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Hotel Leela Venture

BSE: 500193|NSE: HOTELEELA|ISIN: INE102A01024|SECTOR: Hotels
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« Mar 14
Accounting Policy Year : Mar '15
 a) Convention
 
 The financial statements are prepared under the historical cost
 convention in accordance with the applicable Accounting Standards and
 the provisions of the Companies Act, 2013
 
 b) Use of Estimates
 
 The preparation of financial statements require the management of the
 Company to make estimates and assumptions that affect the reported
 balances of assets and liabilities and disclosures relating to the
 contingent liabilities as at the date of the financial statements and
 the reported amount of income and expenses during the year. Examples of
 such estimates include provisions for doubtful debts, employee
 benefits, provision for income taxes, useful life of depreciable fixed
 assets and provision for impairment.
 
 c) Fixed Assets
 
 Fixed assets are stated at cost (or valuation as applicable) less
 depreciation. Cost includes expenses incidental to the installation of
 the assets and attributable borrowing costs. Cost also includes
 exchange differences arising on reporting of long term foreign currency
 monetary items at rates different from those at which they were
 initially recorded during the period or reported in previous financial
 statements, in so far as they relate to acquisition of a depreciable
 capital asset.
 
 Valuation of freehold land and leasehold rights on properties situated
 at Mumbai, Bangalore and Goa was carried out during March 2009. The
 fixed assets of Goa were initially revalued in the year 2001 and that
 of Mumbai in the year 2004. Valuation was carried out in all the cases
 by professional valuers, the basis of valuation being realisable value
 as determined by the valuer.
 
 Revalued fixed assets are stated based on the revaluation and all other
 fixed assets are stated at cost. Additions on account of valuation are
 credited to Revaluation Reserve.
 
 d) Depreciation and Amortisation
 
 Effective 1st April 2014, the Company depreciates its fixed assets over
 the useful life in the manner prescribed in Schedule II of the
 Companies Act, 2013, as against the earlier practice of depreciating at
 the rates prescribed in Schedule XIV of the Companies Act, 1956.
 
 Based on technical evaluation, the useful life of continuous process
 plant other than windmill has been estimated as 15 years (on a single
 shift basis), which is different from that prescribed in Schedule II of
 the Act.
 
 Depreciation on additions / deletions during the year are provided on
 prorata basis. Assets purchased / installed during the year costing
 less than Rs. 5,000 each are fully depreciated.
 
 Premium and other capitalised cost relating to leasehold land is
 amortised over the period of lease.
 
 Buildings constructed on leasehold land are depreciated at the
 applicable rate on the assumption that the lease will be renewed in the
 normal course. Depreciation on Computer Software is provided over a
 period of six years. License fee and Franchise fee are amortised over
 five years.
 
 Depreciation on revalued portion is withdrawn from Revaluation Reserve
 till 31st March, 2014 and charged to profit and loss account for the
 subsequent period.
 
 e) Investments
 
 Current investments are carried at lower of cost and quoted / fair
 value. Long-term investments are carried at cost. However provision for
 diminution is made to recognise a decline, other than temporary, in the
 value of investments, such reduction being determined and made for each
 investment individually.
 
 f) Inventories
 
 Inventories are valued at lower of cost (weighted average basis) or net
 realisable value.
 
 g) Employee benefit
 
 i) Post-employment benefit plans
 
 Contribution to defined contributory retirement benefit schemes are
 recognised as an expense when employees have rendered services
 entitling them to contributions.
 
 For defined benefit schemes, the cost of providing benefits is
 determined using the Project Unit Credit Method, with actuarial
 valuation being carried out at each balance sheet date. Actuarial gains
 and losses are recognized in full in the profit and loss account for the
 period in which they occur. Past service cost is recognized immediately
 to the extent that the benefits are already vested, and otherwise
 amortized on straight-line basis over the average period until the
 benefits become eligible for being vested.
 
 ii) Short-term employee benefits
 
 The undiscounted amount of short term employee benefits expected to be
 paid in exchange for the services rendered by employees is recognised
 during the period when the employee renders the service. These benefits
 include compensated absences such as paid annual leave.
 
 iii) Long-term employee benefits
 
 Compensated absences which are not expected to occur within twelve
 months after the end of the period in which the employee renders the
 related services are recognized as a liability at the present value of
 the defined benefit obligation at the balance sheet date.
 
 h) Recognition of income and Expenditure
 
 Revenue/Incomes and Costs/Expenditures are accounted on accrual.
 
 i) Borrowing Costs
 
 Borrowing costs that are directly attributable to the acquisition and
 construction of qualifying assets are capitalised. A qualifying asset
 is an asset that necessarily takes substantial period of time to get
 ready for its intended use. Gains/Losses (net) on settlement of
 derivative contracts where they relate to the acquisition or
 construction of fixed assets are adjusted to the carrying cost of such
 assets.
 
 j) Taxation
 
 (i) Provision for current taxation has been made in accordance with the
 Income Tax laws applicable to the assessment year.
 
 (ii) Wealth tax for the year has been provided as required under the
 Wealth Tax Act and Rules, 1957.
 
 (iii) Deferred tax is recognized on timing difference being the
 difference between taxable income and accounting income that originates
 in one period and is capable of reversal in one or more subsequent
 periods. Where there is unabsorbed depreciation, or carry forward
 losses, deferred tax assets are recognised only if there is virtual
 certainty of realisation of such assets.
 
