are recognized immediately in the Statement of Profit and Loss.

i) Foreign Currency Transactions

Transactions in foreign currencies are accounted for at the prevailing rates of exchange on the date of the transaction.

Monetary items denominated in foreign currencies, are restated at the prevailing rates of exchange at the Balance Sheet date. All gains and losses arising out of fluctuations in exchange rates are accounted for in the Statement of Profit and Loss.

Exchange differences on forward exchange contracts, entered into for hedging foreign exchange fluctuation risk in respect of an existing asset/liability, are recognized in the Statement of Profit and Loss in the reporting period in which the exchange rate changes. Premium / Discount on forward exchange contracts is amortized over the period of the contract.

j) Borrowing costs

Borrowing costs attributable to the acquisition or construction of qualifying assets, as defined in Accounting Standard 16 on Borrowing Costs are capitalized as part of the cost of the asset up to the date when the asset is ready for its intended use. Other borrowing costs are expensed as incurred.

k) Income Tax

Income taxes are accounted for in accordance with Accounting Standard 22 on Accounting for Taxes on Income. Taxes comprise both current and deferred tax.

Current tax is measured at the amount expected to be paid to /recovered from the taxation authorities, using the applicable tax rates and tax laws.

The Tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantively enacted tax rates and tax regulations.

The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufficient future taxable income will be available against which the deferred tax asset can be realized.

l) Earnings Per Share

The Company reports basic and diluted Earnings per Share (EPS) in accordance with Accounting Standard 20 on Earnings per Share. Basic EPS is computed by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted EPS is computed by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares, except where the results are anti-dilutive.

m) Operating leases

Operating lease payments are recognized as an expense in the Statement of Profit and Loss on the following basis, as applicable:

i) A percentage of restaurant sales as provided for in the lease agreement

ii) In the ratio of forecasted sales over the lease period Consequently, based on the current trend of sales, the company has recognized an additional charge of Rs 27.17 Million towards lease rentals.

n) Intial Public Offering Expenses

Initial Public Offering related expenses are carried in the balance sheet to be written off to the Securities Premium account in accordance with section 78 of the Companies Act 1956 and to the extent the Securities Premium account is unable to absorb the costs, expensed to the Statement of Profit and Loss on completion of listing (refer note I above).

o) Cash Flow Statement

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard 3 on Cash Flow Statements and presents the cash flows by operating, investing and financing activities of the Company.

Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and unencumbered bank balances.

p) Contingent liabilities

Contingent Liabilities as defined in Accounting Standard 29 on Provisions, Contingent Liabilities and Contingent Assets are disclosed by way of notes to the accounts. Disclosure is not made if the possibility of an outflow of future economic benefits is remote. Provision is made if it becomes probable that an outflow of future economic benefits will be required to settle the obligation.

 
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