NOTES FORMING PART OF STANDALONE FINANCIAL STATEMENTS NATURE OF OPERATIONS Oberoi Realty Limited (the 'Company' or 'ORL'), a public limited company, is engaged primarily in the business of real estate development and hospitality. 1. SIGNIFICANT ACCOUNTING POLICIES A. Basis of brparation The financial statements have been brpared to comply in all material respects with the mandatory Accounting Standards notified by Companies (Accounts) Rules, 2014, (as amended) and the relevant provisions of the Companies Act, 2013. The financial statements have been brpared under the historical cost convention on an accrual basis in accordance with the accounting principles generally accepted in India. The accounting policy has been consistently applied by the Company. B. Use of estimates The brparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events, plans and actions, actual results could differ from these estimates. Any revision to accounting estimates and assumptions are recognised prospectively. C. Tangible assets, intangible assets and capital work in progress Tangible assets are stated at cost less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price and any attributable / allocable cost of bringing the asset to its working condition for its intended use. The cost also includes direct cost and other related incidental expenses. Revenues earned, if any during trial run of assets is adjusted against cost of the assets. Intangible assets are stated at cost less accumulated amortisation and impairment losses, if any. Cost comprises the acquisition price, development cost and any attributable / allocable incidental cost of bringing the asset to its working condition for its intended use. Capital work in progress is stated at cost less impairment losses, if any. Cost comprises of expenditures incurred in respect of capital projects under development and includes any attributable / allocable cost and other incidental expenses. Revenues earned, if any, before capitalisation from such capital project are adjusted against the capital work in progress. Borrowing costs relating to acquisition / construction / development of tangible assets, intangible assets and capital work in progress which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. D. Debrciation and amortisation i) Tangible assets (a) Debrciation is provided from the date the assets are ready to be put to use, on straight line method as per the useful life of the assets as brscribed under Part C of Schedule II of the Companies Act, 2013 except for the following class of assets where the management has estimated useful life which differs from the useful life brscribed under the Act. Hence the useful lives for these assets are different from the useful lives as brscribed under Part C of Schedule II of the Companies Act, 2013. Debrciation method, useful life and residual value are reviewed periodically. (b) Assets individually costing less than or equal to H 0.05 Lakh are fully debrciated in the year of purchase except under special circumstances. ii) Intangible assets Intangible assets are amortised using straight line method over the estimated useful life, not exceeding 5 years. Amortisation method, useful life and residual value are reviewed periodically. iii) Leasehold land and improvements are amortised on the basis of duration and other terms of lease. E. Impairment of tangible / intangible assets The carrying amount of tangible assets / intangible assets is reviewed periodically for any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. F. Investments Investments are classified into long-term (non-current) and short-term (current) investments. Investments intended to be held for not more than a year are classified as short-term investments. All other investments are classified as long-term investments. Long-term investments are stated at cost less permanent diminution in value, if any. Short-term investments are stated at the lower of cost or fair value. G. Valuation of Inventories i) Construction materials and consumables The construction materials and consumables are valued at lower of cost or net realisable value. The construction materials and consumables purchased for construction work issued to the construction work in progress are treated as consumed. ii) Construction work in progress The construction work in progress is valued at lower of cost or net realisable value. Cost includes cost of land, development rights, rates and taxes, construction costs, borrowing costs, other direct expenditure, allocated overheads and other incidental expenses. iii) Finished stock of completed projects (ready units) Finished stock of completed projects and stock in trade of units is valued at lower of cost or net realisable value. iv) Food and beverages Stock of food and beverages are valued at lower of cost (computed on a moving weighted average basis, net of taxes) or net realizable value. Cost includes all expenses incurred in bringing the goods to their brsent location and condition. v) Hospitality related operating supplies Hospitality related operating supplies such as guest amenities and maintenance supplies are expensed as and when purchased. H. Segment Reporting The Company's reporting segments are identified based on activities, risk and reward structure, organisation