Mar 31, 2018
1. Significant Accounting Policies
a. Revenue Recognition
Revenue is recognized, net of sales related taxes, when persuasive evidence of an arrangement exists, the fees are fixed or determinable, the product is delivered or services have been rendered and collectability is reasonably assured. The Company considers the terms of each arrangement to determine the appropriate accounting treatment.
The following additional criteria apply in respect of various revenue streams within filmed entertainment:
Theatrical â Contracted minimum guarantees are recognized on the theatrical release date. The Companyâs share of box office receipts in excess of the minimum guarantee is recognized at the point they are notified to the Company.
Television â License fees received in advance which do not meet all the above criteria are included in deferred income until the above criteria is met.
Other â DVD, CD and video distribution revenue is recognized on the date the product is delivered or if licensed in line with the above criteria. Provision is made for physical returns where applicable. Digital and ancillary media revenues are recognized at the earlier of when the content is accessed or declared. Visual effects, production and other fees for services rendered by the Company and overhead recharges are recognized in the period in which they are earned and in certain cases, the stage of production is used to determine the proportion recognized in the period.
Other income
Dividend income is recognized when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the effective interest rate applicable.
b. Property, plant and equipment and depreciation
Property, Plant and Equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost of Property, Plant and Equipment comprises of its purchase price or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation, if any, and borrowing costs for assets that necessarily take a substantial period of time to get ready for their intended use. Subsequent costs are included in the assets carrying amount or recognized 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.
Capital Work-in-progress (CWIP) includes expenditure that is directly attributable to the acquisition/construction of assets, which are yet to be commissioned.
Depreciation is provided under written down value method at the rates and in the manner prescribed under Schedule II to the Companies Act, 2013.The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. Gains or losses arising from de-recognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is de-recognized.
c. Intangible assets
Intangible assets acquired by the Company are stated at cost less accumulated amortization less impairment loss, if any, (film production cost and content advances are transferred to film and content rights at the point at which content is first exploited).
Investments in films and associated rights, including acquired rights and distribution advances in respect of completed films, are stated at cost less amortization less provision for impairment. Costs include production costs, overhead and capitalized interest costs net of any amounts received from third party investors. A charge is made to write down the cost of completed rights 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, except where the asset is not yet available for exploitation. The average life of the assets is the lesser of 10 years or the remaining life of the content rights. The amortization charge is recognized in the Statement of Profit and Loss within cost of sales. The determination of useful life is based upon Managementâs judgment and includes assumptions on the timing and future estimated revenues to be generated by these assets, which are summarized in Note 2.
Intangible assets comprising film scripts and related costs are stated at cost less amortization less provision for impairment. The script costs are amortized over a period of 3 years on a straight-line basis and the amortization charge is recognized in the income statement within cost of sales. The determination of useful life is based upon Managementâs estimate of the period over which the Company explores the possibility of making films using the script.
Other intangible assets, which comprise internally generated and acquired software used within the Entityâs digital, home entertainment and internal accounting activities, are stated at cost less amortization less provision for impairment. A charge is made to write down the cost of software over the estimated useful lives except where the software is not yet available for use. The average life of the software is the lesser of 3 years or the remaining life of the software. The amortization charge is recognized in the Statement of Profit and Loss.
d. Impairment of non-financial assets
At each reporting date, for the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at the cash generating unit level. All individual assets or cash generating units are tested for impairment whenever events or changes in circumstances both internal and external indicate that the carrying amount may not be recoverable.
An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price of assets and their âvalue in useâ.
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. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
Film and content rights are stated at the lower of unamortized cost and estimated recoverable amounts. In accordance with Ind AS 36 Impairment of Assets, film content costs are assessed for indication of impairment on a library basis as the nature of the Companyâs business, the contracts it has in place and the markets it operates in do not yet make an ongoing individual film evaluation feasible with reasonable certainty. Impairment losses on content advances are recognized when film production does not seem viable and refund of the advance is not probable.
All assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist.
e. Borrowing costs
The Company is capitalising borrowing costs that are directly attributable to the acquisition or construction of qualifying assets. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost with any difference between the proceeds (net of transaction costs) and the redemption value recognized in the income statement within finance costs over the period of the borrowings using the effective interest method. Finance costs in respect of film productions and other assets which take a substantial period of time to get ready for use or for exploitation are capitalized as part of the assets. All other borrowing costs are recognized as expense in the period in which they are incurred and charged to the Statement of Profit and Loss.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
f. Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on risk exposure arising from financial assets like debt instruments measured at amortised cost e.g., trade receivables and deposits.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on Trade receivables or contract revenue receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider all contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss (P&L). This amount is reflected under the head âother income or other expensesâ in the P&L.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
g. Inventories
Inventories primarily comprise of music CDs and DVDs are valued at the lower of cost and net realizable value. Cost in respect of goods for resale is defined as all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost in respect of raw materials is purchase price.
Purchase price is assigned using a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
h. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is more likely than not that an outflow of resources will be required to settle the obligations and can be reliably measured. Provisions are measured at Managementâs best estimate of the expenditure required to settle the obligations at the balance sheet date. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Contingent liabilities are not recognized in the financial statements but are disclosed by way of notes to accounts unless the possibility of an outflow of economic resources is considered remote.
Contingent assets are not recognized in financial statements. However, the same is disclosed, where an inflow of economic benefit is virtual.
i. Employee Benefits
Short term employee benefits obligations
Short-term employee benefits are recognized as an expense in the Statement of Profit and Loss for the year in which related services are rendered.
Post-employment benefits and other long term employee benefits
Defined contribution plan
Provident fund & National Pension scheme: The Companyâs contributions paid or payable during the year to the provident fund, employeeâs state insurance corporation and National pension scheme 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 Companyâs 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. Re-measurement gains and losses are recognized immediately in the Other Comprehensive Income as income or expense and are not reclassified to profit or loss in subsequent periods. 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 plan
In accordance with Ind AS 102 Share Based Payments, the fair value of shares or options granted is recognized as personnel costs with a corresponding increase in equity. The fair value is measured at the grant date and spread over the period during which the recipient becomes unconditionally entitled to payment unless forfeited or surrendered.
The fair value of share options granted is measured using the Black Scholes model, each taking into account the terms and conditions upon which the grants are made. At each Balance Sheet date, the Company revises its estimate of the number of equity instruments expected to vest as a result of non-market based vesting conditions. The amount recognized as an expense is adjusted to reflect the revised estimate of the number of equity instruments that are expected to become exercisable, with a corresponding adjustment to equity. The Companyâs share option plan does not feature any cash settlement option.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares are allocated to equity share capital with any excess being recorded as securities premium.
j. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
A lease is classified at the inception date as a finance lease or an operating lease. Leases in which significantly all the risks and rewards incidental to ownership are transferred to the lessee are classified as Finance leases. All other leases are Operating Leases.
As a lessee
Finance lease
Leases are classified as finance leases (including those for land), if substantially all the risks and rewards incidental to ownership of the leased asset is transferred to the lessee.
At the commencement of the lease term, the Company recognises finance leases as assets and liabilities in its balance sheet at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Any indirect costs of the Company are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Operating lease
Leases (including those for land) which are not classified as finance leases are considered as operating lease. Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term unless either:
A. Another systematic basis is more representative of the time pattern of the userâs benefit even if the payments to the lessors are not on that basis; or
B. The payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases. If payments to the lessor vary because of factors other than general inflation, then this condition is not met.
As a lessor
Finance lease
All assets given on finance lease are shown as receivables at an amount equal to net investment in the lease. Principal component of the lease receipts are adjusted against outstanding receivables and interest income is accounted by applying the interest rate implicit in the lease to the net investment.
