(a) Basis of preparation
The financial statements have been prepared and presented on accrual
basis under the historical cost convention and in accordance with the
applicable accounting standards prescribed by the Companies (Accounting
Standards) Rules, 2006 and the relevant provisions of the Companies
Act, 1956 (''the Act''). The accounting policies have been consistently
applied unless otherwise stated.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at the
date of the financial statements and the results of operations during
the reporting periods. Although these estimates are based upon
management''s best knowledge of current events and actions, actual
results could differ from those estimates. Significant estimates used
by management in the preparation of these financial statements include
the estimates of the economic useful lives of the fixed assets,
provision for bad and doubtful receivable and accruals for employee
(c) Revenue recognition
Revenues comprise income from the sale of rooms, food, beverages and
allied services during a guest''s stay at the hotel. Room revenue is
recognised based on occupation and revenue from sale of food, beverages
and other allied services, is recognised as the services are rendered.
Unbilled revenues represent revenues recognised which have not been
billed to the customers at the Balance Sheet date and are billed
Income from management and technical services are recognised as the
services are rendered based on agreements with the concerned parties.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
(d) Fixed assets
Fixed assets are stated at cost less accumulated
depreciation/amortisation and impairment losses. All costs relating to
acquisition and installation of fixed assets are capitalised.
Advances paid towards acquisition of fixed assets before the financial
year-end and the cost of the fixed assets not ready for their intended
use, are disclosed as capital work-in-progress.
Expenditure directly relating to expansion is capitalised only if it
increases the life or functionality of an asset beyond its original
standard of performance.
e) Depreciation and amortisation
Depreciation on fixed assets is provided on the straight line method,
using the higher of rates specified in Schedule XIV to the Act or the
management estimates of the economic useful lives of such assets. These
rates are specified below:
Intangible assets, which includes goodwill on acquisition of the
business of entities, are amortised over a period of five years.
Assets individually costing less than Rs. 5,000 are fully depreciated in
the year of purchase.
(f) Borrowing costs
Borrowings costs that are directly attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets for the period up to the completion of their acquisition
or construction. All other borrowing cost as incurred are charged to
the Statement of Profit and Loss.
(g) Impairment of assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Statement of Profit and Loss. If at the Balance Sheet
date there is an indication that if a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciated/amortised historical cost.
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of the long-term investments.
Inventory comprises food, beverages, stores and spare parts and is
carried at the lower of cost and net realisable value. Cost includes
all expenses incurred in bringing the goods to their present location
and condition and is determined on a weighted average basis. Net
realisable value is the estimated selling price in the ordinary course
of business, less estimated costs of completion to make the sale.
(j) Foreign currency transactions
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction and non-monetary items which are carried
at fair value or other similar valuation denominated in a foreign
currency are reported using the exchange rates that existed when the
values were determined.
Exchange differences arising on the settlement of monetary items or on
reporting monetary items at rates different from those at which they
were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the
year in which they arise.
Where the Company leases land and buildings along with related assets
as a part of a combined lease arrangement, the Company determines
whether these assets acquired are integral to the land and building. If
these assets are integral, the Company analyses the nature of the lease
arrangement on a combined basis for all assets. If the assets are not
integral to the land and building, the Company evaluates each asset
individually, to determine the nature of the lease.
Leases, which effectively transfer to the Company substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalised at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly to the Statement of
Profit and Loss. Lease management fees, legal charges and other initial
direct costs are capitalised.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalised leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognised as an expense
in the Statement of Profit and Loss on a straight line basis.
(l) Employee benefits
Expenses and liabilities in respect of employee benefits are recorded
in accordance with Accounting Standard 15 Employee Benefits AS 15.
The Company contributes to the statutory provident fund of the Regional
Provident Fund Commissioner, in accordance with the Employees''
Provident Funds and Miscellaneous Provisions Act, 1952. The plan is a
defined contribution plan and contribution paid or payable is
recognised as an expense in the period in which the employee renders
Gratuity is a post employment benefit and is a defined benefit plan.
The liability recognised in the Balance Sheet represents the present
value of the defined benefit obligation at the Balance Sheet date less
the fair value of plan assets (if any), together with adjustments for
unrecognised actuarial gains or losses and past service costs.
Independent actuaries using the projected unit credit method calculate
the defined benefit obligation annually.
Actuarial gains or losses arising from experience adjustments and
changes in actuarial assumptions are credited or charged to the
Statement of Profit and Loss in the year in which such gains or losses
Liability in respect of compensated absences becoming due or expected
to be availed within one year from the Balance Sheet date is recognised
on the basis of undiscounted value of estimated amount required to be
paid or estimated value of benefit expected be availed by the
employees. Liability in respect of compensated absences becoming due or
expected to be availed more than one year after the Balance Sheet date
is estimated on the basis of actuarial valuation in a manner similar to
(m) Stock based compensation
The Company accounts for stock based compensation based on the
intrinsic value method. Option discount representing the excess of the
fair value or the market value of the underlying shares at the date of
the grant over the exercise price of the option is amortised on a
straight line basis over the vesting period of the shares issued under
the Company''s Employee Stock Option Plan (ESOP).
(n) Tax expense
Provision is made for income tax under the tax payable method based on
the liability computed after taking credit for deductions, allowances
and exemptions as per the relevant tax regulations.
Minimum Alternate Tax
Minimum alternate tax (MAT) paid in accordance to the tax laws, which
gives rise to future economic benefits in the form of adjustment to
future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax.
Accordingly, MAT is recognised as an asset in the Balance Sheet when it
is probable that future economic benefit associated with it will flow
to the Company and the asset can be measured reliably.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the Balance Sheet date.
Deferred tax assets are recognised only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets are recognised on carry forward of unabsorbed
depreciation and tax losses only if there is virtual certainty that
such deferred tax assets can be realised against future taxable
Unrecognised deferred tax assets of earlier years are re-assessed and
recognised to the extent that it has become reasonably certain that
future taxable income will be available against which such deferred tax
assets can be realised.
(o) Earnings per share
Basic earnings/(loss) per share are calculated by dividing the net
profit or loss for the period attributable to equity shareholders by
the weighted average number of equity shares outstanding during the
period. The weighted average numbers of equity shares outstanding
during the period are adjusted for events of bonus issue, bonus element
in a rights issue to existing shareholders, share split and reverse
share split (consolidation of shares).
For the purpose of calculating diluted earnings/(loss) per share, the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(p) Provisions and contingent liabilities
The Company creates a provision when there is a present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. Where there is a possible obligation
or a present obligation in respect of which the likelihood of outflow
of resources is remote, no provision or disclosure is made.
(q) Onerous contracts
Present obligations arising under onerous contracts are recognised and
measured as a provision. An onerous contract is considered to exist
where the Company has a contract under which the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits
expected to be received under it.