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Accounting Policies of Eros International Media Ltd. Company

Mar 31, 2016

1 CORPORATE INFORMATION

Eros International Media Limited ("the Company") was incorporated in India, under the Companies Act, 1956. The Company is a global player within the Indian media and entertainment industry and is primarily engaged in the business of film production, exploitation and distribution. It operates on a vertically integrated studio model controlling content as well as distribution and exploitation across multiple formats globally, including cinema, digital, home entertainment and television syndication. Its shares are listed on leading stock exchanges in India (BSE Scrip Code: 533261; NSE Scrip Code: EROSMEDIA).

I. Basis of preparation

The Company is engaged in the business of sourcing Indian film content either through acquisition, co-production or production of such films, and subsequently exploiting and distributing such films in India through music release, theatrical distribution, DVD and VCD release, television licensing and new media distribution avenues such as cable or DTH licensing; and trading and exporting overseas rights to its paren Eros Worldwide FZ LLC.

The Company''s financial statements which have been prepared under historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act 2013 and comply in all material aspects with the accounting principles generally accepted in India including the Accounting Standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (as amended).

The accounting policies have been consistently applied unless otherwise stated.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Act. The Company considers 12 months to be its normal operating cycle.

II. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles (''GAAP'') requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, as well as disclosure of contingent liabilities on the date of the financial statements. Key estimates made by the Company in preparing these financial statements include useful lives of assets as well as utilization of economic benefits from these assets, accrual of expenses, recoverability of trade receivables, minimum alternate tax credits and deferred tax assets as well as assumptions for valuation of employee benefits and stock options. Management believes that the estimates made in the preparation of financial statements are prudent and reasonable. Actual results may differ from those estimates. Any revision to accounting estimates is recognised prospectively, in the period in which revisions are made.

III. Significant accounting policies (a) Revenue recognition

- Theatrical sales: Revenue from theatrical distribution is recognised on exhibition of films. In case of distribution through theatres, revenue is recognised on the basis of box office reports received from various exhibitors. Contracted minimum guarantees are recognised on theatrical release.

- Sale of film rights: Sale of rights is recognised on effective delivery of materials to customers as per terms of the sale agreements. Sale of overseas rights are recognised on assignment of such rights, as per pre-agreed transfer pricing norms.

- Sale of satellite rights and physical home entertainment products: Revenue is recognised on delivery of content to customers, as per-contracted terms. Digital and other new media revenues are recognised at the earlier of when the content is accessed or if licensed, the date the revenue is contracted or declared.

- Production fee: Revenue from production fee is recognised on the basis of services rendered at relevant stages of production of the film, in accordance with terms of agreement.

(b) Other income

- Dividend income is recognised when the right to receive dividend is established.

- Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

- On disposal of current investments, the difference between the carrying amount and the disposal proceeds is recognised in the Statement of Profit and Loss.

(c) Tangible assets and depreciation

- Tangible assets are stated at acquisition cost less accumulated depreciation and impairment losses, if any. Acquisition cost includes purchase cost (net of available credits) and all incidental expenses to bring the asset to their present location and condition. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increase the future benefits from the existing asset beyond its previously assessed standard of performance.

- Depreciation is provided under written down value method at the rates and in the manner prescribed under Schedule II to the Companies Act, 2013.

(d) Intangible assets and amortisation

- Investment in film and associated rights are recorded at their acquisition costs less accumulated amortisation and impairment losses, if any. Cost includes acquisition and production cost, direct overhead cost, capitalized foreign currency exchange differences and capitalized interest. When ready for exploitation, advances granted to secure rights are transferred to film rights. These rights are amortised over the estimated useful lives, writing off more in year one which recognises initial income flows and then the balance over a period of up to nine years, or the remaining life of the content rights, whichever is less. Amortisation of film rights

is presented under ''purchases/ operating expenses''.

In the case of film content that is acquired after its initial exploitation, commonly referred to as catalogue rights, amortisation is spread evenly over the lower often years or the license period. Management''s estimate is based upon factors such as historical performance of similar films, the star power of the lead actors and actresses and once released actual results of each film.

The management regularly reviews, and revises when necessary, its estimates, which may result in a change in the rate of amortisation and/or a write down of the asset to the recoverable amount.

- Other intangible assets are carried at acquisition costs less accumulated amortisation, which is provided under written down value method at the rates and in the manner prescribed under Schedule II to the Companies Act, 2013.

(e) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

(f) Content advances

Advances are paid to producers/owners of films and artists, in terms of the agreements entered into with them, for acquisition of associated rights. All advances are reviewed by the management periodically, considering facts of each case, to determine recoverability. These advances are transferred to film rights at the point of exploitation.

