Accounting Policies of ITC Hotels Ltd. Company

Mar 31, 2025

2. Material Accounting Policies

Statement of Compliance

These financial statements have been prepared in
accordance with Indian Accounting Standards (Ind
AS) notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to
time) and presentation requirements of Division II of
Schedule III to the Companies Act, 2013.

Basis of Preparation

The comparative period includes transactions of the
Demerged Undertaking from the date of incorporation
of the Company i.e., 28th July, 2023 up to 31st March,
2024 and hence are not comparable with the current
year.

The financial statements are prepared in accordance
with the historical cost convention, except for certain
items that are measured at amortised cost or fair value
as explained in the accounting policies. The financial
statements are presented in Indian Rupees (INR)
which is also the Company’s functional currency. The
Company has prepared the financial statements on
the basis that it will continue to operate as a going
concern.

Fair Value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date, regardless of whether that price
is directly observable or estimated using another
valuation technique. In estimating the fair value of an
asset or a liability, the Company takes into account
the characteristics of the asset or liability if market
participants would take those characteristics into
account when pricing the asset or liability at the
measurement date. Fair value for measurement and /
or disclosure purposes in these financial statements is
determined on such a basis, except for share-based
payment transactions that are within the scope of Ind
AS 102 - Share-based Payment, leasing transactions
that are within the scope of Ind AS 116 - Leases, and
measurements that have some similarities to fair value
but are not fair value, such as net realisable value in
Ind AS 2 - Inventories or value in use in Ind AS 36 -
Impairment of Assets.

The preparation of financial statements in conformity
with Ind AS requires management to make judgements,
estimates and assumptions that affect the application
of the accounting policies and the reported amounts of
assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses
during the year. Actual results could differ from those
estimates. The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only
that period; they are recognised in the period of the
revision and future periods if the revision affects both
current and future periods.

Operating Cycle

All assets and liabilities have been classified as current
or non-current as per the Company’s normal operating
cycle and other criteria set out in the Schedule III to
the Companies Act, 2013 and Ind AS 1 - Presentation
of Financial Statements based on the nature of the
business of the Company. The Company has identified
twelve months as its operating cycle.

Property, Plant and Equipment

Property, plant and equipment (PP&E) are stated at
cost of acquisition or construction less accumulated
depreciation and impairment, if any. Cost is inclusive
of inward freight, non-refundable duties / taxes and
incidental expenses related to acquisition. In respect of
major projects involving construction, directly related
pre-operational expenses form part of the value of
assets capitalised. All upgradation / enhancements
are charged off as revenue expenditure unless they
bring similar significant additional benefits.

An item of PP&E is derecognised upon disposal
or when no future economic benefits are expected
to arise from the continued use of asset. Any gain
or loss arising on the disposal or retirement of an
item of PP&E is determined as the difference between
the sales proceeds and the carrying amount of the
asset and is recognised in Statement of Profit and
Loss.

Depreciation of these assets commences when
the assets are ready for their intended use which
is generally on commissioning. Items of PP&E are
depreciated in a manner that amortizes the cost of
the assets after commissioning, less its residual value,
over their useful lives as specified in Schedule II of the
Companies Act, 2013 on a straight line basis, except
where the useful life has been re-assessed based on
independent technical evaluation, taking into account
the operating conditions, maintenance history etc. of
the asset. Land, including perpetual lease where the
Company is a lessee, is not depreciated.

The estimated useful lives of PP&E of the Company
are as follows:

PP&E’s residual values, useful lives and method of
depreciation are reviewed at each Balance Sheet
date and changes, if any, are treated as changes in
accounting estimate.

Intangible Assets

Intangible Assets that the Company controls and
from which it expects future economic benefits are
capitalised upon acquisition and measured initially:

a. for assets acquired in a business combination, at
fair value on the date of acquisition.

b. for separately acquired assets, at cost comprising
the purchase price (including non-refundable
duties / taxes) and directly attributable costs to
prepare the asset for its intended use.

Internally generated brands, websites and customer
lists are not recognised as intangible assets.

The useful life of an intangible asset is considered
finite where the rights to such assets are limited to
a specified period of time by contract or law or the
likelihood of technical, technological obsolescence or
commercial obsolescence.

Intangible assets that have finite lives are amortized
over their estimated useful lives by the straight line
method from the date that they are available for use

unless it is practical to reliably determine the pattern
of benefits arising from the asset. Amortization
expenses and impairment losses and reversal of
impairment losses are included in the ‘Depreciation
and amortization expense’ in the Statement of Profit
and Loss.