structure and internal reporting systems. Segment revenue and expense include amounts which can be directly attributable to the segment and allocable on reasonable basis. Segment assets and liabilities are assets / liabilities which are directly attributable to the segment or can be allocated on a reasonable basis. Income / expenses / assets / liabilities relating to the enterprise as a whole and not allocable on a reasonable basis to business segments are reflected as unallocated income / expenses / assets / liabilities. I. Revenue récognition i) Revenue from real estate projects The Company follows the percentage of project completion method for its projects. The revenue recognition policy is as under: The Company recognises revenue in proportion to the actual project cost incurred (including land cost) as against the total estimated project cost (including land cost), subject to achieving the threshold level of project cost (excluding land cost) as well as area sold, in line with the Guidance Note issued by ICAI and depending on the type of project. Revenue is recognised net of indirect taxes and on execution of either an agreement or a letter of allotment. The estimates relating to percentage of completion, costs to completion, area available for sale etc. being of a technical nature are reviewed and revised periodically by the management and are considered as change in estimates and accordingly, the effect of such changes in estimates is recognised prospectively in the period in which such changes are determined. Land cost includes the cost of land, land related development rights and brmium. ii) Revenue from hospitality Room revenue is recognised based on occupancy. Revenue from sale of food and beverages and other allied services is recognised as and when the services are rendered. Revenue is recognised net of trade discounts and indirect taxes, if any. iii) Revenue from lease rentals and related income Lease income is recognised in the statement of profit and loss on straight line basis over the lease term, unless there is another systematic basis which is more rebrsentative of the time pattern of the lease. Revenue from lease rental is disclosed net of indirect taxes, if any. Revenue from property management service is recognised at value of service and is disclosed net of indirect taxes, if any. iv) Other income Dividend income is recognised when the right to receive dividend is established. Other incomes are accounted on accrual basis, except interest on delayed payment by debtors and liquidated damages which is accounted on acceptance of the Company's claim. J. Foreign currency transactions Foreign currency transactions are recorded in the reporting currency (Indian Rupee) by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of the transaction. All monetary items denominated in foreign currency are converted into Indian rupees at the year-end exchange rate. The exchange differences arising on such conversion and on settlement of the transactions are recognised in the statement of profit and loss. Non-monetary items in terms of historical cost denominated in a foreign currency are reported using the exchange rate brvailing on the date of the transaction. K. Leases i) Where the Company is the lessee Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating lease. Operating lease payments are recognised as an expense in the statement of profit and loss on straight line basis over the lease term, unless there is another systematic basis which is more rebrsentative of the time pattern of the lease. ii) Where the Company is the lessor Assets rebrsenting lease arrangements given under operating leases are included in fixed assets. Lease income is recognised in the statement of profit and loss on straight line basis over the lease term, unless there is another systematic basis which is more rebrsentative of the time pattern of the lease. Initial direct costs are recognised immediately in the statement of profit and loss. L. Taxation i) Provision for income tax is made under the liability method after availing exemptions and deductions at the rates applicable under the Income-tax Act, 1961. ii) Deferred tax resulting from timing difference between book and tax profits is accounted for using the tax rates and laws that have been enacted as on the balance sheet date. iii) Deferred tax assets arising on the temporary timing differences are recognised only if there is reasonable certainty of realisation. 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. In the year in which the Company recognises MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement". The Company reviews the "MAT Credit Entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will be able to utilise the MAT Credit Entitlement within the period specified under the Income-tax Act, 1961. M. Employee stock option scheme The employee share based payments are accounted on the basis of 'intrinsic value of option' rebrsenting the excess of the market price on the date of grant over the exercise price of the shares granted under the 'Employee Stock Option Scheme' of the Company and is amortised as deferred employees compensation on a straight line basis over the vesting period in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. N. Provisions and