Mar 31, 2018
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER EXPLANATORY INFORMATION
a) Overall consideration and basis of preparation
The standalone financial statements have been prepared in accordance with the accounting principals generally accepted in India, including the Indian Accounting Standards (''Ind AS'') as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (''the Act'') read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
These standalone financial statements have been prepared using the significant accounting policies and measurement bases summarised below. These accounting policies have been used consistently throughout all periods presented in these standalone financial statements.
The standalone financial results have been reviewed by the Audit Committee and approved by the Board of Directors in their meeting held on May 17, 2018.
The Company continued to incur losses, during year ended March 31, 2018 but in view of the present positive net worth, expected substantial subscription revenue growth and continued financial support from certain stakeholders of the Company, the financial statements continue to be prepared on a going concern basis.
All assets and liabilities have been classified as current or noncurrent as per the Company''s normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013.
b) Foreign currency translation
Functional and presentation currency
These standalone financial statements are presented in currency Indian Rupee (''), which is also the functional currency of the Company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions (spot exchange rate).
Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss.
c) Revenue
Revenue is recognised when it is probable that the economic benefits will flow to the Company and it can be reliably measured.
Revenue is measured at the fair value of the consideration received/receivable net of rebates and taxes. The Company applies the revenue recognition criteria to each separately identifiable component of the sales transaction as set out below.
Revenue from rendering of services
Subscription income is recognised on completion of services and when no significant uncertainty exists regarding the amount of consideration that will be derived.
Other networking and management income and carriage income are recognised on accrual basis as per the terms of related agreements and when no significant uncertainty exists regarding the amount of consideration that will be derived. Carriage revenue recognition is done basis negotiations/ formal agreements with broadcasters.
Advertisement income is recognised when the related advertisement gets telecasted and when no significant uncertainty exists regarding the amount of consideration that will be derived. Other advertisement revenue for slot sale is recognised on period basis.
Activation and set top boxes pairing charges are recognised as revenue to the extent it relates to pairing and issue of the related boxes and when no significant uncertainty exists regarding the amount of consideration that will be derived and the upfront obligation is discharged. Where part of the revenues collected at the time of activation relates to future services to be provided by the Company, a part of activation revenue is deferred and recognised over the expected customer life.
Income from rendering technical services and broadband services are recognised on accrual basis.
Revenue from sale set top box (STBs) & viewing cards (VCs)
Revenue from sale of goods is recognised when the significant risks and rewards in respect of ownership of the goods are transferred to the buyer, usually on delivery of the goods and when no uncertainty exists regarding the amount of consideration that will be derived. The Company collects sales taxes and value added taxes (VAT)/goods and services tax (GST) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.
Interest
Interest income is reported on an accrual basis using the effective interest method.
d) Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the related service or as incurred.
e) Borrowing costs
Borrowing costs include interest, amortisation of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. Capitalisation of borrowing cost is suspended in the period during which the active development is delayed due to, other than temporary, interruption. All other borrowing costs are charged to profit or loss as incurred.
f) Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their cost of acquisition less accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price (net of CENVAT/GST credit availed), borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted.
Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
All other repair and maintenance costs are recognised in statement of profit or loss as incurred.
Set top boxes are treated as part of capital work in progress till the end of the month of activation thereof post which the same are depreciated.
Subsequent measurement (depreciation and useful lives)
Depreciation on property, plant and equipment is provided on the straight-line method, computed on the basis of useful lives.
Leasehold improvements are amortised over their lease term or estimated useful lives, whichever is less.
Leasehold land is amortised over the effective period of lease.
Plant and equipment taken over under scheme of arrangement in the earlier years are depreciated over the management''s estimate of remaining useful life, a period of 5 years.
The residual values, useful lives and method of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
De-recognition
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition (calculated as the difference between the net disposal proceeds and its carrying amount) is included in the profit or loss when the respective asset is derecognised.
g) Intangible assets
Recognition and initial measurement
Intangible assets acquired separately are stated at their cost of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
Subsequent measurement
Goodwill is not amortised but it is tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.
Software are amortised over a period of six years on straight-line-basis.
Cost of news, current affairs, chat shows and events including sports events etc. are fully expensed on first telecast.
Program, film and cable rights are amortised on a straight-line basis over the license period or 60 months from the date of purchase, whichever is shorter.
Subsequent expenditures on the maintenance of intangible assets are expensed as incurred.
When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the respective intangible asset, and is recognised in profit or loss.
h) Impairment of non-financial 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 amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss.
If at the reporting date, there is an indication that 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 and the same is accordingly reversed in the Statement of Comprehensive Income.
Goodwill is tested for impairment annually when circumstances indicate that the carrying value may be impaired.
i) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instruments and are measured initially at:
a) fair value, in case of financial instruments subsequently carried at fair value through profit or loss (FVTPL);
b) fair value adjusted for transaction costs, in case of all other financial instruments.
