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Accounting Policies of IOL Netcom Ltd. Company

Jun 30, 2010

A) Basis of preparation of financial statements

The financial statements have been prepared to comply in all material aspects with the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), in accordance with Indian Generally Accepted Accounting Principles and as per the provision of the Companies Act, 1956. The financial statements are prepared under the historical cost convention on accrual and going concern basis.

b) Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of financial statements, the reported amount of revenues and expenses and the disclosures relating to contingent liabilities as on the date of financial statements. Actual results could differ from those of estimates. Any revision in accounting estimates is recognized in accordance with the respective accounting standard.

c) Revenue Recognition

- Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

- Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer.

- Revenue from services is recognized on accrual basis over the period of services.

d) Fixed Assets and Depreciation

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation and impairment loss. Cost includes direct expenses as well as clearly identifiable indirect expenses incurred to bring the assets to their working condition for its intended use, net of CENVAT/Service Tax recoverable.

Capital work in progress includes assets that are under construction/development and not yet ready to use.

Fixed Assets are depreciated on a straight-line basis at the rates specified in Schedule XIV of Companies Act, 1956 except a few items of Fixed Assets which are depreciated on a written down value basis. Proportionate depreciation is charged for addition / deletion during the year. Individual assets of value less than Rs.5, 000 are depreciated in the year of purchase.

e) Intangible Assets

- Project development Expenses

Expenditure related to the development of IPTV project are treated as Project Development Expenses and classified as "Intangible Assets" to be amortized over a period of 5 years.

- Content Rights

The Company purchases movie/film rights, software rights, copyrights and trademarks related to IPTV Project. Expenditure related to the acquisition of content rights for IPTV is classified as "Intangible Assets" to be amortized over a period of 5 years or license period, whichever is lower.

- Others

Other Intangible assets are amortized over a period of 5 years.

f) Foreign Currency Transactions

Transactions in foreign currency are recorded at the rates of exchange in force at the time the transactions are effected. Monetary items are translated into rupees at the exchange rates prevailing at the balance sheet date. Non- monetary items are carried at their historical rupee values. Exchange differences on foreign exchange transaction are recognized in profit and loss account.

g) Investments

Investments are classified into current and long-term investments. Current investments are stated at lower of cost or market value. Long-term investments are classified at cost less provisions, if any, for permanent diminution in the value of such investments.

h) Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined on a weighted average basis. Inventories include other costs incurred in bringing the inventories to their present location and condition.

i) Employee Benefits

- Provident fund is a defined contribution scheme and is charged to Profit and Loss Account on accrual basis.

- The Companys liabilities towards gratuity are considered as defined benefit plans. The present value of obligation towards gratuity is determined on actuarial valuation basis.

- The Companys liabilities towards leave encashment benefits is accounted for on the basis of actuarial valuation and the resuitant actuarial gains and losses are charged to profit & loss account.

j) Operating Leases

- Lease Income:

Lease rentals in respect of Operating Lease arrangements are recognized in Profit & Loss Account in accordance with AS-19 "Leases". Costs, including depreciation, incurred in earning the lease income are recognized as expenses.

- Lease Expense:

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as Operating Leases. Operating Lease payments are recognised as an expense in the Profit & Loss Account on a straight line basis over the lease period.

k) Finance Leases

Assets acquired under finance leases are capitalized at the inception of the lease and depreciated on straight line basis over the useful life in accordance with the Companys depreciation policy. The amount outstanding towards these liabilities is shown as borrowings in the balance sheet.

I) Earnings Per Share

The Company reports basic and diluted earnings per share in accordance with AS-20 "Earnings Per Share". Basic earnings per share are computed by dividing the net profit or loss for the year by the weighted average number of Equity Shares outstanding during the year. Diluted earnings per share is computed by dividing the net profit or loss for the year by the weighted average number of Equity Shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares.

m) Taxation

Tax expenses comprise current income tax, deferred tax, & fringe benefit tax. Income tax & fringe benefit tax comprises the amount of tax for the period determined in accordance with the Income Tax Act, 1961.

- Fringe Benefit Tax (FBT):

FBT payable under the provisions of Section 115WC of the Income Tax Act, 1961 is in accordance with the Guidance Note on Accounting for Fringe Benefits Tax issued by the ICAI regarded as an additional Income Tax and considered in determination of the profit / (losses) for the year.

- Deferred Tax

The Company provides for deferred tax using the liability method, based on the timing difference resulting from the recognition of items in the financial statements / and in estimating its current income tax provision. Deferred Tax Assets arising from temporary timing difference are recognized to the extent, there is reasonable certainty that the assets can be realized in future. Deferred tax assets are recognized only if there is a virtual certainty backed by convincing evidence of realization of such assets. Deferred tax assets and liabilities are reviewed as at each balance sheet date and are appropriately adjusted, to the extent considered necessary, to reflect the amount that is reasonably or virtually certain to be realized.

n) Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the carrying value of such asset is reduced to its recoverable amount and the impairment loss is charged to Profit and Loss Account. If at the Balance Sheet date there is an indication that an impairment loss recognized in prior periods no longer exists or has decreased, then the assets are restated to that effect.

o) Provisions, Contingent Liabilities and Contingent Assets

Contingent Liabilities as defined in AS - 29 on "Provisions, Contingent Liabilities and Contingent Assets" are disclosed by way of Notes to Accounts. Provision is made if it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as a contingent liability.

Oct 21, 12:00 am
Oct 21, 4:14 pm
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