Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697752948788.pdf (Georgia)
JSC METRO EUPHORIA HOTEL BATUMI Financial Statements Together with the Independent Auditors’ Report As at and for the year ended 31 December 2020 CONTENTS: INDEPENDENT AUDITORS’S REPORT .................................................................... 3 FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION ................................................................... 6 STATEMENT OF COMPREHENSIVE INCOME ............................................................. 7 STATEMENTS OF CHANGES IN EQUITY .................................................................. 8 STATEMENT OF CASH FLOWS ............................................................................ 9 NOTES TO THE FINANCIAL STATEMENTS 1.
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GENERAL INFORMATION ........................................................................ 10 BASIS FOR PREPARATION ....................................................................... 10 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS ....................................... 11 FINANCIAL INSTRUMENTS – RISK MANAGEMENT .............................................. 12 PRIOR PERIOD RECLASSIFICATIONS ............................................................ 14 PROPERTY AND EQUIPMENT .................................................................... 15 RIGHT OF USE ASSET AND LEASE LIABILITIES ................................................ 16 INVENTORIES ..................................................................................... 17 TRADE AND OTHER RECEIVABLES .............................................................. 17 CASH AND CASH EQUIVALENTS................................................................. 18 SHARE CAPITAL .................................................................................. 18 TRADE AND OTHER PAYABLES .................................................................. 18 REVENUE FROM HOTEL ACTIVITIES ............................................................ 19 OTHER OPERATING EXPENSES .................................................................. 20 OTHER INCOME................................................................................... 20 TRANSACTIONS WITH RELATED PARTIES ...................................................... 20 COMMITMENTS AND CONTINGENCIES ......................................................... 21 CHANGES IN CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS ....................... 21 EVENTS AFTER THE REPORTING DATE ........................................................ 22 SUMMERY OF SIGNIFICANT ACCOUNTING POLICIES ......................................... 22 JSC METRO EUPHORIA HOTEL BATUMI STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2020 (In GEL) Revenue from hotel activities Other income Depreciation and
 amortization Cost of materials Employee salaries and compensations Utilities and communication expenses Impairment changes of financial assets Other operating expenses OPERATING (LOSS) PROFIT Interest income Finance expenses Net loss from exchange rate differences Note 2020 2019 Reclassified (Note 5) 13 15 6,7 9 14 7 17,302,942 976,557 (9,757,604) (5,175,814) (3,927,857) (1,974,645) 34,770 (3,185,981) 27,003,947 - (7,508,916) (5,287,385) (4,473,953) (1,958,164) (698,033) (4,240,155) (5,707,631) 2,837,341 140,458 (908,476) (356,498) 1,868 (228,578) (60,368) TOTAL COMPREHENSIVE (LOSS) INCOME (6,832,147) 2,550,263 BASIC AND DILLUTED (LOSS)/EARININGS PER SHARE (0,113) 0.042 Notes on pages 10-29 are an integral part of these financial statements.
Page 7 - 29 JSC METRO EUPHORIA HOTEL BATUMI STATEMENTS OF CHANGES IN EQUITY For the year ended 31 December 2020 (In GEL) 31 December 2018 Share Capital 60,529,922 Retained earnings 5,369,292 Total 65,899,214 IFRS 16 Implementation effect - (17,625) (17,625) 1 January 2019 60,529,922 5,351,667 65,881,589 Total comprehensive income - 2,550,263 2,550,263 31 December 2019 60,529,922 7,901,930 68,431,852 Total comprehensive loss - (6,832,147) (6,832,147) 31 December 2020 60,529,922 1,069,783 61,599,705 Notes on pages 10-29 are an integral part of these financial statements.
Page 8 - 29 JSC METRO EUPHORIA HOTEL BATUMI STATEMENT OF CASH FLOWS For the year ended 31 December 2020 (In GEL) CASH FLOWS FROM OPERATING ACTIVITIES: (Loss) profit before tax Adjustments for: Depreciation on property and equipment Amortization on right of use asset Gain (loss) from sale of PPE Impairment changes for financial assets Write down of inventory Interest income Finance expenses Net loss from exchange rate difference Cash inflow from operating activities before changes in operating assets and liabilities Movements in working capital: (Increase) decrease in inventories Decrease in trade and other receivables Decrease in trade and other payables Tax payables increase (decrease) Cash inflow from operating activities Interest paid on lease liabilities NET CASH INFLOW FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment Sale of property and equipment Decrease (Increase) of loans granted NET CASH INFLOW (OUTFLOW) FORM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of lease liabilities Note 2020 2019 (6,832,147) 2,550,263 6 7 9 8 7 7 6 3,201,762 6,555,842 (11,358) (34,770) 355,928 (140,458) 908,476 356,498 3,027,161 4,481,755 10,721 698,033 163,802 (1,868) 228,578 60,368 4,359,773 11,218,813 (611,127) 1,774,631 (565,985) 372,427 5,329,719 (908,476) 4,421,243 10,373 462,250 (2,820,397) (318,943) 8,552,096 (228,578) 8,323,518 (524,197) 112,587 1,065,294 (536,619) 16,922 (922,687) 653,684 (1,442,384) 11,939 - 7 (6,362,417) (5,582,399) NET CASH OUTFLOW FROM FINANCING ACTIVITIES (6,350,478) (5,582,399) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,275,551) 1,298,735 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR Effect of changes in foreign exchange rate on cash and cash equivalents CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 10 10 1,474,176 207,260 (833) (31,819) 197,792 1,474,176 Notes on pages 10-29 are integral part of these financial statements.
Page 9 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 1.