Subsequent measurement
Financial instruments at amortised cost - the financial instrument is measured at the amortised cost if both the following conditions are met:
i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (''SPPI'') on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method.
All other debt instruments are measured at fair value through other comprehensive income or FVTPL based on Company''s business model.
Equity investments - All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are generally classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The classification is made on initial recognition and is irrevocable.
Mutual funds - All mutual funds in scope of Ind-AS 109 are measured at FVTPL.
De-recognition of financial assets
A financial asset is primarily de-recognised when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset.
Financial liabilities
Initial recognition and measurement
All financial liabilities are recognised initially at fair value and transaction cost that is attributable to the acquisition of the financial liabilities is also adjusted. These liabilities are classified as amortised cost.
Subsequent measurement
Subsequent to initial recognition, these liabilities are measured at amortised cost using the EIR method.
De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
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 for financial assets.
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 Company expects to receive. When estimating the cash flows, the Company consider the following
- All contractual terms of the financial assets (including prepayment and extension) over the expected life of the assets.
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
Trade receivables
As a practical expedient the Company has adopted ''simplified approach'' for recognition of lifetime expected loss on trade receivables. The estimate is based on three years average default rates observed over the expected life of the trade receivables and is adjusted for forward-looking estimates. These average default rates are applied on total credit risk exposure on trade receivables at the reporting date to determine lifetime expected credit losses.
Other financial assets
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition and if credit risk has increased significantly, impairment loss is provided.
j) Post-employment, long term and short term employee benefits
Defined contribution plans Provident fund
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has further payment obligation once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due.
Defined benefit plans Gratuity
Gratuity is a post-employment benefit and is in the nature of a defined benefit plan. The liability recognised in respect of gratuity is the present value of the defined benefit obligation at the reporting date, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit/obligation is calculated at the reporting date by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in actuarial assumptions are credited or charged to the statement of other comprehensive income in the year in which such gains or losses are determined.
Other employee benefits Compensated absences
Liability in respect of compensated absences becoming due or expected to be availed within one year from the date is recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more than one year after the Balance Sheet date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in actuarial assumptions are charged to statement of profit and loss in the year in which such gains or losses are determined.
Short term employee benefits
Short-term employee benefits, are current liabilities, measured at the undiscounted amount that the Company expects to pay as a result of the unused entitlement.
k) Share based employee remuneration
The Company operates equity-settled share-based remuneration plans for its employees, where the fair value of employee''s services is determined indirectly by reference to the fair value of the equity instruments granted.
This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to ESOP reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded as securities premium.
l) Provisions, contingent assets and contingent liabilities
Provisions are recognised only when there is a present obligation, as a result of past events, and when a reliable estimate of the amount of obligation can be made at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Provisions are discounted to their present values, where the time value of money is material.
Contingent liability is disclosed for:
- Possible obligations which will be confirmed only by future events not wholly within the control of the Company; or
- 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 disclosed when probable and recognised when realisation of income is virtually certain.
m) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the year is adjusted for the effects of mandatorily convertible instrument in compliance with Ind AS 33.
For the purpose of calculating diluted earnings per share, the net profit or loss 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.
n) Leases
Where the Company is a lessee Finance leases
Management applies judgement in considering the substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include i) the length of the lease term in relation to the economic life of the asset ii) the present value of the minimum lease payments in relation to the asset''s fair value and iii) whether the Company obtains ownership of the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair values of the respective lease interest. If the minimum lease payments cannot be allocated reliably between the two components, entire lease is classified as a finance lease, unless it is clear that both elements are operating leases, in which case the entire lease is classified as an operating lease. Each component is then evaluated separately for possible treatment as a finance lease, taking into consideration the fact that land normally has an indefinite economic life.
The interest element of lease payments is charged to profit or loss, as finance costs over the period of the lease.
Operating leases
Where the company is a lessee, Payments on operating lease agreements are recognised as an expense an a straight-line basis over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases. Associated costs such as maintenance and insurance are expensed as incurred.
Where the Company is a lessor
Operating leases
Lease income from operating leases where the Company is a lessor is recognised in income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.
o) Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.
Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting year. Deferred income taxes are calculated using the liability method.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilised against future taxable income. This is assessed based on the Company''s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit.
p) Inventories
Stores and spares are valued at cost on weighted average basis or at net realisable value whichever is lower.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
q) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company is a multi-system operator providing cable television network services and allied services which is considered as the only reportable segment. The Company''s operations are based in India.
r) Significant management judgement in applying accounting policies and estimation uncertainty
These standalone financial statements have been prepared in accordance with generally accepted accounting principles in India which require management to make estimates and assumptions that affect the reported balances of assets, liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of income and expenses during the periods. Although these estimates and assumptions used in accompanying financial statements are based upon management''s evaluation of relevant facts and circumstances as of date of these standalone financial statements which in management''s opinion are prudent and reasonable, actual results may differ from estimates and assumptions used in preparing accompanying financial statements. Any revision to accounting estimates is recognised prospectively from the period in which results are known materialise in accordance with applicable Accounting Standards.