Operating lease
Lease income from operating lease (excluding amount for services such as insurance and maintenance) is recognized in the statement of profit or loss on a straight-line basis over the lease term, unless either:
A. Another systematic basis is more representative of the time pattern of the userâs benefit even if the payments to the Company are not on that basis; or
B. The payments to the Company are structured to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases. If payments to the Company vary because of factors other than general inflation, then this condition is not met.
k. Foreign Currency Transactions
Transactions in foreign currencies are translated at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated at the prevailing rates of exchange at the balance sheet date. Nonmonetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognized in the Statement of Profit and Loss in the period in which they arise. Nonmonetary items carried at fair value that are denominated in foreign currencies are translated at rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
The Companyâs functional currency and the presentation currency is same i.e. Indian Rupee (Rs. ).
l. Financial instrument
Non-derivative financial instruments
Financial assets and financial liabilities are recognized when the Company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets or liabilities (other than financial assets and liabilities at fair value through Statement of Profit and Loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through Statement of Profit and Loss are recognized immediately in profit or loss. Financial assets and financial liabilities are offset against each other and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
A financial instrument is measured at fair value through profit or loss if:
- it has been acquired principally for the purpose of selling/ repurchasing it in the near term
- on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent pattern of short term profit taking or
- it is a derivative that is not designated in a hedging relationship.
The fair value of financial instruments denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The foreign exchange component forms part of its fair value gain or loss. Therefore for financial instruments that are classified as fair value through Statement of Profit and Loss, the exchange component is recognized in Statement of Profit and Loss.
Financial Assets
Financial assets are divided into the following categories:
- financial assets carried at amortised cost
- financial assets at fair value through Other Comprehensive Income
- financial assets at fair value through Statement of Profit and Loss;
Financial assets are assigned to the different categories by Management on initial recognition, depending on the nature and purpose of the financial assets. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available. Financial Assets like Investments in Subsidiaries are measured at Cost as allowed by Ind-AS 27 - Separate Financial Statements and hence are not fair valued.
Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These are non-derivative financial assets that are not quoted in an active market. Loans and receivables (including trade and other receivables, bank and cash balances) are measured subsequent to initial recognition at amortized cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognized in the Statement of Profit and Loss.
In accordance with Ind AS 109: Financial Instruments, the Company recognizes impairment loss allowance on trade receivables and content advances based on historically observed default rates. Impairment loss allowance recognized during the year is charged to Statement of Profit and Loss.
Financial assets at fair value through Other Comprehensive Income
Financial assets at fair value through Other Comprehensive Income are non-derivative financial assets held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. It includes nonderivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. Gains and losses arising from investments classified under this category is recognized in the Statement of Profit and Loss when they are sold or when the investment is impaired.
In the case of impairment, any loss previously recognized in Other Comprehensive Income is transferred to the Statement of Profit and Loss. Impairment losses recognized in the Statement of Profit and Loss on equity instruments are not reversed through the Statement of Profit and Loss. Impairment losses recognized previously on debt securities are reversed through the Statement of Profit and Loss when the increase can be related objectively to an event occurring after the impairment loss was recognized in the Statement of Profit and Loss.
When the Company considers that fair value of financial assets can be reliably measured, the fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Company applies its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. Equity instruments measured at fair value through profit or loss that do not have a quoted price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment at the end of each reporting period.
An assessment for impairment is undertaken at least at each balance sheet date.
A financial asset is derecognized only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Company retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Company transfers substantially all the risks and rewards of ownership of the asset, or if the Company neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.
Financial liabilities
Financial liabilities are classified as either âfinancial liabilities at fair value through profit or lossâ or âother financial liabilitiesâ. Financial liabilities are subsequently measured at amortized cost using the effective interest method or at fair value through profit or loss.
Financial liabilities are classified as at fair value through profit or loss when the financial liability is held for trading such as a derivative, except for a designated and effective hedging instrument, or if upon initial recognition it is thus designated to eliminate or significantly reduce measurement or recognition inconsistency or it forms part of a contract containing one or more embedded derivatives and the contract is designated as fair value through profit or loss.
Financial liabilities at fair value through profit or loss are stated at fair value. Any gains or losses arising of held for trading financial liabilities are recognized in profit or loss. Such gains or losses incorporate any interest paid and are included in the âother gains and lossesâ line item.