GENERAL INFORMATION JSC Metro Euphoria Hotel Batumi (hereinafter the Company) is a joint stock company established in Georgia in accordance with the Civil Code of Georgia.

The company was founded in 2017.

The company identification number is 445504482.

The legal address of the company is Lech and Maria Kaczynski St.N 1a Entrance D, Apartment D405, Batumi, Georgia.
The principal business activity of the company is to provide accommodation, food and entertainment activities, conference rooms for local and international guests.

The company manages the following hotels on the basis of lease agreements: "Euphoria" (own), "Intourist Palace", "Sky Tower", "Business Legend Hotel", "Legend Hotel Batumi", "City Hotel" and "Euphoria - Apartments and Residence".

The company has A and B class shares on the Georgian Stock Exchange.

For detail information see Note 11.


As at 31 December 2020 and 2019, 100% of the shares of the company were owned by JSC Metro Tijar Ve Mali Yatirimlar (Republic of Turkey).

Ultimate shareholder of JSC Metro Euphoria Hotel Batumi is Galif Ozturk, a citizen of Georgia.

The company is managed by a general meeting of partners and a supervisory board.

The supreme governing body of the company is the General Meeting of Partners.
The Supervisory Board determines the business policy and appoints the directors who are responsible for the day-to-day operations of the company.

The company’s directors are Esma Zandaradze and Diana Beridze.

2.

BASIS FOR PREPARATION These financial statements have been prepared in accordance with International Financial Reporting Standards and International Accounting Standards as issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRSs).
The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates.

It also requires management to exercise judgment in the most appropriate application in applying the accounting policies.

The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in Note 3.

The financial statements are presented in Georgian Lari, which is also the Company’s functional currency.
The reporting period for the Company is the calendar year from 1 January to 31 December.

The principal accounting policies adopted in the preparation of the financial statements are set out in note 20.

The policies have been consistently applied to all the years presented, unless otherwise stated.

The financial statements have been prepared under the historical cost bases.

Amounts in the financial statements are presented without rounding, unless otherwise stated.
In the process of preparing the financial statements, Management decided to change the presentation of the statement of comprehensive income.

Presentation of statement of comprehensive income by economic nature more clearly and comprehensibly reflects the business activities of the company than by functions (Note 5).

Going Concern These financial statements have been prepared on the assumption that the Company is a going concern and will continue its operations for the foreseeable future.
Shareholders has the intention to further develop the business of the Company in Georgia.

Coronavirus affected the Company’s operating effectiveness, and it is possible to be the cause of losses in 2021.

Management believes that the crisis caused by the pandemic will end and the company will return to normal operating activities in the future periods.

As a result, the management believes that the going concern assumption is appropriate for the Company.
Adoption of new IFRS There have been adopted some new standards and interpretations neither of which have material effect in the Company’s financial statements for the year ended 31 December 2020: • • Definition of a Business (Amendments to IFRS 3); IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment – Disclosure Initiative - Definition of Material); and Page 10 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 2.
BASIS OF PREPARATION (CONTINUED) • Revisions to the Conceptual Framework for Financial Reporting.

b) New standards, interpretations and amendments not yet effective There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Company has decided not to adopt early.
The following amendments are effective for the period beginning 1 January 2021: • COVID-19-Related Rent Concessions (Amendments to IFRS 16); • Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to IFRS 9, IAS 39 and IFRS 7); The following amendments are effective for the period beginning 1 January 2022: • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); • Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and • References to Conceptual Framework (Amendments to IFRS 3).
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current.

These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period.
The amendments also clarify that ‘settlement’ includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument.

The amendments were originally effective for annual reporting periods beginning on or after 1 January 2022.
However, in May 2020, the effective date was deferred to annual reporting periods beginning on or after 1 January 2023.

The Company has assessed the possible impact of new standards on its financial statements and concluded that these and any other standards issued by IASB, but not yet effective, are not expected to have material impact on the Company’s financial statements.

3.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The Company makes certain estimates and assumptions regarding the future.
Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In the future, actual experience may deviate from these estimates and assumptions.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Useful lives of property and equipment.

Property and equipment are depreciated over their useful lives.

Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness.

Changes to estimates can result in significant variations in the carrying value and amounts charged to the statement of comprehensive income in specific periods (Note 18).
Impairment of financial assets - the Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables.

To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and aging.

The expected loss rates are based on the Company’s historical credit losses experienced over the three year period prior to the period end.
Lease term, incremental borrowing rate (IBR) and lease payments.

The lease term is defined as the non- cancellable term of the lease, together with any periods covered by an option to extend the lease (including the renewal option implied through customary business practices) if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised.
Management applies judgement to determine the lease term when lease contracts include renewal options that are exercisable only by the Organisation.

Page 11 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 3.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) It considers all relevant factors that create an economic incentive to exercise the renewal option.
After the commencement date, the Organisation reassesses the lease term if there is a significant event or a change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew, or to terminate the lease.

The management applies judgement to estimate the IBR.

The management uses an observable information to determine the base rate and adjustments for the lessee specific factors and the asset factors (the adjustment for security).
In Georgia it is customary that lease renewal option is implied through customary business practices and not all renewal options are documented within the lease agreements.

In such cases, the initial measurement of the lease liability assumes the payments for renewal periods equal to the contractual amount and will remain unchanged throughout the lease term.
Taxation - During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.

As a result, the Company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due.

The Company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law.
This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.

Legal proceedings.

The Company only recognizes a provision where there is a present obligation from a past event, a transfer of economic benefits is probable and the amount of costs of the transfer can be estimated reliably.

In instances where the criteria are not met, a contingent liability may be disclosed in the notes to the financial statements.
Realization of any contingent liabilities not currently recognized or disclosed in the financial statements could have a material effect on the Company’s financial position.

