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
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
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
Depreciation on revalued portion is withdrawn from Revaluation Reserve
till 31st March, 2014 and charged to profit and loss account for the
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
Inventories are valued at lower of cost (weighted average basis) or net
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
(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
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
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
(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
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
(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
(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
(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
(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.