Other financial liabilities (including borrowing and trade and other payables) are subsequently measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
A financial liability is derecognized only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. Changes in liabilities fair value that are reported in profit or loss are included in the Statement of Profit and Loss within finance costs or finance income.
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when, and only when, there is a legally enforceable right to offset the recognized amount and there is intention either to settle on net basis or to realize the assets and to settle the liabilities simultaneously.
m. Taxes
Taxation on profit and loss comprises current tax and deferred tax. Tax is recognized in the Statement of Profit and Loss except to the extent that it relates to items recognized directly in equity or Other Comprehensive Income in which case tax impact is also recognized in equity or Other Comprehensive Income.
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date along with any adjustment relating to tax payable in previous years.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax is not recognized for all taxable temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates and interest in joint arrangements where it is probable that the differences will not reverse in the foreseeable future.
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 alternate tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. MAT credit entitlement is recognized as a deferred tax 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.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to utilize all or part of the deferred tax asset. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will available to utilize the deferred tax asset.
n. Earnings per share
Basic EPS is computed by dividing net profit after taxes for the year by weighted average number of equity shares outstanding during the financial year, adjusted for bonus share elements in equity shares issued during the year and excluding treasury shares, if any.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
o. Cash and cash equivalents
Cash and cash equivalents include cash in 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. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
Deposits held with banks as security for overdraft facilities are included in restricted deposits held with bank.
p. Segment reporting
Ind-AS 108 Operating Segments (âInd-AS 108â) requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Chief Operating Decision Maker. The revenues of films are earned over various formats; all such formats are functional activities of filmed entertainment and these activities take place on an integrated basis. The management team reviews the financial information on an integrated basis for the Company as a whole, with respective heads of business for each region and in accordance with Ind-AS 108, the Company provides a geographical split as it considers that all activities fall within one segment of business which is filmed entertainment. The management team also monitors performance separately for individual films or for at least 12 months after the theatrical release.
The Company has identified three geographic markets: India, UAE and Rest of the world.
q. Statement of cash flows
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
In line with the amendments to Ind AS 7 Statement of Cash flows (effective from 1 April, 2017), the Company has provided disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The adoption of amendment did not have any material impact on the financial statements.
r. Dividends
The Company recognises a liability for dividends to equity holders of the Company when the dividend is authorized and the dividend is no longer at the discretion of the Company. As per the corporate laws in India, a dividend is authorised when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
s. Event occurring after the reporting date
Adjusting events (that provides evidence of condition that existed at the balance sheet date) occurring after the balance sheet date are recognized in the financial statements. Material non-adjusting events (that are inductive of conditions that arose subsequent to the balance sheet date) occurring after the balance sheet date that represents material change and commitment affecting the financial position are disclosed in the Directorsâ Report.
t. Standards Issued but not yet Effective
Following are the new standards and amendments to existing standards (as notified by Ministry of Corporate Affairs (MCA) on 28 March 2018) which are effective for annual periods beginning after 1 April 2018. The Company intends to adopt these standards or amendments from the effective date.
Ind AS 115 Revenue from contract with customers
Ind AS 115 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including Ind AS 18 Revenue and Ind AS 11 Construction Contracts. The core principle of the new standard that an entity should recognize 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. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers. This Standard permit two possible methods of transition i.e. retrospective approach and modified retrospective method.
Based on the preliminary assessment, the company does not expect any significant impacts on transition to Ind AS 115. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information when the standard will be adopted. The quantitative impacts would be finalized based on a detailed assessment which has been initiated to identify the key impacts along with evaluation of appropriate transition options to be considered.
Amendments to existing Ind AS
The following amended standards are not expected to have a significant impact on the Companyâs standalone financial statements. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Company when it will adopt the respective standards.
- Ind AS 40 - Investment Property - The amendment lays down the principle regarding the transfer of asset to, or from, investment property.