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below.
Significant management judgements
The following are significant management judgements in applying the accounting policies of the Company that have the most significant effect.
Recognition of deferred tax assets - The extent to which deferred tax assets can be recognised is based on the assessment of the probability of the Company''s future taxable income against which the deferred tax assets can be utilised.
Evaluation of indicators for impairment of non-financial assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
Property, plant and equipment - Management assess the remaining useful lives and residual values of property, plant and equipment and believes that the assigned useful lives and residual values are reasonable.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below:
Recoverability of advances/receivables- The management from time to time reviews the recoverability of advances and receivables. The review is done at least once in a financial year and such assessment requires significant management judgement based on financial position of the counter-parties, market information and other relevant factors.
Defined benefit obligation- Management''s estimate of the defined benefit obligation is based on a number of critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may impact the defined benefit obligation amount and the annual defined benefit expenses.
Contingencies- Management judgement is required for estimating the possible outflow of resources, if any, in respect of contingencies, claim, litigations etc against the Company as it is not possible to predict the outcome of pending matters with accuracy.
Fair value measurement
The Company measures certain financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Company uses following measurement techniques:
- The fair value measurement for financial instruments where active market quotes are available is based on the quotes available in the principal market for selling the asset or transferring the liability.
- The Company uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm''s length transaction at the reporting date.
- The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
Refer Note 37 B for Fair Value Hierarchy.
s) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments maturing within 90 days from the date of acquisition. Cash and cash equivalent are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
t) Equity and reserves
Share capital represents the nominal (par) value of shares that have been issued.
Securities premium includes any premium received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from securities premium, net of any related income tax benefits.
Other components of equity include the following:
Re-measurement of net defined benefit liability-comprises the actuarial losses from changes in demographic and financial assumptions and the return on plan assets (refer note 35)
Retained earnings includes all current and prior period retained profits and share-based employee remuneration (refer note 15)
All transactions with owners of the parent are recorded separately within equity.
u) Recent accounting pronouncements
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018.
Ind AS 115- Revenue from Contract with Customers:
On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognise 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 entity''s contracts with customers.
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8-Accounting Policies, Changes in Accounting Estimates and Errors;
- Retrospectively with cumulative effect of initially applying the standard recognised at the date of initial application (Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.
The Company is in the process of evaluating the impact of adoption of Ind AS 115 on its financial statements.
Mar 31, 2017
1. NATURE OF OPERATIONS
SITI Networks Limited (formerly SITI Cable Network Limited) (hereinafter referred to as the ''Company'' or ''SNL'') was incorporated in the state of Maharashtra, India. The Company is engaged in distribution of television channels through analogue and digital cable distribution network and allied services.
2. GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH INDIAN ACCOUNTING STANDARDS (IND AS)
SNL, is a public company incorporated and domiciled in India. Its registered office is at Madhu Industrial Estate, 4th Floor, P. B Marg, Worli, Mumbai 400013, India. The Company''s shares are listed on the National Stock Exchange of India Limited and BSE Limited. The standalone financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (''Ind AS'') specified under Section 133 of the Companies Act, 2013 (''the Act'').
For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under 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 are the first financial statements which the Company has prepared in accordance with Ind AS. For the purpose of comparatives, financial statements for the year ended 31 March 2016 and opening balance sheet as at 1 April 2015 are also prepared as per Ind AS. Refer note 48 for the explanation of transition from Indian GAAP to Ind AS. The standalone financial results along with comparative figures have been reviewed by the Audit Committee and approved by the Board of Directors in their meeting held on May 26, 2017.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER EXPLANATORY INFORMATION
a) Overall considerations and first time adoption of Ind ASs
These standalone financial statements have been prepared using the significant accounting policies and measurement bases summarized below.
These accounting policies have been used throughout all periods presented in these standalone financial statements, except where the Company has applied certain accounting policies and exemptions upon transition to Ind AS.
In accordance with Ind AS 101, the Company presents three balance sheets, two statements of profit and loss, two statements of cash flows and two statements of changes in equity and related notes, including comparative information for all statements presented, in its first Ind AS financial statements. In future periods, Ind AS 1 requires two comparative periods to be presented for the balance sheet only in certain circumstances.
b) Basis of preparation
These standalone financial statements of the Company have been prepared in accordance with Ind AS notified by the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. Accordingly, these standalone financial statements for the year ended 31 March 2017 are the Company''s first Ind AS standalone financial statements. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). Refer note 48 for the explanation of transition from Indian GAAP to Ind AS.