The estimated useful lives of intangible assets of the
Company with finite lives are as follows:

The useful lives of intangible assets are reviewed
annually to determine if a reset of such useful life is
required for assets with finite lives. The impact of such
changes is accounted for as a change in accounting
estimate. Amortization expenses are taken to the
Statement of Profit and Loss.

An intangible asset is derecognised on disposal, or
when no future economic benefits are expected
from use or 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 recognised in
the Statement of Profit and Loss when the asset is
derecognised.

Impairment of Assets

The Company assesses, at each reporting date,
whether there is an indication that an asset or cash
generating unit may be impaired. If any indication
exists, the Company estimates the asset’s recoverable
amount. Recoverable amount is higher of an asset’s
fair value less costs of disposal and its value in use.
Value in use is the present value of estimated future
cash flows expected to arise from the continuing
use of an asset or cash generating unit and from its
disposal at the end of its useful life.

Impairment loss, if any, is provided to the extent, the
carrying amount of assets or cash generating units
exceed their recoverable amount.

Impairment losses recognised in prior years are
reversed when there is an indication that the
impairment losses recognised no longer exist or have
decreased. Such reversals are recognised as an
increase in carrying amounts of assets to the extent
that it does not exceed the carrying amounts that
would have been determined (net of amortization or
depreciation) had no impairment loss been recognised
in previous years.

Inventories

Inventories are stated at lower of cost and net realisable
value. The cost is calculated on weighted average
method. Cost comprises expenditure incurred in the
normal course of business in bringing such inventories
to their present location and condition. Net realisable
value is the estimated selling price less estimated
costs necessary to make the sale.

Foreign Currency Transactions and Derivatives

The functional and presentation currency of the
Company is Indian Rupee.

Transactions in foreign currency are accounted for
at the exchange rate prevailing on the transaction
date. Gains / losses arising on settlement as also on
translation of monetary items are recognised in the
Statement of Profit and Loss.

Derivatives are initially recognised at fair value and
are subsequently remeasured to their fair value at the
end of each reporting period. The resulting gains /
losses are recognised in Statement of Profit and Loss
immediately.

Investment in Subsidiaries, Associates and Joint
Ventures

Investment in subsidiaries, associates and joint
ventures are carried at cost less accumulated
impairment, if any.

Financial instruments, Financial assets, Financial
liabilities and Equity Instruments

Financial assets and financial liabilities are recognised
when the Company becomes a party to the contractual
provisions of the relevant instrument and are initially
measured at fair value except for trade receivables
that do not contain a significant financing component,
which are measured at transaction price. Transaction
costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other
than financial assets and financial liabilities measured
at fair value through profit or loss) are added to or
deducted from the fair value on initial recognition of
financial assets or financial liabilities. Purchase or sale
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 when the Company
commits to purchase or sell the asset.

Financial Assets

Recognition: Financial assets include Investments,
Trade Receivables, Advances, Security Deposits,

Other Bank Balances, Cash and Cash equivalents.
Such assets are initially recognised at fair value or
transaction price, as applicable, when the Company
becomes party to contractual obligations. The
transaction price includes transaction costs unless
the asset is being fair valued through the Statement
of Profit and Loss.

Classification: Management determines the

classification of an asset at initial recognition
depending on the purpose for which the assets were
acquired. The subsequent measurement of financial
assets depends on such classification.

Financial assets are classified as those measured at:

(a) amortised cost, where the financial assets are
held solely for collection of cash flows arising
from payments of principal and / or interest.

(b) fair value through other comprehensive income
(FVTOCI), where the financial assets are held
not only for collection of cash flows arising from
payments of principal and interest but also from the
sale of such assets. Such assets are subsequently
measured at fair value, with unrealised gains and
losses arising from changes in the fair value being
recognised in other comprehensive income.

(c) fair value through profit or loss (FVTPL), where
the assets are managed in accordance with
an approved investment strategy that triggers
purchase and sale decisions based on the
fair value of such assets. Such assets are
subsequently measured at fair value, with
unrealised gains and losses arising from changes
in the fair value, including interest income and
dividend income, if any, are recognised in ‘Other
Income’ in the Statement of Profit and Loss in the
period in which they arise.

Trade Receivables, Advances, Security Deposits,
Other Bank Balances, Cash and Cash equivalents
etc. are classified for measurement at amortised
cost while investments may fall under any of
the aforesaid classes. Further, investments in
equity instruments may be classified as fair value
through other comprehensive income, where an
irrevocable election is made for such classification
at the time of initial recognition of the investment.

Impairment: The Company assesses at each
reporting date whether a financial asset (or a
group of financial assets) such as investments,
trade receivables, advances and security
deposits held at amortised cost and financial
assets that are measured at fair value through
other comprehensive income are tested for

impairment based on evidence or information
that is available without undue cost or effort.
Expected credit losses are assessed and loss
allowances recognised if the credit quality of the
financial asset has deteriorated significantly since
initial recognition.