- Ind AS 21 - The Effects of Changes in Foreign Exchange Rates - The amendment lays down principles to determine the date of transaction when a company recognizes a non-monetary prepayment asset or deferred income liability.
- Ind AS 12 - Income Taxes - The amendments explain that determining temporary differences and estimating probable future taxable profit against which deductible temporary differences are assessed for utilization are two separate steps.
Mar 31, 2017
Corporate Information
Eros International Media Limited (the âCompanyâ) 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).
These standalone financial statements were authorized for issue in accordance with a resolution of the Directors on 26 May 2017.
Basis of preparation
For all periods, up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under the Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
These financial statements for the year ended 31 March 2017 have been prepared in accordance with Indian Accounting Standards (âInd-ASâ) consequent to the notification of The Companies (Indian Accounting Standards) Rules, 2015 (the Rules) issued by the MCA. These are the first Ind-AS financial statements of the Company, wherein the Company has restated its Balance Sheet as at 1 April 2015 and financial statements for the year ended and as at 31 March 2016 also as per Ind-AS.
The standalone financial statements have been prepared on a historical cost basis, except for the following:
© Employee Stock Option Compensation measured at fair value (refer accounting policy on ESOP).
© Accounting of Business Combinations at fair value
All assets and liabilities have been classified as current or noncurrent as per the Companyâs 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.
1. Significant accounting policies
a. Revenue recognition
Revenue is recognized, net of sales related taxes, when persuasive evidence of an arrangement exists, the fees are fixed or determinable, the product is delivered or services have been rendered and collectability is reasonably assured. The Company considers the terms of each arrangement to determine the appropriate accounting treatment.
The following additional criteria apply in respect of various revenue streams within filmed entertainment:
Theatrical - Contracted minimum guarantees are recognized on the theatrical release date. The Companyâs share of box office receipts in excess of the minimum guarantee is recognized at the point they are notified to the Company.
Television - License fees received in advance which do not meet the revenue recognition criteria are included in deferred income until the above criteria is met.
Other - DVD, CD and video distribution revenue is recognized on the date the product is delivered or if licensed in line with the revenue recognition criteria. Provision is made for physical returns where applicable. Digital and ancillary media revenues are recognized at the earlier of when the content is accessed or declared. Visual effects, production and other fees for services rendered by the Company and overhead recharges are recognized in the period in which they are earned and in certain cases, the stage of production is used to determine the proportion recognized in the period.
Other income
Dividend income is recognized when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the effective interest rate applicable.
b. Property, plant and equipment and depreciation
Property, Plant and Equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises of purchase price inclusive of taxes etc. up to the date the asset is ready for its intended use. Depreciation is provided under written down value method at the rates and in the manner prescribed under Schedule II to the Companies Act, 2013.
c. Intangible assets
Intangible assets acquired by the Company are stated at cost less accumulated amortization less impairment loss, if any, (film production cost and content advances are transferred to film and content rights at the point at which content is first exploited).
Investments in films and associated rights, including acquired rights and distribution advances in respect of completed films, are stated at cost less amortization less provision for impairment. Costs include production costs, overhead and capitalized interest costs net of any amounts received from third party investors. A charge is made to write down the cost of completed rights 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, except where the asset is not yet available for exploitation. The average life of the assets is the lesser of 10 years or the remaining life of the content rights. The amortization charge is recognized in the Statement of profit and loss within Film right costs including amortization costs. The determination of useful life is based upon Managementâs judgment and includes assumptions on the timing and future estimated revenues to be generated by these assets.
Intangible assets comprising film scripts and related costs are stated at cost less amortization less provision for impairment. The script costs are amortized over a period of
3 years on a straight-line basis and the amortization charge is recognized in the Statement of profit and loss within Film right costs including amortization costs. The determination of useful life is based upon Managementâs estimate of the period over which the Company explores the possibility of making films using the script.
