Accounting Policies of Pentamedia Graphics Ltd. Company

Mar 31, 2017

a. corporate information

Pentamedia Graphics Limited (PMGL) is a Public Limited Company incorporated in the state of Tamilnadu and listed on the BSE Limited (BSE). The company has been mainly in the following business during the year:

a. Pre & Post production of digital contents for animation & Visual effects for Film, TV & Internet.

b. Consultancy on multimedia & Software

c. Training and maintenance of media & Software products.

significant accounting policies: b. basis of preparation of financial statements

The Financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013.

a. revenue recognition

Revenue/Incomes and Costs/Expenditure are generally accounted on accrual, as they are earned or incurred.

(i) Revenue from Multimedia business (for sale of digital content on fixed price basis) is recognized based on milestones reached.

(ii) Revenue in respect of Training and Education services is recognized on rendering of services, only when it is reasonably certain that the ultimate collection will be made. The revenue from fixed time contracts is recognized over the period of contracts. For services rendered through franchisees only the company''s share of revenue is recognized.

(iii) Revenue for services charges is recognized after completion of each stage of service.

(v) Revenue from Software development (on time and material basis) is recognized based on software developed and billed to the clients.

B) USE OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Differences between actual and estimates are recognized in the period in which the results are known/ materialized.

C) property, plant AND equipment:

(I) Fixed assets are stated at cost including taxes, duties, freight etc related to purchase and installation less accumulated depreciation.

(II) Intangible assets, that are not yet ready for their intended use, are carried at costs, comprising direct cost, other incidental/attributable expenses and reflected under capital work in progress/Intangible assets under development respectively.

(III) Capital work in progress represents capital advances and expenditure incurred during the earlier years pertaining to software development pending capitalization.

(IV) Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets derecognized.

During the year, a land costing Rs. 2.60 Cr was sold for Rs. 8.90 Cr on which a gain of Rs. 6.30 Cr was recognized. Also, a building with carrying amount of Rs.6.82 Cr was sold for Rs. 6.10 Cr on which a loss of Rs. 0.72 Cr was recognized and shown in the Profit and Loss Account under the head Other Income.

(V) Capital Work in Progress of Rs. 7.87 crores has been converted into Computers and Software under the head fixed assets.

D) INTANGIBLE Assets

Intangible assets are recognized only if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. The intangible assets are recorded at cost and are carried at cost.

During the year the intangible assets under development of Rs. 3.70 crores has been transferred to Computers and Software under the head fixed assets.

E) depreciation

Depreciation on fixed assets is provided on the straight-line method in accordance with the rates specified under Schedule II to the Companies Act, 2013.

F) INVENTORIES

Inventories consist of Digital Content and developed Software which are valued at cost.

G) RETIREMENT BENEFITS TO EMPLOYEES

The Liability for future payment of gratuity has been provided in the accounts. The liability is not funded separately.

H) TAXES ON INCOME

Income Tax

Since MAT Provision is applicable for the year 2016-17, provision is created of Rs. 842,000 Deferred Tax

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize at Rs. 3,648,000.

(I) CASH AND CASH EQUIVALENTS

The company considers all highly liquid financial instruments, which are readily convertible into cash and have original maturities of three months or less from the date of purchase, to be cash equivalents.

(J) IMPAIRMENT OF ASSETS

The carrying value of assets at each balance sheet date is reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and impairment is recognized, if the carrying amount exceeds the recoverable amount.

(k) preliminary expenses

Preliminary expenses are amortized over a period of five years commencing from the year at commercial operations and closed during the reporting period.

(L) provisions, contingent liabilities and contingent assets

Provisions are recognized only when the company has present or legal or constructive obligations as a result of past events, for which it is probable that an outflow of economic benefit will be required to settle the transaction and a reliable estimate can be made for the amount of the obligation. Contingent liability is disclosed for (i) Possible obligations which will be confirmed only by future events not wholly within the control of the company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

During the previous year, in the case of Dallah Albaraka, Ireland, a liability of Rs. 51 Crores was arrived through a consent memo which was signed through court to arrive at a settlement of Rs. 51 Crores. Out of this, Rs. 25 Crores is paid during the year 2015-2016 and the balance of Rs. 26 Crores was paid in the current year 2016-2017 which was earlier shown as outstanding in the Balance Sheet as Short Term provision.

