Major Accounting Policies

The Hotel Companies' financial statements are compiled in accordance with Indian Accounting
Standards (Ind AS), which have notified under section 133 of the Companies Act, 2013, as well as
paragraph 7 of the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to
time. Except for certain financial instruments measured at fair value other than those with carrying
amounts that are reasonable approximations of fair values, the financial statements are prepared
using the historical cost convention on an accrual basis. These financial statements have been
created in Indian rupees (INR). Management must make estimates and assumptions that affect the
reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent
liabilities at the date of the financial statements when preparing financial statements in accordance
with accounting principles generally accepted in India (Indian GAAP). Actual outcomes may differ
from those forecasts. Except for certain financial assets and liabilities (including derivative
instruments) that are measured at fair value or assets measured at fair value less present value of
defined benefit obligation or land at fair value on transition date, the standalone financial statements
have been prepared on a historical cost basis. On a regular basis, the estimations and underlying
assumptions are scrutinised. Accounting estimate revisions are recorded in the period in which the
estimate is revised. Estimation ,assumption and judgement are required for
 To determine estimated useful life of Property, Plant and Equipment (PPE)
 To recognize and measure obligation arising from defined benefit plan
 To recognize deferred tax assets and liabilities
 To recognize and measure other provisions
 To discount long term financial assets or liabilities

Current and Non-Current Classification of Asset and Liability

According to Schedule 3 of the Company Act, assets and liabilities must be classified as current or
noncurrent. The following guidelines are used to classify any asset or liability as current.

No. Current Asset Current Liability

(a) In the usual working cycle, expected to be Anticipated to be resolved throughout the
realized or planned to be sold or consumed normal operational cycle.
(b) Is primarily used for trading. Holdings that are predominantly used for
trading
(c) Within twelve months of the reporting period, it are expected to be settled within twelve
 is expected to be realized. months of the reporting period
(d) Unless prevented from being exchanged or There is no automatic right to postpone
utilized to satisfy a liability for at least twelve liability settlement for at least twelve months
months after the reporting period, cash or cash after the reporting period.
equivalents are acceptable.

Non-current assets and liabilities are defined as those that do not meet the preceding requirements.
The operating cycle is the period of time between when assets are acquired and when they are
realised in cash or cash equivalents. For the purpose of current and non-current asset and liability
classification, the companies determined that their operational cycle is 12 months based on the
services delivered and their realisations in cash and cash equivalents.

Revenue Recognition
Revenue is recognized to the degree that the economic advantages are likely to flow to the company
and can be reliably evaluated, regardless of when the payment is paid. Revenue is calculated at the
fair value of the consideration received or receivable, excluding taxes and duties, and taking into
account contractually agreed payment terms. To decide whether it is acting as principal or agent, the
corporation evaluates its income arrangements against particular criteria. The Group does not collect
sales tax, value added tax (VAT), or goods and services tax (GST) on its own account. Rather, it is a
tax levied by the seller on behalf of the government on the value added to the commodity. As a result,
it is not included in revenue.
Following are the major heads under which revenue is recognized:
 Rooms, Restaurant and other Service: After the guest checks into the hotel, the income
from guest accommodations is recognized on a daily basis. Other service revenues are
recorded as and when they are rendered.
 Interest Income: Interest income is documented using the effective interest rate (EIR) for all
financial instruments measured at amortized cost.
 Dividend Income: After the Group's right to receive payment is established, which is usually
when shareholders approve the dividend, revenue is recorded.

Inventory
Food and beverage inventory, as well as rooms and running supplies, are evaluated at the lower of
cost and net realizable value. The weighted average cost approach is used to calculate the cost of
purchase and other costs incurred in bringing the inventory to their current location and condition. The
price is established on a first-come, first-served basis. The estimated selling price in the regular
course of business less the estimated costs to make the transaction is the net realizable value.

Property, Plant and Equipment

Property Except for freehold land, which is not depreciated, plant and equipment are shown at cost,
net of any credit obtained in respect of any taxes, duties, and impairment losses, less cumulative
depreciation/amortization and impairment losses, if any. The cost of transferring the asset to its
intended use includes the purchase price as well as any relevant expenditure (duties, freight,
financing charges, construction and commissioning fees). Financing costs related to the acquisition of
fixed assets that take a long time to prepare for their intended use are also included to the extent that
they relate to the time before the assets are ready for use. Expenditure that is directly related to
building or erection is capitalized. Indirect expenses incurred during the construction period are
capitalized as part of the construction cost to the degree that they are connected to or incidental to
the construction. Direct construction spending due to the cost of assets under construction is
classified as capital work in progress, whereas indirect construction expenditure is classified as
construction expenditure pending allocation.
Following spending on existing fixed assets is only added to their book value if it raises the future
benefits from the existing assets beyond their previously assessed standard of performance,
according to the Taj GVK Policy. The Company has opted to use the carrying value of all of its
property, plant, and equipment recognized as of April 1, 2015 (transition date) measured under prior
GAAP as its considered cost as of the transition date in the transition to Ind-AS.
Building interiors and accessories, which include the interiors of the Hotel building that will be
renovated, are depreciated on an SLM basis over a period of ten years, which represents the useful
life of such assets in management's opinion. Because assets have varying useful lifetimes, they are
accounted for and depreciated separately as major components of property, plant, and equipment.
The Standalone Statement of Profit and Loss recognizes any gain or loss on the sale of an item of
property, plant, or equipment.
Lemon Tree depreciates some buildings, plant, and equipment over projected useful lifetimes that are
less than those prescribed in Schedule II of the Companies Act, 2013 which is stated in table. These
anticipated useful lifetimes, according to management, are realistic and reflect a fair assessment of
the duration over which the assets are likely to be utilized.
Fixed Asset Useful Life Considered
Plant and Machinery 15 Years
Building 60 Years/ Leased Remaining Life (whichever is
lower)
Electric Equipment and Fittings 10 Years
Office Equipment 5 Years
Furniture and Fixtures 8 to 10 Years
Crockery, Cutlery, and soft furnishings 3 Years
Commercial Vehicles 6 Years
Private Vehicles 8 Years
Computers 3 Years