Application of these accounting principles to legal cases requires the Company’s management to make determinations about various factual and legal matters beyond its control.
The Company reviews outstanding legal cases following developments in the legal proceedings and at each balance sheet date, in order to assess the need for provisions in its financial statements.
Among the factors considered in making decisions on provisions are the nature of litigation, claim or assessment, the legal process and potential level of damages in the jurisdiction in which the litigation, claim or assessment has been brought, the progress of the case (including the progress after the date of the financial statements but before those statements are issued), the opinions or views of legal advisers, experience on similar cases and any decision of the Company’s management as to how it will respond to the litigation, claim or assessment.
Detail information about legal proceedings is disclosed in Note 17.

4.

FINANCIAL INSTRUMENTS – RISK MANAGEMENT The Company is exposed through its operations to the following financial risks: • • Credit risk Liquidity risk • Market risk In common with all similar businesses, the Company is exposed to risks that arise from its use of financial instruments.

Note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented throughout these financial statements.

Principal financial instruments The principal financial instruments used by the Company, from which financial risk arises, are as follows: • • • • • Trade and other receivables Cash and cash equivalents Trade and other payables Borrowings Lease liabilities Page 12 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 4.
FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONTINUED) All financial assets are presented at amortized cost.

Due to their short-term nature, the carrying value of financial assets and liabilities (except of lease liabilities) approximates their fair values.

Lease liabilities carrying value approximates their fair values.
General objectives, policies and processes The Management has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance function.
The Management receives monthly reports from the Company Financial Controller through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Management is to set policies that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and flexibility.
Further details regarding these policies are set out below: Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

The Company is mainly exposed to credit risk from credit sales.

The Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered.
The Management determines concentrations of credit risk by through a monthly review of the trade receivables' ageing analysis.

Further disclosures regarding trade receivables, which are either past due or impaired, are provided in Note 9.

Liquidity risk Liquidity risk refers to the availability of sufficient funds to meet loan repayments and other financial commitments associated with financial instruments as they actually fall due.
In order to manage liquidity risk, the Company performs regular monitoring of future expected cash flows, which is a part of assets/liabilities management process.
In order to manage liquidity risk, the Company performs regular monitoring of future expected cash flows, which is a part of assets/liabilities management process The table below shows the contractual terms of financial liabilities (undiscounted figures): Up to 1 year 12,218 7,942,169 1,011,690 8,966,077 2020 From 1 to 5 years - 2019 Up to 1 year From 1 to 5 years 8,623,957 - 6,160,823 1,484,731 13,974,051 - 8,623,957 7,645,554 21,619,605 Borrowings Lease liabilities Trade payables Market risk Market risk is the risk that the fair value of a financial instrument will decrease because of changes in market factors.
Market risk arises from the Company’s use of interest bearing, tradable and foreign currency financial instruments.

It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) and foreign exchange rates (currency risk).

Currency risk Currency risk is defined as the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
The Company is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.

The Company’s financial assets and financial liabilities are nominated in GEL, except lease liabilities, which is nominated in USD (GEL14,866,410), as at 31 December 2020.

Page 13 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 4.
FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONTINUED) The Company’s exposure to foreign currency exchange rate risk as at 31 December 2019 is presented in the table below: Financial assets Issued loans Trade receivables Cash and cash equivalents Financial liabilities Lease liabilities Trade payables Total net explosure Currency risk sensitivity GEL USD Total 118,976 2,456,455 1,428,467 4,003,898 787,090 57,288 45,709 890,087 906,066 2,513,743 1,474,176 4,893,985 - 16,593,124 16,593,124 1,140,249 1,140,249 344,482 344,482 1,484,731 1,484,731 2,863,649 545,605 The following table details the Company’s sensitivity to a 20% increase and decrease in USD against the GEL.
20% is the sensitivity rates used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign currency exchange rates.

USD impact (loss)/gain Interest rate risk 2020 2019 20% -20% 20% -20% (2,973,282) 2,973,282 109,121 (109,121) The interest rate risk is the risk related to the interest-bearing financial instruments, because of the variable rate.
The Company issued loan and received borrowing at fixed interest rate and respectively the risk of interest rate fluctuation is reduced at acceptable level.

Fair value hierarchy The fair value of cash and cash equivalents were determined using level 1 measurement, the fair value of borrowings was determined using level 2 measurement and the fair value of other financial assets and liabilities were determined using level 3 measurement.
Capital disclosures The Company's objectives when maintaining capital are: • To safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders; and • To provide an adequate return to shareholders by pricing services commensurately with the level of risk.

The Company sets the amount of capital it requires in proportion to risk.
The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

5.

PRIOR PERIOD RECLASSIFICATIONS In the process of preparing the financial statements, Management decided to change the presentation of the statement of comprehensive income.
Presentation of statement of comprehensive income by economic nature more clearly and comprehensibly reflects the business activities of the company than by functions.

The Management of the Company has made some prior period reclassifications for presentation purposes.