Other intangible assets, which comprise internally generated and acquired software used within the Entityâs digital, home entertainment and internal accounting activities, are stated at cost less amortization less provision for impairment. A charge is made to write down the cost of completed rights over the estimated useful lives except where the asset is not yet available for exploitation. The average life of the assets is the lesser of 3 years or the remaining life of the asset. The amortization charge is recognized in the Statement of profit and loss.
d. Impairment of non-financial assets
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at the cash generating unit level. All individual assets or cash generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external or internal factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price of assets and their âvalue in useâ.
I n 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. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
Film and content rights are stated at the lower of unamortized cost and estimated recoverable amounts. In accordance with Ind AS 36 Impairment of Assets, film content costs are assessed for indication of impairment on a library basis as the nature of the Companyâs business, the contracts it has in place and the markets it operates in do not yet make an ongoing individual film evaluation feasible with reasonable certainty. Impairment losses on content advances are recognized when film production does not seem viable and refund of the advance is not probable.
All assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist.
e. Borrowing costs
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost with any difference between the proceeds (net of transaction costs) and the redemption value recognized in the Statement of profit and loss within finance costs over the period of the borrowings using the effective interest method. Finance costs in respect of film productions and other assets which take a substantial period of time to get ready for use or for exploitation are capitalized as part of the assets.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.
f. Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on risk exposure arising from financial assets like debt instruments measured at amortized cost e.g., trade receivables and deposits.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on Trade receivables or contract revenue receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider all contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of profit and loss. This amount is reflected under the head âother expensesâ in the Statement of profit and loss.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
g. Inventories
Inventories primarily comprise of music CDs and DVDs, and are valued at the lower of cost and net realizable value. Cost in respect of goods for resale is defined as purchase price, including appropriate labour costs and other overhead costs. Cost in respect of raw materials is purchase price.
Purchase price is assigned using a weighted average basis. Net realizable value is defined as anticipated selling price or anticipated revenue less cost to completion.
h. Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is more likely than not that an outflow of resources will be required to settle the obligations and can be reliably measured. Provisions are measured at Managementâs best estimate of the expenditure required to settle the obligations at the statement of financial position date and are discounted to present value where the effect is material.
i. Retirement and other employee benefits
Defined contribution plan
Provident fund & National Pension scheme: The Companyâs contributions paid or payable during the year to the provident fund, employeeâs state insurance corporation and National pension scheme 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 Companyâs 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. Re-measurement gains and losses are recognized immediately in the Other Comprehensive Income as income or expense and are not reclassified to profit or loss in subsequent periods. 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
In accordance with Ind AS 102 Share Based Payments, the fair value of shares or options granted is recognized as personnel costs with a corresponding increase in equity. The fair value is measured at the grant date and spread over the period during which the recipient becomes unconditionally entitled to payment unless forfeited or surrendered.
The fair value of share options granted is measured using the Black Scholes model, each taking into account the terms and conditions upon which the grants are made. At each Balance Sheet date, the Company revises its estimate of the number of equity instruments expected to vest as a result of non-market based vesting conditions. The amount recognized as an expense is adjusted to reflect the revised estimate of the number of equity instruments that are expected to become exercisable, with a corresponding adjustment to equity reserves. The Companyâs share option plan does not feature any cash settlement option.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares are allocated to share capital with any excess being recorded as share premium.
j. Leases
A lease is classified at the inception date as a finance lease or an operating lease. Leases in which significantly all the risks and rewards incidental to ownership are transferred to the lessee are classified as finance leases. All other leases are operating Leases. Payments under operating leases are charged to the Statement of profit and loss on a straight line basis over the period of the lease.
k. Foreign Currency
Transactions in foreign currencies are translated at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated at the prevailing rates of exchange at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognized in the Statement of profit and loss in the period in which they arise. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
The Companyâs functional currency and the presentation currency is same i.e. Indian Rupee ('').
l. Financial instrument
Non-derivative financial instruments
Financial assets and financial liabilities are recognized when the Company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets or liabilities (other than financial assets and liabilities at fair value through profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognized immediately in Statement of profit and loss. Financial assets and financial liabilities are offset against each other and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
A financial instrument is measured at fair value through profit or loss if:
® it has been acquired principally for the purpose of selling/repurchasing it in the near term;
® on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent pattern of short term profit taking; or
® it is a derivative that is not designated in a hedging relationship.