(g) Investments

- Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.

- Current investments are carried at lower of cost and fair value determined on an individual investment basis.

- Long-term investments are carried at cost. However, provision for diminution in the value of investments, if any, is made to recognise a decline, other than temporary in nature.

(h) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is computed as follows:

- Raw prints and tapes on purchase cost at a moving weighted average basis.

- Home entertainment products, at actual cost.

- Inventories related to films under production are stated at acquisition and production cost plus relevant overhead cost and capitalized interest net of any amounts received from third party investors.

(i) Impairment of assets

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset''s or cash generating unit''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased.

(j) Provisions and contingencies

- Provisions are recognised when there is present obligation as a result of a past event and it is more likely than not that an outflow of resources will be required to settle the obligation. Provisions are measured at the management''s best estimate of the outflow required to settle the obligations at the Balance Sheet date.

- The Company does not recognise a

contingent liability but discloses its existence in the financial statements unless the possibility of an outflow is remote. Contingent liabilities are disclosed when:

- there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

- a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

(k) Employee benefits

- Defined contribution plan

Provident fund: The Company''s contributions paid or payable during the year to the provident fund and employee''s state insurance corporation are recognised in the Statement of Profit and Loss. This fund is administered by the respective Government authorities, and the Company has no further obligation beyond making its contribution, which is expensed in the year to which it pertains.

- Defined benefit plan

Gratuity: The Company''s liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. The cost for past services is recognised on a straight line basis over the average period until the amended benefits become vested. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

Compensated absences: Accumulated compensated absences are expected to be availed or encashed within 12 months from the end of the year and are treated as short-term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

- Employee stock option compensation

Stock options granted by the Company are accounted using intrinsic value method as prescribed by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. Intrinsic value of the option being excess of market value of the underlying share immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit to employee stock option outstanding account. Deferred employee compensation is charged to Statement of Profit and Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee compensation expense, equal to the amortised portion of value of lapsed option and credit to deferred employee compensation expense equal to the unamortised portion of lapsed option.

(I) Leases

The Company has evaluated all existing leases as ''Operating leases''. Aggregate of lease rentals payable under non-cancellable operating lease arrangements (over the initial and subsequent periods of lease) are charged to the Statement of Profit and Loss on a straight line basis over the non-cancellable period of the lease.

(m) Foreign currency transactions

Transactions in foreign currencies are accounted at exchange rates prevalent on the date of the transaction. Foreign currency monetary assets and liabilities at the period end are translated using the exchange rates prevailing at the end of the period. All exchange differences are recognised in the Statement of Profit and Loss. Non-monetary foreign currency items are recorded using the exchange rates that existed when the values were determined and accordingly investments in shares of foreign subsidiaries are denominated in Indian currency at the rate of exchange prevailing at the time when the original investments are made.

The reporting currency of the Company is Indian Rupee (Rs.).

(n) Taxes on income

Income tax expense comprises current income tax and deferred tax.

- Current taxes

Provision for current income-tax is recognised in accordance with the provisions of Indian Income tax Act, 1961, and rules made thereunder, and recorded at the end of each reporting period based on the amount expected to be paid to the tax authorities in accordance with the taxation laws prevailing in the respective jurisdictions.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.

- Deferred taxes

Deferred tax assets and liabilities are recognised for the future tax consequences

attributable to timing differences that result between the profits offered for income taxes and the profits as per the financial statements. Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in the future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty, supported by convincing evidence of recognition of such assets. Deferred tax assets are reassessed for the appropriateness of their respective carrying values at each balance sheet date.

Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

- Minimum Alternative Tax (''MAT'')

Minimum alternate tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. MAT credit entitlement 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, which is the period for

which MAT credit is allowed to be carried forward. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.

(o) Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.

(p) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short- term highly liquid investments which are readily convertible into known amounts of cash and are subject to insignificant risk of changes in value. Cash credits are shown within borrowings in current liabilities on the Balance sheet.


Mar 31, 2015

I. Basis of preparation

The Company is engaged in the business of sourcing Indian film content either through acquisition, co-production or production of such films, and subsequently exploiting and distributing such films in India through music release, theatrical distribution, DVD and VCD release, television licensing and new media distribution avenues such as cable or DTH licensing; and trading and exporting overseas rights to its parent Eros Worldwide FZ LLC.

The Company's financial statements which have been prepared under historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act 2013 and comply in all material aspects with the accounting principles generally accepted in India including the Accounting Standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014.

The accounting policies have been consistently applied unless otherwise stated.

All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Act.The Company considers 12 months to be its normal operating cycle.

II. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles ('GAAP') requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, as well as disclosure of contingent liabilities on the date of the financial statements. Key estimates made by the Company in preparing these financial statements include useful lives of assets as well as utilization of economic benefits from these assets, accrual of expenses, recoverability of trade receivables, minimum alternate tax credits and deferred tax assets as well as assumptions for valuation of employee benefits and stock options. Management believes that the estimates made in the preparation of financial statements are prudent and reasonable. Actual results may differ from those estimates. Any revision to accounting estimates is recognized prospectively, in the period in which revisions are made.

III. Significant accounting policies

(a) Revenue recognition

* Theatrical sales: Revenue from theatrical distribution is recognized on exhibition of films. In case of distribution through theatres, revenue is recognized on the basis of box office reports received from various exhibitors. Contracted minimum guarantees are recognized on theatrical release.

* Sale of film rights: Sale of rights is recognized on effective delivery of materials to customers as per terms of the sale agreements.Sale of overseas rights are recognized on assignment of such rights, as per pre-agreed transfer pricing norms.

* Sale of satellite rights and physical home entertainment products: Revenue is accounted on delivery to customers, as per-contracted terms. Digital and other new media revenues are recognized at the earlier of when the content is accessed or if licensed, the date the revenue is contracted or declared.

* Production fee: Revenue from production fee is recognized on the basis of services rendered at relevant stages of production of the film, in accordance with terms of agreement.

(b) Other income

* Dividend income is recognised when the right to receive dividend is established.

* Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

* On disposal of current investments, the difference between the carrying amount and the disposal proceeds is recognized in the Statement of Profit and Loss.

(c) Tangible assets and depreciation

* Tangible assets are stated at acquisition cost less accumulated depreciation and impairment losses, if any. Acquisition cost includes purchase cost (net of available credits) and all incidental expenses to bring the asset to their present location and condition. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increase the future benefits from the existing asset beyond its previously assessed standard of performance.

* Depreciation is provided under written down value method at the rates and in the manner prescribed under Schedule II to the Companies Act, 2013.

* Depreciation upto FY 2013-14 has been provided at the rate and in the manner prescribed under Schedule XIV of the Companies Act, 1956.

(d) Intangible assets and amortisation

* Investment in film and associated rights are recorded at their acquisition costs less accumulated amortisation and impairment losses, if any. Cost includes acquisition and production cost, direct overhead cost, capitalized foreign currency exchange differences and capitalized interest. When ready for exploitation, advances granted to secure rights are transferred to film rights. These rights are amortised over the estimated useful lives, writing off more in year one which recognizes initial income flows and then the balance over a period of up to nine years, or the remaining life of the content rights, whichever is less. Amortization of film rights is presented under 'purchases/ operating expenses'.

In the case of film content that is acquired after its initial exploitation, commonly referred to as catalogue rights, amortization is spread evenly over the lower of ten years or the license period. Management's estimate is based upon factors such as historical performance of similar films, the star power of the lead actors and actresses and once released actual results of each film.

The management regularly reviews, and revises when necessary, its estimates, which may result in a change in the rate of amortizationand/or a write down of the asset to the recoverable amount.

* Other intangible assets are carried at acquisition costs less accumulated amortization, which is provided under written down value method at the rates and in the manner prescribed under Schedule II to the Companies Act, 2013

(e) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use orsale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

(f) Content advances

Advances are paid to producers/owners of films and artists, in terms of the agreements entered into with them, for acquisition of associated rights. All advances are reviewed by the management periodically, considering facts of each case, to determine recoverability. These advances are transferred to film rights at the point of exploitation.

(g) Investments

* Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long- term investments.

* Current investments are carried at lower of cost and fair value determined on an individual investment basis.

* Long-term investments are carried at cost. However, provision for diminution in the value of investments, if any, is made to recognize a decline, other than temporary in nature.

(h) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is computed as follows:

* Raw prints and tapes on purchase cost at a moving weighted average basis.

* Home entertainment products, at actual cost.

* Inventories related to films under production are stated at acquisition and production cost plus relevant overhead cost and capitalized interest net of any amounts received from third party investors.

(i) Impairment of assets

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset's or cash generating unit's net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased.

(j) Provisions and contingencies

* Provisions are recognized when there is present obligation as a result of a past event and it is more likely than not that an outflow of resources will be required to settle the obligation. Provisions are measured at the management's best estimate of the outflow required to settle the obligations at the Balance Sheet date.

* The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow is remote. Contingent liabilities are disclosed when:

* there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

* a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

(k) Employee benefits

Defined contribution plan

Provident fund: The Company's contributions paid or payable during the year to the provident fund and employee's state insurance corporation are recognized in the Statement of Profit and Loss. This fund is administered by the respective Government authorities, and the Company has no further obligation beyond making its contribution, which is expensed in the year to which it pertains.