Contingent liabilities i) A provision is recognised when (a) The Company has a brsent obligation as a result of a past event; (b) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) A reliable estimate can be made of the amount of the obligation. ii) A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation that may, but probably may not, require an outflow of resources. A contingent liability also arises in extreme cases where there is a probable liability that cannot be recognised because it cannot be measured reliably. iii) Where there is a possible obligation or a brsent obligation such that the likelihood of outflow of resources is remote, no provision or disclosure is made. O. Borrowing costs Borrowing costs that are directly attributable to the acquisition / construction of qualifying assets or for long -term project development are capitalised as part of their costs. Borrowing costs are considered as part of the asset cost when the activities that are necessary to brpare the assets for their intended use are in progress. Other borrowing costs are recognised as an expense, in the period in which they are incurred. P. Employee benefits i) Defined contribution plans Retirement benefits in the form of contribution to provident fund and pension fund are charged to statement of profit and loss. ii) Defined benefit plans Gratuity is in the nature of a defined benefit plan. Provision for gratuity is calculated on the basis of actuarial valuations carried out at balance sheet date and is charged to the statement of profit and loss. The actuarial valuation is performed using the projected unit credit method. Actuarial gains and losses are recognised immediately in the statement of profit and loss. iii) Other employee benefits Leave encashment is recognised as an expense in the statement of profit and loss as and when they accrue. The Company determines the liability using the projected unit credit method, with actuarial valuations carried out as at balance sheet date. Actuarial gains and losses are recognised immediately in the statement of profit and loss. Q. Earnings per share Basic earnings per share is calculated by dividing the net profit / (loss) for the year attributable to equity shareholders (after deducting brference dividends and attributable taxes) by weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit / (loss) for the year attributable to equity shareholders and the weighted average numbers of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. NOTE 1 : OTHER NOTES A. In our opinion, all current assets appearing in the Balance Sheet as at March 31, 2016 have a value on realisation in the ordinary course of the Company's business at least equal to the amount at which they are stated in the Balance Sheet. B. Balance of trade receivables, trade payables and loans and advances are subject to confirmation from respective parties and reconciliation, if any. C. The Company is primarily engaged in real estate development. The Company has acquired various lands / development rights and certain projects are at initial stage of implementation. The projects may be developed with various end uses, such as hotel, retail outlets, plots, residential, commercial and IT specific use. Such projects will be classified under fixed assets or inventories, as the case may be, based on ultimate end use as per final development of the property. Pending such reclassification on final development of such properties, such plots and the cost incurred on development of projects is included under the head 'Work in progress' or 'Plots of land' as part of 'Current assets'. D. The Company's normal operating cycle in respect of operations relating to the construction of real estate projects may vary from project to project depending upon the size of the project, type of development, project complexities and related approvals. Operating cycle for all completed projects and hospitality business is based on 12 months period. Assets and liabilities have been classified into current and non-current based on the operating cycle. E. As per section 135 of the Companies Act, 2013 read with relevant rules thereon, the Company was required to spend H736.71 Lakh on Corporate Social Responsibility (CSR) activities during FY 2015-16, against which the Company has spent H44.67 Lakh during the year under review majorly towards maintaining green initiatives and beautification of public spaces and H500.00 Lakh as contribution to Maharashtra Chief Minister's Relief Fund for mitigation of drought situation in the State of Maharashtra. F. The share of profit / loss in the LLP is accounted in the books of the Company as and when the same is credited / debited to the Partners' Capital Account. G. Previous year figures have been regrouped, re-arranged and re-classified wherever necessary to conform to current year's classification. H. Figures have been rounded off to the nearest thousand. As per our report of even date For P. RAJ & CO. Chartered Accountants Firm Registration No. 108310W P. S. Shah Partner Membership No.44611 For and on behalf of the Board of Directors Vikas Oberoi Chairman & Managing Director T. P. Ostwal Director Saumil Daru Director - Finance cum Chief Financial Officer Bhaskar Kshirsagar Company Secretary Place : Mumbai, date : April 29, 2016 |