These reclassifications were made for the year ended 31 December 2019 and can be presented as follows: Page 14 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 5.
PRIOR PERIOD RECLASSIFICATIONS (CONTINUED) Financial Statement Area Revenue Revenue from hotel activities Non-operational income/ (expense) Cost of sales Cost of materials Utilities and communication expenses Depreciation and amortization Other operating expenses Impairment changes of financial assets Before Reclassification 27,003,948 - (156,225) (21,857,359) - - - - General and administrative expenses (2,153,025) Reclassification (27,003,948) 27,003,948 156,225 21,857,359 (5,287,385) (1,958,164) (7,508,916) (4,240,155) (698,033) 2,153,025 Reclassified - 27,003,948 - - (5,287,385) (1,958,164) (7,508,916) (4,240,155) (698,033) - Employee benefits and compensations Finance income / (expense), net Loss from exchange rate difference, net Interest expense, net 6.
PROPERTY AND EQUIPMENT - (4,473,953) (4,473,953) (58,498) - - 58,498 (60,368) 1,868 - (60,368) 1,868 Building Machinery Equipment and furniture Other Total 20,077 15,678 70,272,315 501,020 Historical cost 31 December 2018 Additions Transferred from inventories Disposal 56,615,651 5,285,084 8,351,503 95,827 - - 25,671 23,240 (2,333) 363,844 12,359 (4,854) 31 December 2019 56,711,478 5,331,662 8,722,852 Additions 352,519 Transferred from inventories Transferred to inventories Disposal - - - - - (23,240) 171,678 369,716 (12,236) - (102,123) - (26,322) 9,433 - - 31 December 2020 57,063,999 5,308,422 9,149,887 9,433 Accumulated depreciation 31 December 2018 Depreciation Disposal (1,651,586) (664,301) (1,300,718) (1,132,812) (531,416) (1,359,979) - 248 627 31 December 2019 (2,784,398) (1,195,469) (2,660,070) (2,360) (2,954) 4,991 (323) Depreciation Disposal (1,145,642) (761,666) (1,293,107) (1,347) - - 893 - 31 December 2020 (3,930,040) (1,957,135) (3,952,284) (1,670) 35,599 (33,509) 70,775,425 524,197 369,716 (35,476) (102,123) 71,531,741 (3,618,965) (3,027,161) 5,866 (6,640,260) (3,201,762) 893 (9,841,885) Net book value 31 December 2019 31 December 2020 53,927,080 4,136,193 53,133,959 3,351,287 6,062,782 5,197,603 9,110 7,763 64,135,165 61,689,856 Buildings consists land owned by company and a 14 floored hotel located on it, with a total area of 27,878 sq.m.
As at 31 December 2020, the Company had inspected whether the carrying amount of property and equipment was impaired: The Company estimated the discounted value of the expected future cash flow as a result of its use, and because it exceeded the carrying amount of its long-term assets, it did not calculate the fair value less costs to sell.

Page 15 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 6.
PROPERTY AND EQUIPMENT (CONTINUED) As at 31 December 2020, the carrying amount of property and equipment was estimated at GEL61,689,856, which is less than the recoverable amount determined by the impairment test - GEL102,885,240.

As a result no impairment of property and equipment was detected.
Fair value of property and equipment was determined using the cash-generating unit discount method, based on expected cash flows, which is categorised as a level 3 recurring fair value measurement, based on data used in the valuation process.

Key assumptions used in determining the fair value measurement of property and equipment is given below: • • • • Future cash flows are estimated in USD using forecasts based on forecasts according to the market data.
The subsequent terminal period is used for impairment testing to estimate future cash flows; Cash flows are discontinued using after-tax discount rate, which is based on market data: 11.6%; The growth rate of terminal period was determined by the long-term inflation rate in USD: 2,24%; Management has identified two key assumptions that can have a significant impact on estimating the discounted future cash flows: - An increase of used discount rate approximately 3% (excluding taxes) would reduce the recoverable amount by GEL26,442 thousand and, consequently, the impairment loss would increase by the same amount; - 10% reduction of planned revenue would reduce the recoverable amount by GEL30,898 thousand and, consequently, the impairment loss would increase by the same amount; On 24 November 2020, the Court of Appeals upheld the Company's claim.
As a result, the seizure of the Company's bank accounts was completely lifted and replaced by a seizure of the generator owned by the company, with a carrying amount of GEL 374,542 as at 31 December 2020.

See note 17 for details on litigation.

7.

RIGHT OF USE ASSET AND LEASE LIABILITIES The company leases 6 hotels in Batumi.

Property rent for these spaces is fixed over the lease term, except for “Hotel Legend” is income relating to variable lease payments.
In accordance with the requirements of IFRS 16, variable payments are not included in the assessment of leases.

Leases are denominated in USD.


Right-of-use assets can be presented as follows: At 1 January Additions Amortization Effect of modification of lease terms At 31 December 2020 17,676,143 6,937,262 (6,555,842) (2,551,094) 2019 3,851,905 18,305,993 (4,481,755) - 15,506,469 17,676,143 The Company masured lease liabilities at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate.
The Company’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions.

The weighted-average rate applied on lease agreements in which lease payments have been reduced between the Company and the Lessor and company considers this changes to be a modification of the lease - 6.61% (USD) and for lease agreements that were signed during 2020 applied – 7% (USD).
Lease commitments for short-term leases and variable lease payments (not in IFRS 16 scope) can be present as follows: Short-term lease expense Expense relating to variable lease payments 2020 164,935 1,110,967 2019 1,089,064 - 1,275,902 1,089,064 Page 16 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 7.
RIGHT OF USE ASSET AND LEASE LIABILITIES (CONTINUED) Lease liabilities can be presented as follows: At 1 January Additions Interest expense Effect of modification of lease terms Lease payments Foreign exchange movements At 31 December 8.
INVENTORIES Hotel supplies Food and beverage Other 2020 16,593,124 6,937,262 908,476 (2,551,094) (7,270,893) 249,535 2019 3,869,530 18,305,993 228,578 - (5,810,977) - 14,866,410 16,593,124 2020 486,625 237,616 61,527 785,768 2019 451,630 338,630 74,549 864,809 Inventories were impaired at fair value less costs to sell as at 31 December 2020 and 2019.