Defined benefit plan

Gratuity: The Company's liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. The cost for past services is recognized on a straight line basis over the average period until the amended benefits become vested. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

Compensated absences: Accumulated compensated absences are expected to be availed or encashed within 12 months from the end of the year and are treated as short- term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Employee stock option compensation

Stock options granted by the Company are accounted using intrinsic value method as prescribed by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. Intrinsic value of the option being excess of market value of the underlying share immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit to employee stock option outstanding account. Deferred employee compensation is charged to Statement of Profit and Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee compensation expense, equal to the amortised portion of value of lapsed option and credit to deferred employee compensation expense equal to the unamortised portion of lapsed option.

(l) Leases

The Company has evaluated all existing leases as 'Operating leases'. Aggregate of lease rentals payable under non-cancellable operating lease arrangements (over the initial and subsequent periods of lease) are charged to the Statement of Profit and Loss on a straight-line basis over the non-cancellable period of the lease.

(m) Foreign currency transactions

Transactions in foreign currencies are accounted at exchange rates prevalent on the date of the transaction. Foreign currency monetary assets and liabilities at the period end are translated using the exchange rates prevailing at the end of the period. All exchange differences are recognized in the Statement of Profit and Loss. Non-monetary foreign currency items are recorded using the exchange rates that existed when the values were determined and accordingly investments in shares of foreign subsidiaries are denominated in Indian currency at the rate of exchange prevailing at the time when the original investments are made.

The reporting currency of the Company is Indian Rupee (Rs.).

(n) Taxes on income

Income tax expense comprises current income tax and deferred tax.

* Current taxes

Provision for current income-tax is recognized in accordance with the provisions of Indian Income tax Act, 1961, and rules made thereunder, and recorded at the end of each reporting period based on the amount expected to be paid to the tax authorities in accordance with the taxation laws prevailing in the respective jurisdictions.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.

* Deferred taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to timing differences that result between the profits offered for income taxes and the profits as per the financial statements. Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in the future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is virtual certainty, supported by convincing evidence of recognition of such assets. Deferred tax assets are reassessed for the appropriateness of their respective carrying values at each balance sheet date.

Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

* Minimum Alternative Tax ('MAT')

Minimum alternate tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. MAT credit entitlement 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, which is the period for which MATcredit is allowed to be carried forward. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.

(o) Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.

(p) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments which are readily convertible into known amounts of cash and are subject to insignificant risk of changes in value. Cash credits are shown within borrowings in current liabilities on the Balance sheet.


Mar 31, 2014

I. Basis of preparation

The Company is engaged in the business of sourcing Indian film content either through acquisition, co-production or production of such films, and subsequently exploiting and distributing such films in India through music release, theatrical distribution, DVD and VCD release, television licensing and new media distribution avenues such as cable or DTH licensing; and trading and exporting overseas rights to its parent Eros Worldwide FZ LLC.

The Company''s financial statements which have been prepared under historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act, 1956 and Companies Act 2013, to the extent applicable and comply in all material aspects with the accounting principles generally accepted in India including the Accounting Standards notified under the Companies Act, 1956 read with the General Circular 15/2013 dated 13 September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013, to the extent applicable.

The accounting policies have been consistently applied unless otherwise stated.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule VI to the Act. The Company considers 12 months to be its normal operating cycle.

II. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles (''GAAP'') requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, as well as disclosure of contingent liabilities on the date of the financial statements. Key estimates made by the Company in preparing these financial statements include useful lives of assets as well as utilization of economic benefits from these assets, accrual of expenses, recoverability of trade receivables, minimum alternate tax credits and deferred tax assets as well as assumptions for valuation of employee benefits and stock options. Management believes that the estimates made in the preparation of financial statements are prudent and reasonable. Actual results may differ from those estimates. Any revision to accounting estimates is recognized prospectively, in the period in which revisions are made.

III. Significant accounting policies

(a) Revenue recognition

* Theatrical sales: Revenue from theatrical distribution is recognized on exhibition of films. In case of distribution through theatres, revenue is recognized on the basis of box office reports received from various exhibitors. Contracted minimum guarantees are recognized on theatrical release.

* Sale of film rights: Sale of rights is recognized on effective delivery of materials to customers as per terms of the sale agreements. Sale of overseas rights is recognized on assignment of such rights, as per pre-agreed transfer pricing norms.

* Sale of satellite rights and physical home entertainment products: Revenue is accounted on delivery to customers, as per contracted terms. Digital and other new media revenues are recognized at the earlier of when the content is accessed or if licensed, the date the revenue is contracted or declared.