(M) SHORT TERM BORROWINGS

Mainly transactions with mayajaal towards services/distribution Rs.48,811,713, amount received franchise Rs.51,657,471, amount received through bank Rs.92,830,816 and amount paid through bank Rs.75,000,000 the balance amount of Rs. 1.78 Crores is shown in the Balance Sheet as Borrowings under Financial Liabilities under the head Current Liabilities.

(N) LONG TERM BORROWINGS:

Since the land and building was sold, the rental advance received from Saravana Bhavan has been adjusted against the consideration received for the sale of land and building.

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Mar 31, 2015

B. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The Financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013.

A) REVENUE RECOGNITION

Revenue/Incomes and Costs/Expenditure are generally accounted on accrual, as they are earned or incurred.

(i) Revenue from Multimedia business (for sale of digital content on fixed price basis) is recognized based on milestones reached.

(ii) Revenue in respect of Training and Education services is recognized on rendering of services, only when it is reasonably certain that the ultimate collection will be made. The revenue from fixed time contracts is recognized over the period of contracts. For services rendered through franchisees only the company's share of revenue is recognized.

(iii) Revenue for services charges is recognized after completion of each stage of service.

(iv) Revenue from Software development (on time and material basis) is recognized based on software developed and billed to the clients.

B) USE OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Differences between actual and estimates are recognized in the period in which the results are known/materialized.

C) FIXED ASSETS

(i) Fixed assets are stated at cost including taxes, duties, freight etc related to purchase and installation less accumulated depreciation.

(ii) A part of fixed asset in Furniture and fixtures and Computer were written off due to expiry of useful life of an asset as per Schedule II of Companies Act 2013.

(iii) During the year a Land situated at Gujarat costing Rs.13,00,000 was sold and the gain recognized in profit and Loss account.

(iv) Intangible assets, that are not yet ready for their intended use, are carried at costs, comprising direct cost, other incidental/ attributable expenses and reflected under capital work in progress/Intangible assets under development respectively.

(v) Capital work in progress represents capital advances and expenditure incurred during the earlier years pertaining to software development pending capitalization.

D) INTANGIBLE ASSETS

Intangible assets are recognized only is it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. The intangible assets are recorded at cost and are carried at cost.

E) DEPRECIATION

Depreciation on fixed assets is provided on the straight-line method in accordance with the rates specified under Schedule II to the Companies Act, 2013. As part of computers original cost or WDV of Rs.2.29 Cr and Furnitures and fixtures original cost /WDV Rs.1 Lacs have exhausted the useful life as per the new schedule, hence there value is written off as depreciation.

F) INVENTORIES

Inventories consist of Digital Content and Software development which are valued at cost.

G) RETIREMENT BENEFITS TO EMPLOYEES

The Liability for future payment of gratuity has been provided in the accounts. The liability is not funded separately.

H) TAXES ON INCOME

Income Tax Provision for taxation is not made for the year ended 2014-15 as there is no tax liability for the period.

Deferred Tax

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize.

I) CASH AND CASH EQUIVALENTS

The company considers all highly liquid financial instruments, which are readily convertible into cash and have original maturities of three months or less from the date of purchase, to be cash equivalents.

J) IMPAIRMENT OF ASSETS

The carring value of assets at each balance sheet date are reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and impairment is recognized, if the carrying amount exceeds the recoverable amount.

During the current year some of the assets are impaired and partly written off and the balance amount is recoverable.

K) PRELIMINARY EXPENSES

Preliminary expenses are amortized over a period of five years commencing from the year at commercial operations and closed during the reporting period.

L) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognized only when the company has present or legal or constructive obligations as a result of past events, for which it is probable that an outflow of economic benefit will be required to settle the transaction and a reliable estimate can be made for the amount of the obligation. Contingent liability is disclosed for (i) Possible obligations which will be confirmed only by future events not wholly within the control of the company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognized in the financial statements and it includes the details of claims against the company.

(i) DAL, Ireland

The company's appeal on Dallah Albaraka(DAL) claim against the guarantor Pentasoft Technologies Ltd which is being claimed on Pentamedia Graphics Ltd. is being contested in the High Court of Madras.

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Mar 31, 2014

B. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared to comply in all material aspects with all the applicable accounting principles in India, the applicable Accounting Standards notified u/s 211 (3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

A) REVENUE RECOGNITION

Revenue/Incomes and Costs/Expenditure are generally accounted on accrual, as they are earned or incurred.

- Revenue from Multimedia business (for sale of digital content on fixed price basis) is recognized based on milestones reached.

- Revenue in respect of Training and Education services is recognized on rendering of services, only when it is reasonably certain that the ultimate collection will be made. The revenue from fixed time contracts is recognized over the period of contracts. For services rendered through franchisees only the company''s share of revenue is recognized.

- Revenue from sales is recognized after despatch of goods to customers.

- Revenue for services charges is recognized after completion of each stage of service.

- Revenue from software development (on time and material basis) is recognized based on software developed and billed to the clients.

Overseas sales & services represent sales to the overseas customer for multimedia and other software development services done.

B) USE OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Differences between actual and estimates are recognized in the period in which the results are known/materialized.

C) FIXED ASSETS

i Fixed assets are stated at cost including taxes, duties, freight etc related to purchase and installation less accumulated depreciation.

ii Capital work in progress represents capital advances and expenditure incurred during the period of software development pending capitalization

D) INTANGIBLE ASSESTS

Intangible assets are recognized only if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. The intangible assets are recorded at cost and are carried at cost.

E) DEPRECIATION

Depreciation on fixed assets other than computers is provided on the straight-line method in accordance with the rates specified under schedule XIV to the Companies Act, 1956. As the computers have exhausted the useful life, their value is written off as depreciation.

F) INVENTORIES

Raw Materials are valued at cost. Finished goods are valued at lower of cost or net realizable value.

G) RETIREMENT BENEFITS TO EMPLOYEES

The liability for future payment of gratuity has been provided in the accounts. The liability is not funded separately.

H) TAXES ON INCOME Income Tax

Provision for taxation is not made for the year ended 31.03.2014 as there is no tax liability for the period.

Deferred Tax

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the diming differences are expected to crystallize.

I) CASH AND CASH EQUIVALENTS

The Company considers all highly liquid financial instruments, which are readily convertible into cash and have original maturities of three months or less from the date of purchase, to be cash equivalents.

J) 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 company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amounts. The reduction is treated as an impairment loss and is recongized in the profit and loss account.

If at the balance sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

K) PRELIMINARY EXPENSES

Preliminary expenses are amortized over a period of five years commencing from the year at commercial operations.

L) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognized only when the Company has present or legal or constructive obligations as a result of past events, for which it is probable that an outflow of economic benefit will be required to settle the transaction and a reliable estimate can be made for the amount of the obligation. Contingent liability is disclosed for (i) Possible obligations which will be confirmed only by future events not wholly within the control of the company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognized in the financial statements.

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Mar 31, 2013

A) REVENUE RECOGNITION

- Revenue from Multimedia business (for sale of digital content on fi xed price basis) is recognized based on milestones reached.

- Revenue in respect of Training and Education services is recognized on rendering of services, only when it is reasonably certain that the ultimate collection will be made. The revenue from fi xed time contracts is recognized over the period of contracts. For services rendered through franchisees only the company’s share of revenue is recognized.

- Revenue from sales is recognized after despatch of goods to customers.

- Revenue for services charges is recognized after completion of each stage of service.