Impairment charge was GEL355,928 and GEL163,802, respectively.

9.
9.

TRADE AND OTHER RECEIVABLES Financial assets Other trade receivables Trade receivables from related parties Provision for expected credit loss Non-financial assets Prepayments Total trade and other receivables 2020 2019 1,988,733 16,155 (1,500,486) 504,402 2,732,284 63,458 (1,516,765) 1,278,977 205,217 1,234,766 709,619 2,513,743 The Company does not hold any collateral as security.

Financial assets distribution by currency is disclosed in Note 4.
The expected loss rates are based on the Company’s historical credit losses experienced over the three year period prior to the period end.

The company applied exemption B5.5.50 and B5.5.51 of IFRS 9 and did not used incorporate forecasts of future conditions of trade receivables.

Therefore, the historical loss rates are not adjusted for current and forward-looking information on macroeconomic factors affecting the Company’s customers.
The lifetime expected loss provision for trade receivables impaired collectively is given as follows: Expected loss rate 31 December 2020 Gross carrying amount Loss provision 31 December 2019 Current 2% >30 5% >60 >120 >180 25% 50% 70% >360 100% Total 457,185 7,673 32,600 18,392 51,417 1,437,621 2,004,888 9,143 384 8,150 9,196 35,992 1,437,621 1,500,486 Gross carrying amount 918,334 194,336 145,058 44,279 Loss provision 18,366 9,717 36,265 22,140 - - 1,430,277 2,732,284 1,430,277 1,516,765 Page 17 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 9.
TRADE AND OTHER RECEIVABLES (CONTINUED) Movements in the impairment allowance for trade and other receivables are as follows: 1 Janunary Increase Unused amounts reversed Impairment changes during the year 2020 (1,516,765) - 16,279 16,279 2019 (837,223) (686,739) 7,197 (679,542) 31 December (1,500,486) (1,516,765) In 2019 impairment of financial assets are presented GEL 18,491 of issued loans impairment charge, which was fully reversed in 2020.

10.
10.

CASH AND CASH EQUIVALENTS Cash on hand Cash on current accounts in bank in Georgian Lari Restricted cash* 2020 3,368 194,424 - 2019 36,881 1,312,492 124,803 197,792 1,474,176 The bank account of the company was seized by the decision of the City Court on June 17, 2019.

The basis for the seizure was the company litigation.

On November 24, 2020, the Court of Appeals upheld the Company's claim.

As a result, the bank accounts were completely removed and the company-owned generator was seized instead.
Financial assets distribution by currency is disclosed in Note 4.

11.

SHARE CAPITAL As at 31 December 2020 and 2019 number of issued and fully paid shares were 60,529,922 ordinary shares with nominal value GEL1 per each share.

On August 11, 2020, the shares of the company were listed on the Georgian Stock Exchange.

In particular, Class B shares (ISIN GE1100003932) were admitted to the Category B listing and trading system of the Georgian Stock Exchange.
The shares were awarded the exchange code (ticker) - MEHBB.

54,476,929 B class shares were placed on the stock exchange, the nominal value of each was 1 GEL, and 6,052,993 Class A shares with a nominal value of 1 GEL.

The structure of shareholders according to the class of shares is defined as follows: (A) Class percentage of shares - 10% (B) Class percentage of shares - 90%.

At a shareholders' meeting, (A) Class 1 stock provides 15 voting rights, while (B) Class 1 stock provides 1 voting right.
The members of the Supervisory Board are elected by the holders of Class (A) shares.

12.

TRADE AND OTHER PAYABLES Financial liabilities Trade payables tp related parties Salary payables Non-financial liabilities Received advances Total trade and other payables Financial liabilities distribution by currency is disclosed in Note 4.
2020 2019 1,011,636 54 1,222,098 262,633 1,011,690 1,484,731 618,889 651,475 1,630,579 2,136,206 Page 18 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 13.

REVENUE FROM HOTEL ACTIVITIES The company operates in Georgia and generates revenue from hotel operations.
The company operates seven hotels: "Metro Euphoria Hotel Batumi", "Business Legend Hotel", "Apartments", "Intourist Hotel Batumi", "Metro Sky Tower", "City Hotel Batumi" and "Hotel Legend", from which the proceeds are fully generated.
The table below shows the breakdown of revenue from contracts with customers in 2020 and 2019 according to sources of revenue, hotels under management and timing of recognition of revenue: 2020 Revenue from rental of rooms Revenue from other hotel services Other operating revenue Timing of transfer of goods and services Point in time Over time 2019 Revenue from rental of rooms Revenue from other hotel services Other operating revenue Timing of transfer of goods and services Point in time Over time Metro Euphoria Hotel Batumi 6,904,466 Business Legend Hotel 1,274,101 Apartments 417,598 Intourist Hotel Batumi 1,531,202 Metro Sky Tower 738,611 City Hotel Batumi 1,028,485 Hotel Legend 3,957,408 Total 15,851,871 635,627 662,501 - 87 - 712 49,286 67,015 10,085 4,016 3,036 9,390 8,178 1,139 706,212 744,860 1,298,128 87 712 116,301 14,101 12,426 9,317 1,451,072 6,904,466 1,274,101 417,598 1,531,202 738,611 1,028,485 3,957,408 15,851,871 Metro Euphoria Hotel Batumi Business Legend Hotel Apartments Intourist Hotel Batumi Metro Sky Tower City Hotel Batumi Total 15,372,971 945,799 492,420 4,646,080 2,714,806 224,628 24,396,704 885,704 1,039,406 12 2,118 - 1,820 301,764 188,975 141,472 45,674 298 1,329,250 - 1,277,993 1,925,110 2,130 1,820 490,739 187,146 298 1,925,110 15,372,971 945,799 492,420 4,646,080 2,714,806 224,628 15,372,971 Page 19 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 14.
OTHER OPERATING EXPENSES Rent* Professional and consultancy service Taxes other than income tax Repair and maintenance Comission fee Other 2020 2019 (1,275,902) (1,089,064) (889,377) (793,317) (107,855) (48,219) (71,311) (958,274) (679,642) (452,313) (668,006) (392,856) (3,185,981) (4,240,155) Short-term leases and hotel income relating to variable lease payments.