The fair value of financial instruments denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. The foreign exchange component forms part of its fair value gain or loss. Therefore for financial instruments that are classified as fair value through profit and loss, the exchange component is recognized in Statement of profit and loss.
Financial Assets
Financial assets are divided into the following categories:
® financial assets carried at amortized cost
® financial assets at fair value through other comprehensive income
® financial assets at fair value through profit and loss;
Financial assets are assigned to the different categories by management on initial recognition, depending on the nature and purpose of the financial assets. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available. Financial Assets like Investments in Subsidiaries are measured at Cost as allowed by Ind-AS 27 - Separate Financial Statements and hence are not fair valued.
Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These are non-derivative financial assets that are not quoted in an active market. Loans and receivables (including trade and other receivables, bank and cash balances) are measured subsequent to initial recognition at amortized cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognized in the Statement of profit and loss.
I n accordance with Ind AS 109: Financial Instruments, the Company recognizes impairment loss allowance on trade receivables and content advances based on historically observed default rates. Impairment loss allowance recognized during the year is charged to Statement of profit and loss.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income are non-derivative financial assets held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. It includes non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. Gains and losses arising from investments classified under this category is recognized in the Statement of profit and loss when they are sold or when the investment is impaired.
I n the case of impairment, any loss previously recognized in other comprehensive income is transferred to the Statement of profit and loss. Impairment losses recognized in the Statement of profit and loss on equity instruments are not reversed through the Statement of profit and loss. Impairment losses recognized previously on debt securities are reversed through the Statement of profit and loss when the increase can be related objectively to an event occurring after the impairment loss was recognized in the Statement of profit and loss.
When the Company considers that fair value of financial assets can be reliably measured, the fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Company applies its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. Equity instruments measured at fair value through profit or loss that do not have a quoted price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment at the end of each reporting period.
An assessment for impairment is undertaken at least at each balance sheet date.
A financial asset is derecognized only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Company retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Company transfers substantially all the risks and rewards of ownership of the asset, or if the Company neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.
Financial liabilities
Financial liabilities are classified as either âfinancial liabilities at fair value through profit or lossâ or âother financial liabilitiesâ. Financial liabilities are subsequently measured at amortized cost using the effective interest method or at fair value through profit or loss.
Financial liabilities are classified as at fair value through profit or loss when the financial liability is held for trading such as a derivative, except for a designated and effective hedging instrument, or if upon initial recognition it is thus designated to eliminate or significantly reduce measurement or recognition inconsistency or it forms part of a contract containing one or more embedded derivatives and the contract is designated as fair value through profit or loss.
Financial liabilities at fair value through profit or loss are stated at fair value. Any gains or losses arising of held for trading financial liabilities are recognized in Statement of profit and loss. Such gains or losses incorporate any interest paid and are included in the âother gains and lossesâ line item.
Other financial liabilities (including borrowing and trade and other payables) are subsequently measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or a shorter period, to the net carrying amount on initial recognition.
A financial liability is derecognized only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. Changes in liabilitiesâ fair value that are reported in profit or loss are included in the Statement of profit and loss within finance costs or finance income.
m. Taxes
Taxation on profit and loss comprises current tax and deferred tax. Tax is recognized in the Statement of profit and loss except to the extent that it relates to items recognized directly in equity or other comprehensive income in which case tax impact is also recognized in equity or other comprehensive income.