- Revenue from software development (on time and material basis) is recognized based on software developed and billed to the clients.

Overseas sales & services represent sales to the overseas customer for multimedia and other software development services done.

B) USE OF ESTIMATES:

The preparation of fi nancial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the fi nancial statements and the reported amounts of revenue and expenses during the reporting period. Differences between actual and estimates are recognized in the period in which the results are known/materialized.

C) FIXED ASSETS

i Fixed assets are stated at cost including taxes, duties, freight etc related to purchase and installation less accumulated depreciation.

ii Capital work in progress represents capital advances and expenditure incurred during the period of software development pending capitalization

D) INTANGIBLE ASSESTS

Intangible assets are recognized only if it is probable that the future economic benefi ts that are attributable to the asset will fl ow to the enterprise and the cost of the asset can be measured reliably. The intangible assets are recorded at cost and are carried at cost.

E) DEPRECIATION

Depreciation on fi xed assets other than computers is provided on the straight-line method in accordance with the rates specifi ed under schedule XIV to the Companies Act, 1956. As the computers have exhausted the useful life, their value is written off as depreciation.

F) INVENTORIES

Raw Materials are valued at cost. Finished goods are valued at lower of cost or net realizable value.

G) INVESTMENTS

Long term investments are stated at cost, except where there is a diminution in value (other than temporary), in which case the carrying value is reduced to recognize the decline.

H) RETIREMENT BENEFITS TO EMPLOYEES

The liability for future payment of gratuity has been provided in the accounts. The liability is not funded separately.

I) BORROWING COSTS

Borrowing Costs attributable to acquisition of assets, are capitalized as part of the cost of such assets. Other borrowing costs are charged to revenue.

J) FOREIGN CURRENCY TRANSACTIONS

Transaction in foreign currency is recorded at the rate of exchange prevailing on the date of transaction. Current assets and liabilities are translated at the year end closing rates. Exchange difference in respect of foreign currency liabilities incurred for acquiring fi xed assets is added to the cost of respective fi xed assets.

K) TAXES ON INCOME

Provision for current tax is made on the basis of Minimum Alternative Tax is provided in accordance with the provisions of Income Tax Act, 1961.

Deferred tax resulting from timing differences between book and tax profi ts is accounted for under the liability method, at the current rate of tax, to the extent that the diming differences are expected to crystallize.

L) 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 company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amounts. The reduction is treated as an impairment loss and is recongized in the profi t and loss account. If at the balance sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is refl ected at the recoverable amount subject to a maximum of depreciated historical cost.

M) PRELIMINARY EXPENSES

Preliminary expenses are amortized over a period of fi ve years commencing from the year at commercial operations.

N) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognized only when the Company has present or legal or constructive obligations as a result of past events, for which it is probable that an outfl ow of economic benefi t will be required to settle the transaction and a reliable estimate can be made for the amount of the obligation. Contingent liability is disclosed for (i) Possible obligations which will be confi rmed only by future events not wholly within the control of the company or (ii) Present obligations arising from past events where it is not probable that an outfl ow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognized in the fi nancial statements.

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Mar 31, 2012

A. CORPORATE INFORMATION

Pentamedia Graphics Limited (PMGL), a Public Limited Company incorporated in the State of Tamilnadu and listed on the Bombay Stock Exchange (BSE). The company has been mainly in the following business during the year:

a. Pre & Post production of digital contents for animation& visual effects for Film, TV &Internet

b. Consultancy on multimedia & software

c. Training and maintenance of media & software products.

B. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared to comply in all material aspects with all the applicable accounting principles in India, the applicable Accounting Standards notified u/s 211 (3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

A) REVENUE RECOGNITION

- Revenue from Multimedia business (for sale of digital content on fixed price basis) is recognized based on milestones reached.

- Revenue in respect of Training and Education services is recognized on rendering of services, only when it is reasonably certain that the ultimate collection will be made. The revenue from fixed time contracts is recognized over the period of contracts. For services rendered through franchisees only the company's share of revenue is recognized.