* Production fee: Revenue from production fee is recognized on the basis of services rendered at relevant stages of production of the film, in accordance with terms of agreement.

(b) Other income

* Dividend income is recognised when the right to receive dividend is established.

* Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

* On disposal of current investments, the difference between the carrying amount and the disposal proceeds is recognized in the Statement of Profit and Loss.

(c) Fixed assets and depreciation

* Fixed assets are stated at acquisition cost less accumulated depreciation and impairment losses, if any. Acquisition cost includes purchase cost (net of available credits) and all incidental expenses to bring the asset to their present location and condition. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increase the future benefits from the existing asset beyond its previously assessed standard of performance.

* Depreciation is provided under written down value method

at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000 each, are depreciated in full, in the year of purchase.

(d) Intangible assets and amortisation

* Investment in film and associated rights are recorded at their acquisition costs less accumulated amortisation and impairment losses, if any. Cost includes acquisition and production cost, subsequent overflows of such cost, direct overhead cost, capitalized foreign currency exchange differences and capitalised interest. When ready for exploitation, advances granted to secure rights are transferred to film rights. These rights are amortised over the estimated useful lives, writing off more in year one which recognizes initial income flows and then the balance over a period of up to nine years, or the remaining life of the content rights, whichever is less. Amortization of film rights is presented under ''purchases/ operating expenses''.

In the case of film content that is acquired after its initial exploitation, commonly referred to as catalogue rights, amortization is spread evenly over the lower of ten years or the license period. Management''s estimate is based upon factors such as historical performance of similar films, the star power of the lead actors and actresses and once released actual results of each film.

The management regularly reviews, and revises when necessary, its estimates, which may result in a change in the rate of amortization and/or a write down of the asset to the recoverable amount.

* Other intangible assets are carried at acquisition costs less accumulated amortization, which is provided under written down value method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956.

(e) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

(f) Content advances

Advances are paid to producers/ owners of films and artists, in terms of the agreements entered into with them, for acquisition of associated rights. All advances are reviewed by the management periodically, considering facts of each case, to determine recoverability. These advances are transferred to film rights at the point of exploitation.

(g) Investments

* Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.

* Current investments are carried at lower of cost and fair value determined on an individual investment basis.

* Long-term investments are carried at cost. However, provision for diminution in the value of investments, if any, is made to recognize a decline, other than temporary in nature.

(h) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is computed as follows:

* Raw prints and tapes on purchase cost at a moving weighted average basis.

* Home entertainment products, at actual cost, including replication cost.

* Inventories related to films under production are stated at acquisition and production cost plus relevant overhead cost and capitalized interest net of any amounts received from third party investors.

(i) Impairment of assets

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset''s or cash generating unit''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased.

(j) Provisions and contingencies

* Provisions are recognized when there is present legal or constructive obligation as a result of a past event and it is more likely than not that an outflow of resources will be required to settle the obligation. Provisions are measured at the management''s best estimate of the outflow required to settle the obligations at the Balance Sheet date.

* The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow is remote. Contingent liabilities are disclosed when:

* there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

* a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

(k) Employee benefits

* Defined contribution plan

Provident fund: The Company''s contributions paid or payable during the year to the provident fund and employee''s state insurance corporation are recognized in the Statement of Profit and Loss. This fund is administered by the respective Government authorities, and the Company has no further obligation beyond making its contribution, which is expensed in the year to which it pertains.

* Defined benefit plan

Gratuity: The Company''s liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. The cost for past services is recognized on a straight line basis over the average period until the amended benefits become vested. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

Compensated absences: Accumulated compensated absences are expected to be availed or encashed within 12 months from the end of the year and are treated as short- term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

* Employee stock option compensation

Stock options granted by the Company are accounted using intrinsic value method as prescribed by the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Intrinsic value of the option being excess of market value of the underlying share immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit to employee stock option outstanding account. Deferred employee compensation is charged to Statement of Profit and Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee compensation expense, equal to the amortised portion of value of lapsed option and credit to deferred employee compensation expense equal to the unamortised portion of lapsed option.

(l) Leases

The Company has evaluated all existing leases as ''Operating leases''. Aggregate of lease rentals payable under non-cancellable operating lease arrangements (over the initial and subsequent periods of lease) are charged to the Statement of Profit and Loss on a straight-line basis over the non-cancellable period of the lease.

(m) Foreign currency transactions

Transactions in foreign currencies are accounted at exchange rates prevalent on the date of the transaction. Foreign currency monetary assets and liabilities at the period end are translated using the exchange rates prevailing at the end of the period. All exchange differences are recognized in the Statement of Profit and Loss. Non- monetary foreign currency items are recorded using the exchange rates that existed when the values were determined and accordingly investments in shares of foreign subsidiaries are denominated in Indian currency at the rate of exchange prevailing at the time when the original investments are made.