Reclassification: When and only when the
business model is changed, the Company shall
reclassify all affected financial assets prospectively
from the reclassification date as subsequently
measured at amortised cost, fair value through
other comprehensive income or fair value through
profit or loss without restating the previously
recognised gains, losses or interest and in terms
of the reclassification principles laid down in the
Ind AS relating to Financial Instruments.

Derecognition: Financial assets are

derecognised when the right to receive cash
flows from the assets has expired, or has been
transferred, and the Company has transferred
substantially all of the risks and rewards of
ownership. Concomitantly, if the asset is one that
is measured at:

(a) amortised cost, the gain or loss is recognised
in the Statement of Profit and Loss;

(b) fair value through other comprehensive
income, the cumulative fair value adjustments
previously taken to reserves are reclassified
to the Statement of Profit and Loss unless
the asset represents an equity investment,
in which case the cumulative fair value
adjustments previously taken to reserves are
reclassified within equity.

Income Recognition: Interest income is
recognised in the Statement of Profit and Loss
using the effective interest method. Dividend
income is recognised in the Statement of Profit
and Loss when the right to receive dividend is
established.

Financial Liabilities

Borrowings, trade payables and other financial
liabilities are initially recognised at fair value and are
subsequently measured at amortised cost. Any
discount or premium on redemption / settlement
is recognised in the Statement of Profit and Loss
as finance cost over the life of the liability using the
effective interest method and adjusted to the liability
figure disclosed in the Balance sheet.

Financial liabilities are derecognised when the liability is
extinguished, that is, when the contractual obligation
is discharged, cancelled or on expiry.

Offsetting Financial Instruments

Financial assets and liabilities are offset and the net
amount is included in the Balance Sheet where there
is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net
basis or realise the asset and settle the liability
simultaneously.

Equity Instruments

Equity instruments are recognised at the value of the
proceeds, net of direct costs of the capital issue.

Revenue

Revenue is measured at the transaction price that
the Company receives or expects to receive as
consideration for goods supplied and services
rendered, net of returns and estimates of variable
consideration such as discounts and schemes.
Revenue excludes taxes such as VAT and Goods
and Services Tax which are payable in respect of
sale of goods and services. Revenue is recognised
when it can be measured reliably and recovery of the
consideration is probable.

Revenue from room, food & beverage, banquet and
allied services etc. is generally recognised at a point
in time when control is transferred to the customer,
which generally occurs when the room is occupied,
food & beverages is sold, banquet and allied services
etc. are rendered in accordance with the contract with
the customer.

The Company provides hotel management services,
grants license to use its trademark & other intellectual
property and offers sale of memberships of loyalty
programs and hotel facilities. Revenue for the same is
recognised over time in accordance with the terms of
the contract.

The Company also offers Loyalty Programs to eligible
customers and business partners. Such programs
entitle the members to rewards in accordance with
the terms & conditions of the program. The revenue
attributable to such reward is deferred and a contract
liability is created at the time of initial sales which is
measured considering the likelihood of its redemption,
as evidenced by the Company’s historical experience.
On redemption / expiry of such reward, revenue is
recognised at pre-determined rates.

Dividend Distribution

Dividends paid (including income tax thereon, if any)
are recognised in the period in which the interim
dividends are approved by the Board of Directors, or
in respect of the final dividend when approved by the
shareholders.

Employee Benefits

Short-term employee benefits are expensed in the
period in which the employee renders the related
service on an undiscounted basis. A liability is
recognised for the amount expected to be paid within
twelve months, if the Company has a present legal
or constructive obligation to pay the same as a result
of past service provided by the employee and the
obligation can be reliably estimated.

The Company makes contributions to both defined
benefit and defined contribution schemes.

Contributions to provident fund, defined contribution
pension plan and national pension system are in
the nature of defined contribution schemes. The
contribution payable is recognised as an expense,
when an employee renders the related service.
The contributions in respect of provident fund are
statutorily deposited with the Employee Provident
Fund Organisation.

The Company also makes contribution to defined
benefit pension and gratuity plan which are mainly
administered through duly constituted and approved
Trusts. The cost of providing benefits under the defined
benefit obligation is calculated by independent actuary
using the projected unit credit method. Service costs
and net interest expense or income is reflected in the
Statement of Profit and Loss. Gain or Loss on account
of remeasurements are recognised immediately
through other comprehensive income in the period in
which they occur.

The employees of the Company are entitled to
compensated leave for which the Company records
the liability based on actuarial valuation computed
using projected unit credit method. These benefits are
unfunded.