For detail information see Note 7.

15.


OTHER INCOME Non-operating income represents property tax and income tax relief given to the Company due to being in industry directly affected by Covid-19 pandemic.

16.
TRANSACTIONS WITH RELATED PARTIES Related party balances and transactions as at and for the years ended 31 December 2019 and 2020 are presented as follows: Statement of financial position Issued loans Trade and other receivables Prepayments Trade and othe payables Lease liabilities Purchase of inventories Additions of Right of use asset Statement of comprehensive income Revenue from hotel activities Finance expenses Interest income Other opearintg income Impairment change of financial assets Key management compensations can be presented as follows: Short term employee benefits 2020 2019 Under common control - 16,155 176,667 (441,272) 906,606 1,259,591 1,169,573 (406,233) (14,866,410) (16,593,124) (1,060,872) 6,937,262 - 17,676,143 1,143,211 (908,476) 140,737 13,147,019 (228,578) 4,367 (1,661,923) (1,860,812) 34,770 (698,033) 2020 321,237 2019 98,750 Page 20 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 17.
COMMITMENTS AND CONTINGENCIES Legal disputes The company and Techno Servis Ltd. (hereinafter "the plaintiff") are an ongoing litigation relating to the period 2017 and 2018, during which the plaintiff provided the company with various services: laundry, drying, ironing, manning and packaging.

The total cost of the service was GEL559,808, of which the company reimbursed GEL435,005, accordingly the plaintiff seeks compensation for the remaining GEL124,803.
On June 7, 2019, the company's bank accounts were seized in the amount of GEL 124,803.

On June 22, 2020, the company applied to the court for the lifting of the seizure on the bank accounts and instead seized the generator owned by the company, which was not satisfied.

The company appealed the decision to the Court of Appeals and on November 24, 2020, the Court of Appeals upheld the company's claim.
As a result, seizure on bank accounts were completely removed and the generator owned by the company was seized instead.

On April 28, 2021, the company filed a lawsuit against the defendant, according to which the company is demanding GEL539,463 from the defendant.

The subject of the dispute is the improper performance of the service by the defendant, which is why the company considers that it has received damages.
The company is waiting for the court hearing to mark where the final decision is to be made.

Tax legislation Georgian tax legislation is subject to varying interpretations, and changes, which can occur frequently.

Management’s interpretation of such legislation as applied to the transactions and activity of the Company may be challenged by the relevant authorities.
As per currently effective tax legislation in Georgia fiscal periods remain open to review by the authorities in respect of taxes for 3 calendar years preceding the period of review.

Provisions for tax liabilities are recognised when the amount can be measured reliably.

No provision is recognised for uncertain tax positions if no reliable estimate can be made.
The Company’s management believes that Georgian tax legislation does not give raise to any further obligation other than already recorded and the Company’s tax positions will be sustained.
Law regulations In accordance with the Law of Georgia on the Securities Market the Company has an obligation to prepare and submit Annual Report to the National Bank of Georgia, together with Independent Auditors’ Report after the end of each financial year, but no later than May 15, which comprises audited financial statements and management report.

18.
18.

CHANGES IN CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Management reviewed useful lives of the fixed assets, assessed condition of the assets and considered that the assets would be used for a longer period than previously specified.
Management has decided to change useful lives from 1 January 2020 for the following groups: Machinery Equipment and furniture Other Revised Useful lives Useful lives before review 7 7 7 5 5 5 The table below shows the effect of changes in accounting estimates by groups of property and equipment on the basis of revised and prior useful service terms: 2020 2021 2022 2023 2024 2025 Machinery (354,869) (354,869) (354,869) 500,270 496,521 65,834 Equipment and furniture (451,790) (452,444) (452,316) (39,088) 728,563 644,362 Other (4,451) (4,675) (4,596) (4,596) (2,813) 11,859 (811,110) (811,988) (811,781) 456,586 1,222,271 722,055 Page 21 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 19.
EVENTS AFTER THE REPORTING DATE Non-adjusting events To compensate for the damage caused by the Covid-19 pandemic and restrictions, the Government of Georgia on January 5, 2021 decided to exempt the hotel business from the 2020 property tax.

The Company considered this event to be a non-adjustable event and fully recognized the 2020 property tax expense in the full income statement as this issue was known after the reporting period.

20.
20.

SUMMERY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPAL ACCOUNTING POLICIES Principal accounting policies applied in the preparation of these financial statements are set out below.

These policies have been consistently applied to all the periods presented, unless otherwise stated.
FINANCIAL INSTRUMENTS Financial assets The Company classifies its financial assets into financial assets at fair value through profit or loss, fair value through other comprehensive income or amortized cost depending on the purpose for which the asset was acquired.

The Company has not classified any of its financial assets at fair value through profit or loss and fair value through other comprehensive income.
Amortized cost These assets arise principally from the provision of goods and services to customers (eg trade receivables), which the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest.
They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade and other receivables are recognised based on simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses.
Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model.

The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset.
For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised.

For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised.

For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.
The Company's financial assets measured at amortized cost comprises of trade and other receivables, loans granted and cash and cash equivalents in the statement of financial position.