The reporting currency of the Company is Indian Rupee (Rs.).

(n) Taxes on income

Income tax expense comprises current income tax and deferred tax.

* Current taxes

Provision for current income-tax is recognized in accordance with the provisions of Indian Income tax Act, 1961, and rules made thereunder, and recorded at the end of each reporting period based on the amount expected to be paid to the tax authorities in accordance with the taxation laws prevailing in the respective jurisdictions.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.

* Deferred taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to timing differences that result between the profits offered for income taxes and the profits as per the financial statements. Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or substantively enacted at the balance sheet date. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in the future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is virtual certainty, supported by convincing evidence of recognition of such assets. Deferred tax assets are reassessed for the appropriateness of their respective carrying values at each balance sheet date.

Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

* Minimum Alternative Tax (''MAT'') Minimum alternate tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. MAT credit entitlement 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, which is the period for which MAT credit is allowed to be carried forward. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.

(o) Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares as appropriate. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.

(p) Cash and cash equivalents

Cash and cash equivalents include cash on hand and deposits held at call with banks. Cash credits are shown within borrowings in current liabilities on the Balance sheet.


Mar 31, 2013

A) Revenue recognition

1. Sale of rights

Sale of rights is recognized on effective delivery of materials to customers as per terms of the sale agreements.

2. Sale of physical home entertainment products

Sale of physical home entertainment products is accounted on delivery to customers, as per agreement/ arrangement.

Digital and other new media revenues are recognized at the earlier of when the content is accessed or if licensed the date the revenue is contracted or declared.

3. Revenue from theatrical distribution of films

Revenue from theatrical distribution is recognized on exhibition of films. In case of distribution through theatres, revenue is recognized on the basis of box office reports received from various exhibitors. In case of distribution of films on commission basis, revenue is recognized inclusive of share of sub-distributor. Overflow from the distributors is accounted when reported.

4. Interest income

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

5. Short term gain on mutual funds

On disposal of current investments, the difference between the carrying amount and the disposal proceeds is recognized in the Statement of Profit and Loss.

(b) Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation. Cost includes purchase cost and all incidental expenses to bring the asset to their present location and condition.

Depreciation is provided under written down value method at the rates prescribed under Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000 each are depreciated at full in the year of purchase.

(c) Intangible assets and amortisation

Investment in Film and associated rights are recorded at their acquisition costs or capitalised cost less accumulated amortisations. Cost includes acquisition and production cost, any direct overhead cost and capitalised interest.

Completed film and associated rights are amortised as a group or individually in the proportion of gross revenues realised which they bear to management''s estimate of the total gross revenues expected to be received. Such revenues can be generated over the life time of the rights, but for amortisation purpose the period is limited to the lower of the life of the rights or 10 years.

In respect of unreleased films, payments towards film rights are classified under advances as the amounts are refundable in the event of non release of the film.

(d) Content advances

Advances are paid to producers/owners of films and for associated rights in terms of the agreements /arrangements entered into with them. All advances are reviewed by the management periodically, considering facts of each case, to determine the recoverability.

(e) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in the value of investments, if any, is made to recognize a decline, other than temporary in nature.

(f) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is computed as follows:

a) Raw prints and tapes on weighted average basis.

b) Home entertainment products, at cost or net realizable value.

c) New film/serial rights where principle rights, generally theatrical, satellite and video rights, have been sold, stock of residual rights are valued at values estimated by the management which would not exceed the relevant cost. Stock of rights in respect of old films are valued at full cost for a period of twelve months from the date

of purchase and, thereafter at appropriate realizable values as estimated by the management not exceeding the cost. All kinds of film, serial rights are reviewed by the management at the end of each reporting period to determine fall in values, if any, based on expected future realizability of such rights.

d) Inventories related to films under production are stated at acquisition and production cost plus relevant overhead cost and capitalized interest net of any amounts received from third party investors.

(g) Impairment of assets

In accordance with Accounting Standard 28 on "Impairment of Assets" as notified by the Central Government under the Companies Act, 1956 the carrying amounts of the assets are reviewed at each balance sheet date to determine whether there is any indication of impairment based on internal or external factors. An asset is treated as impaired when the carrying cost of the asset exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognized in the Statement of Profit and Loss or against revaluation surplus, where applicable.

(h) Provisions and contingencies

Provisions are recognized when there is present legal or constructive obligation as a result of a past event and it is more likely than not that an outflow of resources will be required to settle the obligation. Provisions are measured at the management''s best estimate of the outflow required to settle the obligations at the Balance Sheet date. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.