Employee Share Based Compensation

Stock Options granted under ITC Employee
Stock Option Scheme (“ITC ESOS”) and ITC
Employee Cash Settled Stock Appreciation
Linked Reward Plan (“ITC ESARP”)

Certain employees of the Company and those who
are deputed to the Company from ITC Limited are
covered under ITC ESOS and ITC ESARP. These
schemes are in the nature of equity / cash settled.

In the case of equity settled awards, the fair value
of the awards at the grant date is amortised on a
straight-line basis over the vesting period. In case of
cash settled awards, the fair value of awards at the
grant date is initially recognised and remeasured at
each reporting date, until settled.

The cost in respect of such share-based payments
is recognised as an employee benefit expenses in
the Statement of Profit and Loss with corresponding
increase in other financial liabilities.

Stock Options granted under ITC Hotels Special
Purpose Employee Stock Option Scheme
(“ITCHL SPESOS”)

The cost of ITCHL SPESOS granted by the Company,
pursuant to the Scheme, to the grantees of ITC ESOS
is recognised based on the fair value of such stock
options in accordance with applicable standards
and the Scheme. The fair value of the stock options,
which are equity settled, is recorded over the balance
vesting term and is recognised as employee benefit
expense to the extent it pertains to the employees
of the Company or those who are deputed to the
Company by ITC Limited over the period in which the
performance and / or service conditions are fulfilled by
such employees.

The fair value, to the extent it pertains to the options
granted to the employees of ITC Group and the
subsidiaries / associates / joint venture of the Company,
is recovered from the respective entities.

Leases

The Company assesses at contract inception whether
a contract is, or contains, a lease. A contract is, or
contains, a lease if it conveys the right to control
the use of an identified asset for a period of time in
exchange for consideration.

Company as a Lessee

Right-of-Use (ROU) assets are recognised at inception
of a contract or arrangement for significant lease
components at cost less lease incentives, if any.
ROU assets are subsequently measured at cost
less accumulated depreciation and accumulated
impairment losses, if any. The cost of ROU assets
includes the amount of lease liabilities recognised,
initial direct cost incurred and lease payments made
at or before the lease commencement date. ROU
assets are generally depreciated over the shorter
of the lease term and estimated useful lives of the
underlying assets on a straight line basis. Lease term
is determined based on consideration of facts and
circumstances that create an economic incentive to
exercise an extension option, or not to exercise a
termination option. Lease payments associated with
short-term leases (i.e., those leases that have a lease
term of 12 months or less from the commencement
date and do not contain a purchase option) and low
value leases (i.e., where the value of the underlying
asset, when new, in order of magnitude T 5 lakhs or
less) are charged to the Statement of Profit and Loss
on a straight line basis over the term of the relevant
lease.

The Company recognises lease liabilities measured
at the present value of lease payments to be made
on the date of recognition of the lease. Such lease
liabilities do not include variable lease payments
(that do not depend on an index or a rate), which are
recognised as expense in the periods in which they
are incurred. Interest on lease liability is recognised
using the effective interest method. Lease liabilities
are subsequently increased to reflect the accretion
of interest and reduced for the lease payments
made. The carrying amount of lease liabilities is also
remeasured upon modification of lease arrangement
or upon change in the assessment of the lease term.
The effect of such remeasurements is adjusted to the
value of the ROU assets.

Company as a Lessor

Leases in which the Company does not transfer
substantially all the risks and rewards of ownership
of an asset are classified as operating leases. Where
the Company is a lessor under an operating lease,
the asset is capitalised within property, plant and
equipment or investment property and depreciated
over its useful economic life. Payments received under
operating leases are recognised in the Statement of
Profit and Loss on a straight line basis over the term
of the lease.

Taxes on Income

Taxes on income comprise current taxes and deferred
taxes. Current tax in the Statement of Profit and Loss
is provided as the amount of tax payable in respect
of taxable income for the period using tax rates and
tax laws enacted during the period, together with
any adjustment to tax payable in respect of previous
years.

Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
and the amounts used for taxation purposes (tax base),
at the tax rates and tax laws enacted or substantively
enacted by the end of the reporting period.

Deferred tax assets are recognised for the future tax
consequences to the extent it is probable that future

taxable profits will be available against which the
deductible temporary differences can be utilised.

Income tax, insofar as it relates to items disclosed
under other comprehensive income or equity, is
disclosed separately under other comprehensive
income or equity, as applicable.

Deferred tax assets and liabilities are offset when there
is legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances
relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has
a legally enforceable right to offset and intends either
to settle on net basis, or to realize the asset and settle
the liability simultaneously.

Claims

Claims against the Company not acknowledged as
debts are disclosed after a careful evaluation of the
facts and legal aspects of the matter involved.