- Revenue from sales is recognized after despatch of goods to customers.

- Revenue for services charges is recognized after completion of each stage of service.

- Revenue from software development (on time and material basis) is recognized based on software developed and billed to the clients.

Overseas sales & services represent sales to the overseas customer for multimedia and other software development services done.

B) FIXED ASSETS

i) Fixed assets are stated at cost including taxes, duties, freight etc related to purchase and installation less accumulated depreciation.

ii) Capital work in progress represents capital advances and expenditure incurred during the period of software development pending capitalization

C) INTANGIBLE ASSESTS

Intangible assets are recognized only if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. The intangible assets are recorded at cost and are carried at cost.

D) DEPRECIATION

Depreciation on fixed assets other than computers is provided on the straight-line method in accordance with the rates specified under schedule XIV to the Companies Act, 1956. As the computers have exhausted the useful life, their value is written off as depreciation.

E) INVENTORIES

Raw Materials are valued at cost. Finished goods are valued at lower of cost or net realizable value.

F) INVESTMENTS

Long term investments are stated at cost, except where there is a diminution in value (other than temporary), in which case the carrying value is reduced to recognize the decline.

G) RETIREMENT BENEFITS TO EMPLOYEES

The liability for future payment of gratuity has been provided in the accounts. The liability is not funded separately.

H) BORROWING COSTS

Borrowing Costs attributable to acquisition of assets, are capitalized as part of the cost of such assets. Other borrowing costs are charged to revenue.

I) FOREIGN CURRENCY TRANSACTIONS

Transaction in foreign currency is recorded at the rate of exchange prevailing on the date of transaction. Current assets and liabilities are translated at the year end closing rates. Exchange difference in respect of foreign currency liabilities incurred for acquiring fixed assets is added to the cost of respective fixed assets.

J) TAXES ON INCOME

Provision for current tax is made on the basis of Minimum Alternate Tax provided in accordance with the provisions of Income Tax Act, 1961.

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the diming differences are expected to crystallize.

K) CASH AND CASH EQUIVALENTS

The Company considers all highly liquid financial instruments, which are readily convertible into cash and have original maturities of three months or less from the date of purchase, to be cash equivalents.

L) 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 company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amounts. The reduction is treated as an impairment loss and is recongized in the profit and loss account. If at the balance sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

M) PRELIMINARY EXPENSES

Preliminary expenses are amortized over a period of five years commencing from the year in which it was incurred.

N) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognized only when the Company has present or legal or constructive obligations as a result of past events, for which it is probable that an outflow of economic benefit will be required to settle the transaction and a reliable estimate can be made for the amount of the obligation. Contingent liability is disclosed for (i) Possible obligations which will be confirmed only by future events not wholly within the control of the company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognized in the financial statements.

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Mar 31, 2011

A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared to comply in all material aspects with all the applicable accounting principles in India, the applicable Accounting Standards notified u/s 211 (3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956.

a) REVENUE RECOGNITION

- Revenue from Multimedia business (for sale of digital content on fixed price basis) is recognized based on milestones reached.

- Revenue in respect of Training and Education services is recognized on rendering of services, only when it is reasonably certain that the ultimate collection will be made. The revenue from fixed time contracts is recognized over the period of contracts. For services rendered through franchisees only the company's share of revenue is recognized.

- Revenue from sales is recognized after dispatch of goods to customers.

- Revenue for service charges is recognized after completion of each stage of service.

- Revenue from sofiware development (on time and material basis) is recognized based on software developed and billed to the clients.