(i) Employee benefits

Defined contribution plan

The Company''s contributions paid or payable during the year to the provident fund/employee''s state insurance corporation are recognized in the Statement of Profit and Loss.

Defined benefit plan

The Company''s liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. The cost for past services is recognized on a straight line basis over the average period until the amended benefits become vested. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation. The accumulated leave of the employees is treated as a short term benefit and accordingly provided on full cost basis.

Stock based compensation

The compensation cost of stock options granted to employees is calculated using the intrinsic value method. The compensation expense is amortized uniformly over the vesting period of the option.

(j) Taxes on income

Income tax expense comprises current income tax and deferred tax.

Current taxes

Provision for current income-tax is recognized in accordance with the provisions of Indian Income Tax Act, 1961, and is made at the end of each reporting period based on the tax liability after taking credit for tax allowances and exemptions.

Deferred taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to timing differences that result between the profits offered for income taxes and the profits as per the financial statements. Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or substantively enacted at the balance sheet date. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in the future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is virtual certainty, supported by convincing evidence of recognition of such assets. Deferred tax assets are reassessed for the appropriateness of their respective carrying values at each balance sheet date.

(k) Borrowing costs

Borrowing costs directly attributable to production of films, and the acquisition or construction of the qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to revenue and recognised as an expense in the Statement of Profit and Loss.

(l) Leases

Operating lease

Aggregate of lease rentals payable under the non-cancellable operating lease arrangements (over the initial and subsequent periods of lease) are charged to the statement of Profit and Loss on straight line basis over the period of the lease.

(m) Foreign currency transactions

Transactions in foreign currencies are accounted at exchange rates prevalent on the date of the transaction. Foreign currency monetary assets and liabilities at the period end are translated using the exchange rates prevailing at the end of the period. All exchange differences are recognized in the statement of Profit and Loss. Non-monetary foreign currency items are carried at the lower of cost and fair value and accordingly the investments in shares of foreign subsidiaries are denominated in Indian currency at the rate of exchange prevailing at the time when the original investments are made or fair values determined.


Mar 31, 2012

I. Basis of preparation

Eros International Media Limited (the 'Company') is engaged in the business of sourcing Indian film content either through acquisition, co-production or production of such films, and subsequently exploiting and distributing such films in India through music release, theatrical distribution, DVD and VCD release, television licensing and new media distribution avenues such as cable or DTH licensing; and trading and exporting the International Rights to its parent Eros Worldwide FZ LLC as per pre-agreed transfer pricing norms. The Company's financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the applicable Accounting Standards ('AS') as notified by the Central Government under the Companies Act, 1956 to the extent applicable.

II. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles ('GAAP') requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements. Management believes that the estimates made in the preparation of financial statements are prudent and reasonable. Actual future period's results could differ from those estimates. Any revision to accounting estimates is recognised in the period in which revisions are made.

III. significant Accounting Policies

(a) Revenue recognition

1. Sale of rights

Sale of rights is recognised on effective delivery of materials to customers as per terms of the sale agreements.

2. Sale of physical home entertainment products

Sale of physical home entertainment products is accounted on delivery to customers, as per agreement/ arrangement.

Digital and other new media revenues are recognised at the earlier of when the content is accessed or if licensed the date the revenue is contracted or declared.

3. Revenue from theatrical distribution of films

Revenue from theatrical distribution is recognised on exhibition of films. In case of distribution through theatres, revenue is recognised on the basis of box office reports received from various exhibitors. In case of distribution of films on commission basis, revenue is recognised inclusive of share of sub-distributor. Overfow from the distributors is accounted when reported.

4. Interest income

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

5. Short term gain on mutual funds

On disposal of current investments, the difference between the carrying amount and the disposal proceeds is recognised in the Statement of Profit and Loss.

(b) Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation. Cost includes purchase cost and all incidental expenses to bring the asset to their present location and condition.

Depreciation is provided under written down value method at the rates prescribed under Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000 each are depreciated at full in the year of purchase.

(c) Intangible assets and amortisation

Investment in Film and associated rights are recorded at their acquisition costs or capitalised cost less accumulated amortisations. Cost includes acquisition and production cost, any direct overhead cost and capitalised interest.

Completed film and associated rights are amortised as a group or individually in the proportion of gross revenues realised which they bear to management's estimate of the total gross revenues expected to be received. Such revenues can be generated over the life time of the rights, but for amortisation purpose the period is limited to the lower of the life of the rights or 10 years.

In respect of unreleased films, payments towards film rights are classified under advances as the amounts are refundable in the event of non release of the film.

