2. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the financial statements are as
given below. These accounting policies have been applied consistently to all the periods presented in the financial
statements.
2.1 Revenue recognition
The Company derives revenue primarily from rendering services related to hotel, restaurant etc. by providing
accommodation and food to the guests.
Revenue is recognised at an amount that reflects the consideration to which the Company expects to be entitled in
exchange for transferring the goods or services to a customer i.e. on transfer of control of the goods or service to
the customer. Revenue from sales of goods or rendering of services is net of Indirect taxes, returns and discounts.
To determine whether to recognize revenue, the Company follows a 5-step process:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to performance obligations
5. Recognizing revenue when/as performance obligation(s) are satisfied.
Revenue is recognised at the transaction price that is allocated to the performance obligation. Revenue includes
room revenue, food and beverage sale and banquet services which is recognised once the rooms are occupied, food
and beverages are sold and other services that have been provided as per the contract with the customer.In relation
to laundry income and other allied services, the revenue has been recognised by reference to the time of service
rendered.
Other income
Other income majorly comprises of rental income, scrap revenue which is recognized when the right to receive the
income is established as per the terms of contract, interest income, write back of creditors. It also includes the interest
waived off on loans borrowed by the company.
Interest Income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest
rate applicable (provided that it is probable that the economic benefits will flow to the company and the amount of
income can be measured reliably).
2.2 Employee Benefits
Short-term employee benefits
The costs of all short-term employee benefits (that are expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service) are recognised during the period in which the
employee renders the related service. The accruals for employee entitlements to benefits such as salaries and bonuses
represent the amounts which the Company has a present obligation to pay as a result of the employee’s services and
the obligation can be measured reliably. The accruals have been calculated at undiscounted amounts based on current
salary levels at the Balance Sheet date.
Post Employment Benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts.
The eligible employees of the Company are entitled to receive post-employment benefits in respect of provident
and family pension fund, in which both the employees and the Company make monthly contributions at a specified
percentage of the employee’s eligible salary. The contributions made to the provident fund are charged to the Statement
of Profit and Loss as incurred. In respect of contribution to the PF Fund, the Company has no further obligations
beyond making the contribution, and hence, such employee benefit plan is classified as Defined Contribution Plan.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net
obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees
have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit
credit method.
The company does not have any earmarked investments as they have not contributed to any gratuity funds. Hence,
there is no plan assets as on 31.03.2023.
2.3 Property, Plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, except for Freehold
land. The company follows revaluation model for Land and cost model for other classes of assets. Costs directly
attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended
by the management.On transition to IND AS, the Company has elected to continue with the carrying value of all
of its property plant and equipment recognised as at April 1, 2016, measured as per the previous GAAP, and use
that carrying value as the deemed cost of such property plant and equipment. For the purpose of Proforma Ind AS
financial information for the financial year ended March 31, 2016 the Company has provided the depreciation based
on the estimated useful life of respective years and as the change in estimated useful life is considered as change in
estimate, accordingly there is no impact of this roll back.
Depreciation on Plant. Property and Equipment
The depreciable amount of PP&E (being the gross carrying value less the estimated residual value) is depreciated on
a systematic basis over its useful life.
De-recognition
An item of PPE is de-recognised at the time of its disposal or when it is assessed that no future economic benefit
would accrue from it. The gain/ loss arising out of such disposal/retirement is taken to statement of profit or loss.
2.4 Investment Property
The properties that comprise a portion that is held to earn rentals or for capital appreciation
and another portion that is held for use in the supply of services or for administrative purposesand if such portions
cannot be sold separately, then such properties are not classified as investment property under IND AS 40 if only an
insignificant portion have been leased out and majority is held as owner occupied property.
2.5Leases & Right to Use Assets
On inception of a contract. the Company assesses whether it contains a lease. A contract contains a lease when it
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right
to use the asset and the obligation under the lease to make payments are recognised in the Company’s statement of
financial position as a right-of-use asset and a lease liability.