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted at the balance sheet date along with any adjustment relating to tax payable in previous years.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
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 alternate tax (MAT) paid in a year is charged to the Statement of profit and loss as current tax. MAT credit entitlement is recognized 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.
n. Earnings per share
Basic earnings per share is computed using the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by considering the impact of the potential issuance of ordinary shares, on the weighted average number of shares outstanding during the period except where the results would be ant dilutive.
o. Cash and cash equivalents
Cash and cash equivalents include cash in 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. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
Deposits held with banks as security for overdraft facilities are included in restricted deposits held with bank.
p. Segment reporting
I nd-AS 108 Operating Segments (âInd-AS 108â) requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Chief Operating Decision Maker. The revenues of films are earned over various formats; all such formats are functional activities of filmed entertainment and these activities take place on an integrated basis. The management team reviews the financial information on an integrated basis for the Company as a whole, with respective heads of business for each region and in accordance with Ind-AS 108, the Company provides a geographical split as it considers that all activities fall within one segment of business which is filmed entertainment. The management team also monitors performance separately for individual films or for at least 12 months after the theatrical release.
The Company has identified three geographic markets: India, United Arab Emirates and Rest of the world.
q. Standards Issued but not yet Effective
I n March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of cash flowsâ and Ind AS 102, âShare-based payment.â These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, âStatement of cash flowsâ and IFRS 2, âShare-based payment,â respectively. The amendments are applicable to the Company from 1 April, 2017.
Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
Amendment to Ind AS 102:
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the âfair valuesâ, but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.
The company is evaluating the requirements of the amendment and their effect on the financial statements.
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.
Mar 31, 2011
I. (a) Basis of preparation
The 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 (ÃASÃ) and Accounting
Rules as notified under the Companies Act, 1956.
(b) Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles (ÃGAAPsÃ) 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 periodÃs results could differ from those
estimates. Any revision to accounting estimates is recognized in the
period in which revisions are made.
III. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The Consolidated Financials Statements (CFS) relates to the Group.
The CFS have been prepared on the following basis:
i. The financial statements of the parent company and its subsidiaries
including step down subsidiaries have been consolidated on a line by
line basis by adding together the book values of the items like assets,
liabilities, income and expenses.
ii. The CFS have been consolidated using uniform accounting policies
for like transactions and other events in similar circumstances. The
impact of change in accounting policies, if not material, has been
ignored.
iii. The excess/deficit (as on the date of acquisition) of the
CompanyÃs investment cost over the subsidiaries networth is recognized
as goodwill/capital reserve.
iv. The CFS are prepared after fully eliminating intra group balances,
intra group transactions and unrealized profits from the intra group
transactions.
v. Minoritiesà interest in net profit/loss of consolidated subsidiary
for the year is identified and adjusted against the income in order to
arrive at the net income attributable to the shareholders of the
Company. Their share of net assets is identified and presented in the
Consolidated Balance Sheet separately. Where accumulated losses
attributable to the minorities are in excess of their equity, in the
absence of the contractual obligation on the minorities, the same are
accounted for by the Holding Company.
vi. The consolidated financial statements are prepared using uniform
accounting policies for like transactions and other events in similar
circumstances and are presented, to the extent possible, in the same
manner as the CompanyÃs separate financial statements.
vii. There are no differences in reporting dates within the group
entities.
(b) 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.
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 profit and loss
account.
(c) 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.
(d) Intangible assets and amortization
Investment in Film and associated rights are recorded at their
acquisition costs or capitalized cost less accumulated amortizations.
Cost includes acquisition and production cost, any direct overhead cost
and capitalized interest.
Completed film and associated rights are amortized as a group or
individually in the proportion of gross revenues realized which they
bear to managementÃs estimate of the total gross revenues expected to
be received. Such revenues can be generated over the life time of the
rights, but for amortization 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.
(e) Investments
Investments that are readily realizable 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 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 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 ÃImpairment of Assetsà as
notified 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 Profit and
Loss Account 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 managementÃs 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) Advances for purchase of film and associated rights
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.
(j) Employee benefits
Defined contribution plan
The CompanyÃs contributions paid or payable during the year to the
provident fund/employeeÃs state insurance
corporation are recognized in the Profit and Loss Account.
Defined benefit plan
The CompanyÃs 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 Profit and Loss Account 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.
(k) 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.
(l) 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 recognized as an expense in the Profit and Loss account.
(m) 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 Profit and Loss Account on straight line basis over
the period of the lease.
(n) 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 Profit and Loss Account. 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.