Overseas sales & services represent sales to the overseas customer for multimedia and other software development services done.

b) FIXED ASSETS

i Fixed assets are stated at cost including taxes, duties, freight etc related to purchase and installation less accumulated depreciation.

ii Capital Work in Progress

Capital work in progress represents capital advances and expenditure incurred during the period of software development pending capitalization

c) INTANGIBLE ASSESTS

Intangible assets are recognized only if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. The intangible assets are recorded at cost and are carried at cost.

d) DEPRECIATION

Depreciation on fixed assets other than computers is provided on the straight-line method in accordance with the rates specified under schedule XIV to the Companies Act, 1956. As the com- puters have exhausted the useful life, major portion of their value is written of as depreciation.

e) INVENTORIES

Raw Materials are valued at cost. Finished goods are valued at lower of cost or net realizable value.

f) INVESTMENTS

Long term investments are valued at cost as per the present market conditions and as per valuation done by the valuer. Increase / Decrease in value is provided for, where the management is of the opinion that the diminution is permanent in nature.

g) RETIREMENT BENEFITS TO EMPLOYEES

As the numbers of permanent employees have been reduced to a bare minimum, the management is of the opinion that retirement benefit can be met as and when the liability arises. As such no provision for gratuity is created for the employees.

h) BORROWING COSTS

Borrowing Costs attributable to acquisition of assets, are capitalized as part of the cost of such assets. Other borrowing costs are charged to revenue.

i) FOREIGN CURRENCY TRANSACTIONS

Transaction in foreign currency is recorded at the rate of exchange prevailing on the date of transaction. Current assets and liabilities are not translated at the year end closing rates. Exchange difference in respect of foreign currency liabilities incurred for acquiring fixed assets is added to the cost of respective fixed assets.

j) TAXES ON INCOME

Provision for current tax is made on the basis of minimum alternative Tax is provided in accordance with the provisions of Income Tax Act, 1961.

The deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and law that have been substantively enacted as of the balance sheet date. Daferred tax liability for difference in depreciation Rs. 9,91,499/- has been created

k) IMPAIRMENT OF ASSETS

The company has not provided for impairment of any assets, this is in contravention of Accounting Standard 28.

l) PRELIMINARY EXPENSES

Preliminary expenses consequent to the merger of Pentasoft Technologies Limited Company are amortized over a period of five years commencing from the current year.

B. NOTES ON ACCOUNTS

1(a) Secured Loans:

i) The secured loans availed from Bank of India, Oriental Bank of Commerce, HSBC by Pentamedia Graphics Limited and Corporation Bank, United Western Bank by Pentasoft Technologies Limited (Pentasoft Technologies Ltd merged with Pentamedia Graphics Ltd w.e.f 01.10.2008 as per Hon'ble High Court of Madras order dated. 03.08.2009), have been settled and the petitions before Debt Recovery Tribunal(DRT) have been disposed of "as setled".

ii) The following bank dues are pending before DRT for disposal:

a) Rs. 24.97 crores to Axis Bank (UTI Bank) by Pentamedia Graphics Limited

b) Rs. 14. 85 crores to Axis Bank (UTI Bank) by Pentasoft Technologies Limited

c) Rs. 10.80 crores to Dhanalakshmi Bank by Pentasoft Technologies Limited

iii) UPS Capital Business is claiming an amount of Rs. 19.85 crores in respect of Pentamedia Graphics Ltd. The company petition is pending with High Court of Madras for orders.

The above amount due to Banks/Institutions does not include any interest that may accrue on the principal amount due from 01.04.2005.

1(b) Claim against the company not acknowledged as Liability:

According to the information and explanation given to us there are no dues of income tax, wealth tax, sales tax, custom duty, excise duty and cess which have not been deposited on account of any dispute except in the following cases.

Income Tax:

i. The Company has fled a writ petition no. 2357/2010 in High Court of Madras for a refund of Rs. 62 crores against the Income Tax demands of Rs. 112.51 crores as mentioned in their notice dated 05.02.2009 and has obtained stay till the disposal of all issues mentioned in the above writ petition from the High Court of Madras vide order dated 15.07.2010 and the court has instructed the Income-Tax department to furnish the details from the AY 1995-96 to 2006-07.

ii. The Company has also obtained the order dated 11.01.2010 from the High Court of Madras, directing the Income Tax Department to process the revised returns fled by the company as per the modified composite scheme of amalgamation and arrangement between Pentamedia Graphics Limited and its subsidiaries as on 01.01.2004. The response from the Income Tax Department is awaited.

iii. Regarding Pentasoft, the Company has fled a writ petition no. 25120/2009 in High Court of Madras for a refund of Rs. 18 crores against the Income Tax demands of Rs. 89.97 crores as mentioned in their notice dated 19.01.2009 and obtained a absolute stay from the High Court of Madras vide order dated 18.12.2009.