(d) Content advances

Advances are paid to producers/owners of films and for associated rights in terms of the agreements / arrangements entered into with them. All advances are reviewed by the management periodically, considering facts of each case, to determine the recoverability.

(e) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in the value of investments, if any, is made to recognise a decline, other than temporary in nature.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is computed as follows:

a) Raw prints and tapes on weighted average basis.

b) Home entertainment products, at cost or net realisable value.

c) New film/serial rights where principle rights, generally theatrical, satellite and video rights, have been sold, stock of residual rights are valued at values estimated by the management which would not exceed the relevant cost. Stock of rights in respect of old films are valued at full cost for a period of twelve months from the date of purchase and, thereafter at appropriate realisable values as estimated by the management not exceeding the cost. All kinds of film, serial rights are reviewed by the management at the end of each reporting period to determine fall in values, if any, based on expected future realisability of such rights.

d) Inventories related to films under production are stated at acquisition and production cost plus relevant overhead cost and capitalised interest net of any amounts received from third party investors.

(g) Impairment of assets

In accordance with Accounting Standard 28 on "Impairment of Assets" as notified by the Central Government under the Companies Act, 1956 the carrying amounts of the assets are reviewed at each balance sheet date to determine whether there is any indication of impairment based on internal or external factors. An asset is treated as impaired when the carrying cost of the asset exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognised in the Statement of Profit and Loss or against revaluation surplus, where applicable.

(h) Provisions and contingencies

Provisions are recognised when there is present legal or constructive obligation as a result of a past event and it is more likely than not that an outflow of resources will be required to settle the obligation. Provisions are measured at the management's best estimate of the outflow required to settle the obligations at the Balance Sheet date. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources

(i) Employee benefits

Defined contribution plan

The Company's contributions paid or payable during the year to the provident fund/employee's state insurance corporation are recognised in the Statement of Profit and Loss.

Defined benefit plan

The Company's liability towards gratuity is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. The cost for past services is recognised on a straight line basis over the average period until the amended benefits become vested. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation. The accumulated leave of the employees is treated as a short term benefit and accordingly provided on full cost basis.

Stock based compensation

The compensation cost of stock options granted to employees is calculated using the intrinsic value method. The compensation expense is amortised uniformly over the vesting period of the option.

(j) Taxes on income

Income tax expense comprises current income tax and deferred tax.

Current taxes

Provision for current income-tax is recognised in accordance with the provisions of Indian Income Tax Act, 1961, and is made at the end of each reporting period based on the tax liability after taking credit for tax allowances and exemptions.

Deferred taxes

Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences that result between the Profits offered for income taxes and the Profits as per the financial statements. Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or substantively enacted at the balance sheet date. The effect of a change in tax rates on deferred tax assets and liabilities is recognised in the period that includes the enactment date.

Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in the future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty, supported by convincing evidence of recognition of such assets. Deferred tax assets are reassessed for the appropriateness of their respective carrying values at each balance sheet date.

(k) Borrowing costs

Borrowing costs directly attributable to production of films, and the acquisition or construction of the qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to revenue and recognised as an expense in the Statement of Profit and Loss.

(l) Leases

Operating lease

Aggregate of lease rentals payable under the non-cancellable operating lease arrangements (over the initial and subsequent periods of lease) are charged to the Statement of Profit and Loss on straight line basis over the period of the lease.

(m) Foreign currency transactions

Transactions in foreign currencies are accounted at exchange rates prevalent on the date of the transaction. Foreign currency monetary assets and liabilities at the period end are translated using the exchange rates prevailing at the end of the period. All exchange differences are recognised in the Statement of Profit and Loss. Non-monetary foreign currency items are carried at the lower of cost and fair value and accordingly the investments in shares of foreign subsidiaries are denominated in Indian currency at the rate of exchange prevailing at the time when the original investments are made or fair values determined.

f) Aggregate number of bonus shares issued during the period of five years immediately preceding the reporting date

66,306,500 equity shares were allotted as fully paid up bonus shares in the financial year 2009-10 by capitalisation of the surplus in the Statement of Profit and Loss account of the Company

g) Aggregate number of equity shares issued under employees stock option scheme (2009) during the period of five years immediately preceeding the reporting date

The Company has issued total 329,857 shares (Previous year - Nil) during the period of five years immediately preceding the reporting date on exercise of options granted under the employees stock option plan (ESOP) wherein part consideration was received in the form of employee services.

As at 31 March 2012, 811,861 options were outstanding under Employee stock option scheme 2009. On exercise of the options so granted under Employee stock option scheme 2009, the paid up equity share capital of the Company will increase by equivalent number of shares.

 
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