Cash and cash equivalents include cash on hand and cash at bank with original maturities of three months or less.
Derecognition of financial assets The Company derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Company has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of ownership but not retaining control.
Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the sale.

Financial liabilities The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired: Fair value through profit or loss and other financial liabilities.
The company didn’t Page 22 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 20.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) classify financial liabilities as fair value through profit or loss.

Other financial liabilities Other financial liabilities include trade and other payables, lease liabilities and borrowings.

Financial liabilities are initially measured at fair value, net of transaction costs.
Financial liabilities are subsequently measured at amortized cost using the effective interest method.

Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability.

The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit and loss.
Offsetting Financial assets and liabilities are offset, and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

PROPERTY, PLANT AND EQUIPMENT All property and equipment are stated at historical cost less depreciation and impairment losses.
Items of property and equipment are initially recognised at cost.

As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation of an asset begins when it is available for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated.

Land and construction in progress is not depreciated.
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of the individual assets: Group Building Machinery Equipment and furniture Other Useful life (year) 50 7 7 7 The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
IMPAIRMENT OF NON-CURRENT ASSETS At each reporting date, the Company reviews the carrying amounts of its non-current (property,plant and equipment and investment property) assets to determine whether there is any indication that those assets have suffered an impairment loss.

If any such indication exists (or cash-generating unit), the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
An impairment loss is recognized immediately in separate statement of comprehensive income.

Recoverable amount is the higher of fair value less costs to sell and value in use.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.

An impairment loss is recognized immediately in separate statement of comprehensive income.

Page 23 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 20.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognized immediately in separate statement of comprehensive income.

LEASES All leases are accounted for by recognising a right-of-use asset and a lease liability except for: - - Leases of low value assets; and Leases with a duration of 12 months or less.

Leases are recognized on the Company’s balance sheet as follows: - - an asset representing the right to use the underlying asset over the lease term, a liability for the obligation to pay the lease payments.
Identifying Leases The Company accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration.

Leases are those contracts that satisfy the following criteria: (a) There is an identified asset; (b) The Company obtains substantially all the economic benefits from use of the asset; and (c) The Company has the right to direct use of the asset.
The Company considers whether the supplier has substantive substitution rights.

If the supplier does have those rights, the contract is not identified as giving rise to a lease.

In determining whether the Company obtains substantially all the economic benefits from use of the asset, the Company considers only the economic benefits that arise use of the asset, not those incidentals to legal ownership or other potential benefits.
In determining whether the Company has the right to direct use of the asset, the Company considers whether it directs how and for what purpose the asset is used throughout the period of use.

If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Company considers whether it was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use.
If the contract or portion of a contract does not satisfy these criteria, the Company applies other applicable IFRSs rather than IFRS 16.
Initial recognition Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Company’s incremental borrowing rate on commencement of the lease is used.

Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate.
In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term.

Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes: • • • amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the Company if it is reasonably certain to assess that option; any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: Page 24 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 20.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) • • • lease payments made at or before commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the Company is contractually required to dismantle, remove or restore the leased asset.

Subsequent measurement Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made.
Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
When the Company revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the revised discount rate that applied on lease commencement.
The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised.

In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
When the variable element of future lease payments dependent on a rate or index is revised, it adjusts the carrying amount of the lease liability to reflect the payments to make over the remaining terms, which are discounted at the same discount rate that applied on lease commencement.

In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
For a contract that contains a lease and non-lease components, an entity accounts for each component within the contract separately.
Determination of lease term The lease term is defined as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease (including the renewal option implied through customary business practices) if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised.
Management applies judgement to determine the lease term when lease contracts include renewal options that are exercisable only by the Company.

It considers all relevant factors that create an economic incentive to exercise the renewal option.

After the commencement date, the Company reassesses the lease term if there is a significant event or a change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew, or to terminate the lease.
Determination of incremental borrowing rate (IBR) IBR is the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment.

The management applies judgement to estimate the IBR.
The management uses an observable information (including communication with its bank) to determine the base rate and adjustments for the lessee specific factors and the asset factors (the adjustment for security).

Determination of lease payments In Georgia it is customary that lease renewal option is implied through customary business practices and not all renewal options are documented within the lease agreements.
In such cases, the initial measurement of the lease liability assumes the payment for renewal period will remain unchanged throughout the lease term.

Page 25 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 20.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Short-term leases and leases of low-value assets The Company applies the recognition exemption for short-term leases (i.e.
lease with a lease term of 12 months or less from the commencement date) and leases of low-value assets.

Associated lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term.

Fair value measurement A number of assets and liabilities included in the Company’s financial statements require measurement at, and disclosure of, fair value.
The fair value measurement of the Company’s financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible.
Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’): • • • Level 1: Quoted prices in active markets for identical items (unadjusted) Level 2: Observable direct or indirect inputs other than Level 1 inputs Level 3: Unobservable inputs (i.e.

not derived from market data).


The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item.

Transfers of items between levels are recognised in the period they occur.

TAXATION Income tax Income tax expense represents the sum of the tax currently payable.

The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are not taxable or deductible in current period.

The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Owing to the specific nature of the taxation system in Georgia, there are no differences between the carrying amounts and tax bases of the assets and liabilities of companies registered in Georgia that could result in deferred tax assets or deferred tax liabilities.

Taxes, other then income tax Taxes other than income tax are recognised when obligating events have occurred.

The obligating events are an event that raises a liability to pay a tax.
Taxes are calculated in accordance with Georgian legislation.

According to the Georgian Tax Legislation, from 1 January 2016 the Company should pay taxes on unified treasury code applicable for all taxes.