 (iv) Minimum Alternate Tax (MAT) credit is recognised 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 is
 written down to the extent there is no longer a convincing evidence
 that the Company will be liable to pay normal income tax during the
 specified period.
 
 k) Impairment of assets
 
 The carrying amounts of assets are reviewed at each balance sheet date,
 to assess any indication of impairment. If any such indication exists,
 the recoverable amount of such assets is estimated. An impairment loss
 is recognized wherever the carrying amount ofthe assets exceeds its
 recoverable amount. The recoverable amount is greater of the net
 selling price or value in use. In assessing value in use, the estimated
 future cash flows are discounted to their present value, based on an
 appropriate discounting factor.
 
 After impairment, depreciation is provided on the revised carrying
 amount of the assets over its remaining useful life. A previously
 recognized impairment loss is increased or reversed depending on
 changes in circumstances. However, the carrying value after reversal is
 not increased beyond the carrying value that would have prevailed by
 charging usual depreciation if there was no impairment.
 
 l) Foreign Currency Transaction
 
 Foreign currency transactions are recorded at the rates of exchange
 prevailing on the date of the transactions.
 
 In line with option given by the Ministry of Corporate Affairs vide
 Notification No G.S.R.225 (E) dated 31st March 2009, the exchange
 differences arising on reporting of long term foreign currency monetary
 items at rates different from those at which they were initially
 recorded during the period, or reported in previous financial
 statements, in so far as they relate to acquisition of a depreciable
 capital asset, are added to or deducted from the cost of the asset and
 will be depreciated over the balance life of the asset, and in other
 cases are accumulated in ''Foreign Currency Monetary Item Translation
 Difference Account'' and amortized over the balance period of such
 long-term asset/ liability but not beyond 31st March 2020, by
 recognising income or expense in each of the periods except the exchange
 differences which are regarded as adjustment to interest costs in terms
 of paragraph 4(e) of Accounting Standard AS (16) Borrowing costs.
 
 All other monetary assets and liabilities in foreign currency as at
 balance sheet date are translated at rates prevailing at the year-end
 and the resultant net gains or losses are recognized as income or
 expense in the year in which they arise.
 
 m) Assets taken on lease
 
 In respect of operating lease transactions, the assets are not
 capitalised in the books of the Company and the lease payments are
 charged to the profit and loss account.
 
 n) Accounting for Provisions, Contingent Liabilities and Contingent
 Assets
 
 A provision is recognised when the Company has a present obligation as
 a result of past event and it is probable that an outflow of resources
 will be required to settle the obligation, in respect of which a
 reliable estimate can be made. Provisions are not discounted to present
 value and are determined as best estimates required to settle the
 obligation at the balance sheet date. Contingent Liability is disclosed
 in case of
 
 (i) A present obligation arising from past events, when it is not
 probable that an outflow of resources will be required to settle that
 obligation;
 
 (ii) A present obligation when no reliable estimate is possible; and
 
 (iii) A possible obligation arising from past events where the
 probability of outflow of resources is remote.
 
 Contingent Assets are not recognized in the financial statements.
 
 o) Government Grants
 
 Revenue Grants are recognized in the profit and loss account in
 accordance with the related scheme and in the period in which these are
 accrued.
 
 Note A : The Loans are secured by :
 
 (a) First ranking pan passu charge on all of the fixed assets (both
 movable and immovable) of Hotel Properties at Mumbai, Goa, Udaipur, New
 Delhi, and Chennai and the Windmills.
 
 (b) Second ranking pari passu charge on the Current Assets of Hotel
 Properties at Mumbai, Goa, Udaipur, New Delhi and Chennai.
 
 (c) Revenue from Hotel Properties at Mumbai, Goa, Udaipur, New Delhi,
 and Chennai and receivables from sale of Hyderabad Land and Joint
 Development at Bangalore.
 
 (d) Pledge of Promoters'' shareholding, in the Company, subject to
 minimum of 51% of their holding
 
 (e) Personal Guarantee of Promoters - Mr. Vivek Nair and Mr Dinesh
 Nair.
 
 (f) Corporate Guarantee of Leela Lace Holdings Private Limited.
 
 (g) Negative lien on the Non-Core Assets.
 
 (h) Second ranking pari passu charge on the fixed assets (both movable
 & immovable) of Hotel Properties at Mumbai, Goa, Udaipur, New Delhi,
 and Chennai and the Windmills.
 
 (i) First pari passu charge on the immovable properties of the Leela
 Palace, Bangalore.
 
 (j) First pari passu charge on the immovable properties of the Leela
 Palace, Bangalore and receivables from Pune Joint Development.
 
 (k) Hypothecation of Vehicles.
 
 Note B :
 
 (a) The loan will be converted to RTL on 1st August, 2018 and repayable
 in 5 annual instalments thereafter.
 
 (i) Working capital facilities from IDBI Bank Ltd (Previous
 year-consortium of banks) are secured by:
 
 (A) First ranking pari passu charge on inventory, receivables and other
 current assets of the Hotel properties at Mumbai, Goa, Udaipur, New
 Delhi and Chennai.
 
 (B) Second ranking pari passu charge on the fixed assets of the Hotel
 properties at Mumbai, Goa, Udaipur, New Delhi, and Chennai and the
 windmills.
 
 (C) Securities listed in note 4 (A) (d) to (g)
 
 (ii) Short term loan from HDFC Ltd was secured by mortgage of certain
 residential flats and personal guarantee of promoters Mr. Vivek Nair
 and Mr. Dinesh Nair.
 
 (a) Additions during the year is on account of exchange variations in
 the long term foreign currency monetary items relating to non
 depreciable assets.
 
 (b) The balance in foreign currency translation difference account
 would be amortised over the balance period of the long term liability
 but not beyond 31st March 2020 by recognition as income or expenditure.
 
 
 
Source : Dion Global Solutions Limited
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