Intangible Assets
Intangible assets acquired separately are valued at cost when they are first recognized. Intangible
assets acquired in a business combination are valued at their fair market value at the time of
purchase. Intangible assets are carried at cost, less accumulated amortization, after taking into
account any credit obtained for taxes and duties. Computer software falls under the category of
"Intangible Assets." During the transition to Ind-AS, the companies have chosen to keep the carrying
value of all intangible assets recognized as of April 1, 2015 (transition date) calculated according to
prior GAAP and utilize that carrying value as the considered cost as of the transition date.
Subsequent expansions are capitalized only if they boost the future economic advantages embodied
in the asset to which they are linked. Internally created intangibles are not capitalized, with the
exception of capitalized development costs, and the relevant expenditure is recorded in profit or loss
in the period in which it is incurred.
The useful life of Lemon Tree’s intangible assets is estimated to be three years, and they will be
amortized on a straight line basis over that time.
Intangible assets with indefinite useful lifetimes are not amortized; instead, they are assessed for
impairment at the end of each year, either individually or at the cash generating unit level. The
assessment of indefinite life is examined once a year to see if the indefinite life continues to be viable.
If this is not the case, the useful life is changed from indefinite to finite on a prospective basis. When
an intangible asset is derecognized, the difference between the net disposal proceeds and the
carrying amount of the asset is measured and recognized in the income statement.
Depreciation and Amortization
The cost of an asset, or another amount substituted for cost, less its anticipated residual value is the
depreciable amount for assets.

Taj GVK:
Taking into account the nature of the asset, the estimated usage of the asset, the operating
conditions of the asset, past history of replacement, and anticipate replacement, depreciation on
tangible fixed assets has been provided using the straight-line method as prescribed in Schedule II to
the Companies Act, 2013, except for the following categories of assets, whose lives have been re-
assessed as follows based on technical evaluation:
Plant and machinery 10 to 20 years
Electrical installations and equipment 20 years
Hotel Wooden Furniture 15 years
Non-wooden furniture & fittings 8 years
End User devices- Computers, Laptops, etc 6 years
Intangible assets with finite lives are amortized over their projected useful economic lives and
examined for impairment whenever there is a possibility of impairment. Once a year, the amortization
periods are examined, and impairment analyses are performed. The current amortization rate for
intangible assets such as computer software is six years.

Lemon Tree Hotel:

The Company depreciates some pieces of building, plant, and equipment over projected useful lives
that are less than the useful life required in Schedule II to the Companies Act, 2013, based on
management estimations. These anticipated useful lifetimes, according to management, are realistic
and reflect a fair assessment of the duration over which the assets are likely to be utilized.
When an item of property, plant, or equipment, as well as any major part, is disposed of or when no
future economic benefits are predicted from its use or disposal, it is de-recognized. When an asset is
derecognized, any gain or loss resulting from the asset's derecognition (determined as the difference
between the net disposal proceeds and the asset's carrying amount) is recorded in the income
statement. At the conclusion of each financial year, the residual values, usable lifetimes, and methods
of depreciation of property, plant, and equipment are examined and, if necessary, proactively
changed.
Chalet Hotels:
Depreciation is charged to the Standalone Statement of Profit and Loss in order to expense the
cost of assets (other than freehold land and properties under construction) less their residual
values over their useful lives, as prescribed in Schedule II to the Companies Act, 2013, using the
straight line method, as per the useful life prescribed in Schedule II to the Companies Act, 2013,
except for the following categories of assets in which the life of the assets has been re-assessed
as follows based on technical evaluation, taking into acc Ount the nature of the asset, the
estimated usage of the asset, the operating cOnditiOns Of the asset, past history of replacement,
anticipated technolOgical changes, manufacturers’ warranties and maintenance suppOrt, etc.:

March 2021 March 2020 Schedule II

Buildings (Interior and Accessories) 14 Years 14 Years NA
Plant and Machinery
- Food and beverages and Kitchen equipment 8 Years 8 Years
15 Years
- AudiO video equipment 5 Years 5 Years
- Laundry equipment, DG set, HVAC system, 15 Years 15 Years
Elevators, Fire fighting system,
- Others 14 Years
14 Years
Electrical installations 14 Years 14 Years 10 Years
Office Equipments
- MObile phones 2 Years 2 Years 5 Years
- Others 4 Years 4 Years
Vehicles 5 Years 5 Years 6 Years
Carpet 7 Years 7 Years NA
Furniture and Fixtures 10 Years 10 Years 8 Years
4 Years 4 Years
COmputer sOftware
NA

Construction of a structure on leasehold land, the cost of commercial operations is amortized over the
remainder of the lease term.  Leasehold improvements are depreciated during the course of the
lease's primary term. Temporary structures and assets with a value of less than Rs. 5,000 are
depreciated at 100% in the year of capitalization. At the Balance Sheet date, the assets' useful
lifetimes and residual values are assessed, and the impact of any changes in estimates is accounted
for prospectively.

Lease
The corporation (as a lessee) evaluates a contract at the start to see if it comprises a lease. When a
contract gives the right to control the use of a specified asset for a length of time in exchange for
money, it is or contains a lease. The company evaluates whether a contract transmits the right to
govern the use of a certain asset by determining whether:

 The contract entails the use of a specific asset

 The company receives substantially all of the economic advantages from the asset's use
throughout the lease term
 The firm has the authority to direct the asset's use

(As Leasee) Operating lease payments are recorded as an expense on a straight-line basis in the
Statement of Profit and Loss over the lease term. The substance of the agreement at the time of the
lease's inception is used to determine whether it is (or contains) a lease. If the fulfillment of the
arrangement is contingent on the use of a specific asset or assets, and the arrangement imparts a
right to use the asset or assets, even if such right is not explicitly described in the arrangement, the
arrangement is or contains a lease. (As Lessor) Operating leases are those in which the Company
does not transfer virtually all of the risks and rewards of asset ownership. The rental income from an
operating lease is recognized in a straight-line fashion over the lease's life. On a straight-line basis,
operating lease receipts are recognized as income in the statement of profit and loss over the lease
duration.

Deferred Tax
The balance sheet approach is used to account for deferred income tax. Except when the deferred
income tax arises from the initial recognition of goodwill, an asset or liability in a transaction that is not
a business combination and affects neither accounting nor taxable profits or losses at the time of the
transaction, deferred income tax assets and liabilities are recognized for deductible and taxable
temporary differences arising between the tax base of assets and liabilities and their carrying amount
in financial statements. Deferred tax liabilities and assets are valued at tax rates that are projected to
apply in the period in which the liability is paid or the asset is realized, depending on tax rates (and
tax laws) that have been adopted or substantially implemented by the reporting period's end.
Deferred income tax assets are recognized to the extent that taxable profit is likely to be available
against which the deductible temporary differences, as well as the carry forward of unused tax credits
and unused tax losses, can be used.
For all taxable temporary differences, deferred tax liabilities are generally recognized. At each
Balance Sheet date, the carrying amount of deferred tax assets is evaluated and lowered to the
extent that it is no longer likely that sufficient taxable profits will be available to use all or part of the
deferred income tax asset.
Only when and to the extent that there is sufficient evidence that the company will pay normal tax
within the defined term and that the MAT credit available can be used, is the Minimum Alternate Tax
(MAT) credit, formed as part of Deferred Tax Credit, recognized as an asset. At each Balance Sheet
date, this asset is examined, and the carrying amount is written down if it is determined that it will not
be recovered within the stipulated time frame.
Impairment of Non-financial Assets
At each reporting date, company evaluates whether there is any indication that an asset may be
impaired. If there is any indication that an asset is impaired, or if yearly impairment testing is
necessary, the firm calculates the asset's recoverable amount. The higher of an asset's or cash-
generating unit's (CGU) fair value less costs of disposal and its value in use is the recoverable
amount. Unless the asset generates cash inflows that are mainly independent of those from other
assets or groupings of assets, the recoverable amount is established for each individual asset. When
an asset's carrying value exceeds its recoverable value, the asset is termed impaired and written
down to the recoverable value.
Estimated future cash flows are discounted to present value using a pre-tax discount rate that
incorporates current market evaluations of the time value of money and the risks specific to the asset
when determining value in use. Recent market transactions are taken into consideration when
assessing fair value less disposal costs. Impairment losses from continuing activities, such as
inventory impairment, are included in the profit and loss statement.
The firm's impairment assessment is based on thorough budgeting and forecast calculations
generated individually for each of the company's CGUs to which the individual assets are assigned.
Budgets and projection computations typically encompass a five-year timeframe. After the fifth year, a
long-term growth rate is calculated and used to estimate future cash flows over longer periods.
Company extrapolates cash flow predictions in the budget for following years using a stable or
declining growth rate, unless a growing rate can be justified, to estimate cash flow projections beyond
the periods covered by the most recent budgets/forecasts.

References:
 Lemon Tree Hotels Ltd Annual Report 2019-20
 Chalet Hotels Ltd Annual Report 2020-21
 Taj GVK Annual Report 2019-20