Inventories Inventories are initially recognized at cost, and subsequently at the lower of cost and net realisable value.

Cost is determined using the weighted average method and includes cost of purchase and other costs incurred in bringing them to their present location and condition.
At each reporting date, inventories are assessed for impairment.

If inventory is impaired, the carrying amount is reduced to its selling price less costs to sell and the impairment loss is recognized immediately in profit or loss.

Page 26 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 20.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company uses a five-step model framework for all contracts with customers: • • • • • Identify the contract(s) with a customer Identify the performance obligations in the contract Determine the transaction price Allocate the transaction price to the performance obligations in the contract Recognise revenue when (or as) the entity satisfies a performance obligation The Company recognizes revenue when satisfies its performance obligation, when control over the goods related to the relevant obligation is transferred to the customer.
Performance obligations and timing of revenue recognition The main part of the company's revenue includes hotel and related services to customers.

Revenue from regular services, such as hotel services, spa and gym services, and other related services, are recognized over time during the reporting period in which the services were delivered in accordance with the contracted daily value.
Revenue from food and beverages and other one-off services are recognized when control of a given asset is transferred to the customer.

Transaction price is paid immediately when the goods are purchased by the customer.

Therefore, recognition of revenue occurs when physical ownership is transferred to the customer or a one-time service is provided.
Determining the transaction price The Company’s revenue is derived from fixed price contracts and therefore the amount of revenue to be earned from each contract is determined by reference to those fixed prices.

The Customer pays the amount before the goods are transferred to customers in hotel and restaurant and when selling through travel agencies, the company receives transaction prie from subcontractors under contract terms ranging from two weeks to one month.
The Company also has no non-cash considerations determined in contracts.

Allocating amounts to performance obligations For all the oral contracts, there is a fixed unit price for each product or service sold/rendered.

Therefore, there is no judgement involved in allocating the oral contract price to each unit ordered in such oral contracts.

In case of large volume order discount, transaction price per unit product is calculated by dividing the total contract value by the number of assets.
Where a customer orders more than one product line, the Company is able to determine the split of the total oral contract price between each product line by reference to each product’s standalone selling prices (all product lines are capable of being, and are, sold separately).
The company used the following exemptions: • Does not consider a significant component of financing when the difference between the date of transfer of control of the asset to the customer and the date of repayment received is less than one year; And • Additional contract costs are recognized as an expense when incurred if the asset's amortization period does not exceed one year.
STAFF COSTS AND RELATED CONTRIBUTIONS Wages, salaries, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Company.

RENT INCOME Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases.

Page 27 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 20.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Rental income arising is accounted for on a straight-line basis over the lease terms and is included in rent income in the statement of profit or loss due to its operating nature.

Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income.
Contingent rents are recognised as revenue in the period in which they are earned.

RECOGNITION OF EXPENSES Expenses are recognized in the statement of comprehensive income if arises any decrease of future economic profit related to the decrease of an asset or increase of a liability that can be reliably assessed.

Expenses incurred during the services rendered are recognized in proportionate calculation with recognized income.
Expenses are recognized in the statement of comprehensive income immediately, if the expenses do not result in future economic profit any more, or if future economic profit do not meet or stop to meet the requirements of recognition as an asset in the balance sheet.

SHARE CAPITAL Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.
The Company's ordinary shares of both classes are classified as equity instruments.

Basic earnings (loss) per share is calculated by dividing the profit for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year.

Dilluted earnings (loss) per share equaled basic earnings (loss) per share in 2020 and 2019 years.
EVENTS AFTER THE REPORTING DATE Events after the reporting period are events before the date of financial statements authorization for issue that provide additional information about the Company’s financial statements are reported in the financial statements.

Events after the reporting period that do not affect the financial position of the Company at the balance sheet date are disclosed in the notes to the financial statements when material.
FOREIGN CURRENCIES CONVERSION Monetary assets and liabilities are translated into company’s functional currency at the official exchange rate of the National Bank of Georgia for the respective balance sheet dates.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities at year- end official exchange rates are recognised in statement of comprehensive income.
Translation at year-end rates does not apply to non-monetary items.
The closing official rates of exchange used for translating foreign currency balances to Georgian lari were: USD TRANSACTIONS WITH RELATED PARTIES 31 December 2020 31 December 2019 3.2766 2.8677 Related parties or transactions with related parties, as defined by IAS 24 “Related party disclosures”, represent: a) Parties that directly, or indirectly through one or more intermediaries: control, or are controlled by, or are under common control with, the Company (this includes parents, subsidiaries and fellow subsidiaries); have an interest in the Company that gives then significant influence over the Company; and that have joint control over the Company; b) Members of key management personnel of the Company or its parent; c) Close members of the family of any individuals referred to in (a) or (b); d) Parties that are entities controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (c) or (b); In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.
Page 28 - 29 JSC METRO EUPHORIA HOTEL BATUMI NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020 (in GEL) 20.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROVISIONS AND CONTINGENT LIABILITIES A provision is a liability of uncertain timing or amount.

A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
An obligating event is an event that creates a legal or constructive obligation that results in an entity having no realistic alternative to settling that obligation.

A legal obligation is an obligation that derives from: (a) A contract (through its explicit or implicit terms); (b) Legislation; or (c) Other operation of law.
A constructive obligation is an obligation that derives from an entity's actions where: (a) By an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and (b) As a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.
A contingent liability is: (a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or (b) a present obligation that arises from past events but is not recognised because: - it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or - the amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities are not reflected in the financial statements.

The information on contingent liabilities is disclosed in the Notes to the financial statements with the exception of cases, when the outflow of resources embodying economic benefits is remote.

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