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Mar 31, 2010

A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared to comply in all material aspects, with all the applicable accounting principles in India, the applicable Accounting Standards notified u/s 211 (3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956.

a) SCHEME OF AMALGAMATION

Consequent to the merger of Pentasoft Technologies Limited with the company as per the order of Honble High Court of Madras dated 3rd August 2009 (w.e.f. 01.10.2008) after the approval of the shareholders, creditors, court held EGM dated on 11lh February 2009 and 24(f) approved by Bombay Stork Exchange Limited dated 25th November 2008, the company issued 38511595 equity shares of Rs. 1/- each to the shareholders of Pentasoft Technologies Limited and 128760443 equity shares of Rs. 1/- each to the agreed secured creditors of Pentasoft Technologies Limited on 18th September 2009. These shares were listed in Bombay Stock Exchange on 6th February 2010.

b) REVENUE RECOGNITION

- Revenue from Multimedia business (for sale of digital content on fixed price basis) is recog- nized based on milestones reached.

- Revenue in respect of Training and Education services is recognized on rendering of services, only when it is reasonably certain that the ultimate collection will be made. The revenue from fixed time contracts is recognized over the period of contracts. For services rendered through franchisees only the companys share of revenue is recognized.

- Revenue from sales is recognized after dispatch of goods to customers.

- Revenue for services charges is recognized after completion of each stage of service.

Revenue from software development (on time and material basis) is recognized based on software developed and bill to the clients

Overseas sales & services represent sales to the overseas customer for multimedia and other software development services done.

c) FIXED ASSETS

i Fixed assets are stated at cost including taxes, duties, freight etc related to purchase and installation less accumulated depreciation.

ii Capital Work In Progress

Capital work in progress represents capital advances and expenditure incurred during the period of software development pending capitalisation.

d) INTANGIBLE ASSESTS:

Intangible assets are recognised only if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. The intangible assets are recorded at cost and are carried at cost.

e) DEPRECIATION

Depreciation on fixed assets other than computers is provided on the straight-line method in accordance with the rates specified under schedule XIV to the Companies Act, 1956. As the computers have exhausted the useful life, their value is written off as depreciation. No depreciation is pro- vided on addition to computers made at the end of the financial year as the same not put to use.

f) INVENTORIES

Raw Materials are valued at cost. Finished goods are valued at lower of cost or net realizable value.

g) INVESTMENTS

Long term investments are valued at cost. Diminution in value is provided for, only where the management is of the opinion that the diminution is permanent in nature.

h) RETIREMENT BENEFITS TO EMPLOYEES

As the numbers of permanent employees have been reduced to a bare minimum, the management is of the opinion that retirement benefit can be met as and when the liability arises.

i) BORROWING COSTS

Borrowing Costs attributable to acquisition of assets, are capitalized as part of the cost of such assets. Other borrowing costs are charged to revenue.

j) FOREIGN CURRENCY TRANSACTIONS

Transaction in foreign currency is recorded at the rate of exchange prevailing on the date of transaction. Current assets and liabilities are translated at theyear end closing rates. Exchange difference in respect of foreign currency liabilities incurred for acquiring fixed assets is added to the cost of respective fixed assets.

k) TAXES ON INCOME

Provision for current tax is made on the basis of Minimum Alternative Tax in accordance with the provi- sions of Income Tax Act, 1961.

The deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and law that have been substantively enacted as of the balance sheet date.

l) IMPAIRMENT OF ASSETS

The company has not provided for impairment of any assets, this is in contravention of Accounting Standard 28.