The company elects not to apply the requirements in paragraphs 22-49 of IND AS 116 toshort-term leases and leases
for which the underlying asset is of low value.The lease payments associated with those leases are recognized as an
expense on a straight-line basis over the lease term.
2.6Impairment of non-financial assets
The Company assesses at each reporting date. whether there is an indication that an asset may be impaired. An asset
is treated as impaired when the carrying cost of the asset exceeds its recoverable value being higher of value in use
and net selling price. Value in use is computed at net present value of cash flow expected over the balance useful
lives of the assets. For assessing impairment. assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (Cash
Generating Units - CGU).
An impairment loss is recognized as an expense in the Statement of Profit and Loss in the year in which an asset is
identified as impaired. The impairment loss recognized in earlier accounting period is reversed if there has been an
improvement in recoverable amount.
2.7 Income Tax
Income Tax comprises current and deferred tax. It is recognized in the Statement of Profit and Loss except to the
extent that it relates to an item recognized directly in equity or in Other Comprehensive Income.
Deferred Tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the
asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the corresponding amounts used for taxation purposes (i.e., tax base).
Deferred tax relating to items recognized outside the Statement of Profit and Loss is recognized either in Other
Comprehensive Income (OCI) or in equity. Deferred tax items are recognized in correlation to the underlying
transaction either in OCI or directly in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
2.8Financial assets, financial liabilities
Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of
the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on
initial recognition of financial asset or financial liability. The Company derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to another entity. The Company derecognises financial liabilities
when, and only when, the Company’s obligations are discharged, cancelled or have expired.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business
whose objective is to hold these assets to collect contractual cash flows and the contractual terms of the financial
assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
Cash and cash equivalent
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of
cash that are subject to an insignificant risk of change in value and having original maturities of three months or less
from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which
are unrestricted for withdrawal and usage.
Trade receivables
Trade receivables are initially recognised at fair value. Subsequently, these assets are held at amortised cost net of
any expected credit losses. Loss allowance on trade receivables is measured at an amount equal to lifetime expected
losses i.e., expected cash shortfall based on the management decision.
Impairment of financial assets (other than at fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is
impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company
recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a
financing transaction. In determining the allowances for doubtful trade receivables, the Company has used a practical
expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The
provision matrix takes into account historical credit loss experience and is adjusted for forward looking information.
The expected credit loss allowance is based on the ageing of the receivables that are due and allowance rates used
in the provision matrix. For all other financial assets, expected credit losses are measured at an amount equal to the
12-months expected credit losses or at an amount equal to the lifetime expected credit losses if the credit risk on the
financial asset has increased significantly since initial recognition.
De-recognition of financial assets
The company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
party. If the company neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the company recognises its retained interest in the asset and an associated liability for
amounts it may have to pay. On de-recognition of a financial asset in its entirety, the difference between the asset’s
carrying amount and the sum of the consideration received and receivable is recognised in the Statement of profit
and loss.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the company are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an
equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by a company entity are recognised at the proceeds received, net of direct
issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method. The carrying
amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective
interest method. Interest expense that is not capitalized as a part of cost of an asset is included in the “Finance Costs”.
The carrying amounts of the borrowings that are not measured at fair value are reasonable approximation of fair
value, as they are floating rate instruments that are re-priced to market interest rates on or near the end of the
reporting period. The interest expense recognized in Profit & Loss account will be based on the current market rate.
De-recognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged,
cancelled, or have expired. An exchange with a lender of debt instruments with substantially different terms is
accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
Similarly, a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment
of the original financial liability and the recognition of a new financial liability. The difference between the carrying
amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
2.9 Inventories
Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a
Weighted Average basis) or net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and selling expenses. Cost includes the fair value of
consideration paid including duties and taxes (other than those refundable), inward freight, and other expenditure
directly attributable to the purchase. Trade discounts and rebates are deducted in determining the cost of purchase.
|