(a) Basis of preparation of financial statements:
- The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles (GAAP) under the
historical cost convention on the accrual basis. GAAP comprises
mandatory accounting standards as specified in the Companies
(Accounting Standards) Rules, 2006, the provisions of the Companies
(b) Use of Estimates:
- The preparation of financial statements in conformity with
generally accepted accounting principles requires that management makes
estimates and assumptions that affect the reported amounts of income
and expenses of the year. The reported balance of assets and
liabilities and the disclosure relating to contingent liabilities as at
the date of the financial statements. These estimates are based upon
management''s best knowledge of current events and actions. The
difference between the actual results and estimates are recognised in
the period in which the results are known/materialised.
(c) Fixed Assets:
- Fixed Assets are stated at original cost, net of tax/duty credits
availed if any, less accumulated depreciation/ amortisation. Costs
include all expenses incurred to bring the assets to its present
location and condition. Assets acquired by way of slump sale are
recorded at book value in the books of the transferor as on the date of
transfer. Revenue expenses incurred in connection with project
implementation in so far as such expenses relate to the period prior to
the commencement of commercial activity are treated as part of the
fixed assets and capitalised.
- Intangible assets are recorded at the consideration paid for
acquisition and are carried at cost less accumulated amortisation.
- Depreciation on all fixed assets is provided pro-rata from/up to
the date of acquisition/disposal using the straight line method at the
rates prescribed by Schedule XIV of the Companies Act, 1956.
- In case of Goodwill, the amount is amortized @4.75% p.a. using the
(e) Provisions, Contingent Liabilities and Contingent Assets:
- Provisions involving substantial degree of estimation in
measurement are recognised if there is a present obligation as a result
of past events and it is probable that there will be an outflow of
resources and the amount of obligation can be reliably estimated.
- Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognised nor disclosed in the
(f) Revenue Recognition:
- Income from Fees and subscriptions, recorded net of discounts and
rebates have been recognised as income for the year irrespective of the
period, for which these are received. However, the Fees receivable from
existing members as at the end of the year has been recognised as
income for the year.
- The costs relating to rendering of these services being
unascertainable are charged off to revenue in the year in which they
become legally payable.
- Input credit availed on Service Tax through revenue expenses paid
are accounted for separately as income, thus accounting the expenses at
their gross values inclusive of service tax. Expenses on which service
tax is paid in subsequent year are booked net off the Un-availed
Service Tax at end of the year.
- Income by way of Franchise Fees (including up-front fees) received
pursuant to franchise agreements entered are recognised as income of
the period in accordance with terms of the agreement, and as per data
submitted by the franchisees.
- Interest income is recognised on a time proportion basis taking
into account the amount outstanding and the rate applicable.
- Any other income i.e. from juice bar sales, consumables etc. are
recognised on receipt basis since the realisations there-from are
immediate and no credit is allowed to the customers/members.
(g) Impairment of Assets:
- The management periodically assesses using, external and internal
sources, whether there is an indication that an asset may be impaired.
- An impairment loss is charged to the Profit and Loss Account in the
year in which the asset is identified as impaired.
- At each balance sheet date, the management reviews the carrying
amounts of its assets included in each cash generating unit to
determine whether there is any indication that those assets were
impaired. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of impairment loss.
- The impairment loss recognised in prior accounting periods is
reversed if there has been a change in the estimate of recoverable
(h) Employee benefits:
- All employee benefits payable wholly within twelve months of
rendering the service are classified as a short-term employee benefits.
Benefits such as salaries, wages, contractual labour charges and short
term compensated absences, etc is recognised in the period in which the
employee/contractual labour renders the related service.
- The gratuity liability is provided and charged off as revenue
expenditure based on actuarial valuation. The Company has subscribed to
the group gratuity scheme policy of LIC of India.
- Any other payments under the relevant labour statutes, wherever
applicable are reimbursed to the Outsourced Agency as and when
(i) Borrowing Cost:
- Borrowing cost incurred for qualifying assets is capitalised up to
the date the asset is ready for intended use, based on borrowings
incurred specifically for financing the asset. In determining the
amount of borrowing cost eligible for capitalization during a period,
any income earned on the temporary investment on those borrowings is
deducted from the borrowing cost incurred.
- Other Borrowing costs are charged off to Revenue Account in the
year in which they are incurred.
(j) Foreign Currency Transactions:
- Foreign Currency Transactions are recorded on initial recognition
in the reporting currency, using the exchange rate on the date of the
transaction. At each balance sheet date, foreign currency monetary
items are reported using the closing rate.
- Exchange differences that arise on settlement of monetary items or
on reporting at each balance sheet date of the Company''s monetary items
at the closing rate are:
i. Upto 31st March, 2008, recognised as income or expense in the
period in which they arise and
ii. Thereafter adjusted in the cost of fixed assets specifically
financed by the borrowings to which the exchange differences relate.
(k) Earnings per share:
Basic Earnings Per Share
- Basic and diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the year, by
weighted average number of equity shares outstanding during the year.
Diluted Earnings Per Share
- For the purpose of calculating Diluted EPS the net profit or loss
for the period attributable to equity shareholders and the weighted
average number of equity shares outstanding during the period are
adjusted for the effects of all potential equity shares.
(l) Taxes on Income:
- Current Tax is the amount of tax payable on the taxable income for
the year as determined in accordance with the provisions of the Income
Tax Act, 1961.
- Deferred Taxation is recognised for all timing differences between
accounting income and taxable income and is quantified using
enacted/substantial enacted tax rates as at balance sheet date.
Deferred Tax asset are recognised subject to the management''s judgement
that the realisation is virtually/reasonably certain.
- Tax credit is recognised in respect of Minimum Alternate Tax (MAT)
paid in terms of Section 115JAA of the Income Tax Act, 1961 based on
convincing evidence that the Company will pay normal income tax within
the statutory time frame and the same is reviewed at each balance sheet
- Long-term Investments are stated at cost, less provision for other
than temporary diminution in value. Current investments comprising
investments in Mutual Funds are stated at the lower of cost and fair
value determined on an individual investment basis.
(n) Cash Flow Statement:
- The Cash Flow Statement is prepared by the indirect method set out
in Accounting Standard (AS) 3 on Cash Flow Statements and presents the
cash flows by operating, investing and financing activities of the
- Cash and cash equivalents presented in the cash flow Statement
consist of cash on hand, balances in Current, Fixed Deposit and Cash
Credit Accounts with Bank.
(o) Transfer to Debenture Redemption Reserve is made pro-rata over the
life of Debentures in terms of the requirement of provisions of
Companies Act, 1956.
(p) Segment Reporting:
- There is only one reportable business segment as envisaged by
Accounting Standard (AS) 17 ''Segment Reporting''. Accordingly, no
separate disclosure for the segment reporting is required to be made in
the financial statement of the Company.
- Secondary segmentation based on geography has not been presented as
the Company operates primarily in India and the Company perceives that
there is no significant difference in its risk and returns in operating
from different geographic areas within India.
Leases, where the Lessor effectively retains the substantially all the
risks and benefits of ownership of the leased items, are classified as
operating lease. Operating lease payments are recognised as expenses in
the Statement of Profit & Loss.