The Company continued to incur losses, during year ended March 31, 2017 but in view of the present positive net worth, expected substantial subscription revenue growth and continued financial support from certain stakeholders of the Company, the financial statements continue to be prepared on a going concern basis.
c) Foreign currency translation
Functional and presentation currency
These standalone financial statements are presented in currency Indian Rupee (''), which is also the functional currency of the Company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions (spot exchange rate).
Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognized in profit or loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.
d) Revenue
Revenue is recognized when it is probable that the economic benefits will flow to the Company and it can be reliably measured.
Revenue is measured at the fair value of the consideration received/receivable net of rebates and taxes. The Company applies the revenue recognition criteria to each separately identifiable component of the sales transaction as set out below.
Revenue from rendering of services
Subscription income is recognized on completion of services and when no significant uncertainty exists regarding the amount of consideration that will be derived.
Other networking and management income and carriage income are recognized on accrual basis as per the terms of related agreements and when no significant uncertainty exists regarding the amount of consideration that will be derived. Carriage revenue recognition is done basis negotiations/ formal agreement with broadcasters.
Advertisement income is recognized when the related advertisement gets telecasted and when no significant uncertainty exists regarding the amount of consideration that will be derived. Other advertisement revenue for slot sale is recognized on period basis.
Activation and set top boxes pairing charges are recognized as revenue to the extent it relates to pairing and issue of the related boxes and when no significant uncertainty exists regarding the amount of consideration that will be derived and the upfront obligation is discharged. Where part of the revenues collected at the time of activation relates to future services to be provided by the Company, a part of activation revenue is deferred and recognized over the expected customer life.
Income from rendering technical services and broadband services are recognized on accrual basis.
Revenue from sale set top box (STB''s) & viewing cards (VC''s)
Revenue from sale of goods is recognized when the significant risks and rewards in respect of ownership of the goods are transferred to the buyer, usually on delivery of the goods and when no uncertainty exists regarding the amount of consideration that will be derived. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.
Interest
Interest income is reported on an accrual basis using the effective interest method.
e) Operating expenses
Operating expenses are recognized in profit or loss upon utilization of the related service or as incurred.
f) Borrowing costs
Borrowing costs include interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is necessary to complete and prepare the asset for its intended use or sale. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. Capitalization of borrowing cost is suspended in the period during which the active development is delayed due to, other than temporary, interruption. All other borrowing costs are charged to profit or loss as incurred.
g) Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their cost of acquisition. The cost comprises purchase price (net of CENVAT credit availed), borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted. Ind AS 101 permits a first-time adopter to measure an item of property, plant and equipment at the date of transition to Ind AS at its fair value and use that fair value as its deemed cost at that date. Accordingly, the Company has elected to apply Ind AS retrospectively, from the date of acquisition of its property, plant and equipment. Further Ind AS 101 allows a first-time adopter to continue the policy adopted for the accounting for exchange differences arising on translation of the long-term foreign currency monetary items recognized in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per previous GAAP. The Company has opted for this exemption and continued its previous GAAP policy for accounting of exchange differences on long-term foreign currency monetary items recognized in the previous GAAP financial statements for the year ended March 31, 2016. Accordingly, foreign currency differences on such items attributable to the acquisition of property, plant and equipment are adjusted against their cost and depreciated prospectively over the remaining useful lives.
All other repair and maintenance costs are recognized in statement of profit or loss as incurred.
Set top boxes are treated as part of capital work in progress till at the end of the month of activation thereof post which the same are depreciated.
Leasehold improvements over the lease term or estimated useful life, whichever is less.
Leasehold land is amortized over the effective period of lease.
Plant and equipment taken over under scheme of arrangement in the earlier years are depreciated over the management''s estimate of remaining useful life, a period of 5 years.
The residual values, useful lives and method of depreciation of are reviewed at each financial year end and adjusted prospectively, if appropriate.
De-recognition
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition (calculated as the difference between the net disposal proceeds and its carrying amount) is included in the profit or loss when the respective asset is derecognized.
h) Intangible assets
Recognition and initial measurement
Intangible assets acquired separately are stated at their cost of acquisition.
Subsequent measurement
Goodwill is not amortized but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.
Software are amortized over a period of six years on straight-line-basis.
Cost of news, current affairs, chat shows and events including sports events etc. are fully expensed on first telecast.
Program, film and cable rights are amortized on a straight-line basis over the license period or 60 months from the date of purchase, whichever is shorter.
Amortization has been included within depreciation and amortization of non-financial assets.
Subsequent expenditures on the maintenance of intangible assets are expensed as incurred.
When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the respective intangible asset, and is recognized in profit or loss within other income or other expenses.
i) Impairment of non-financial 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 amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss.
If at the reporting date, there is an indication that 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 and the same is accordingly reversed in the Statement of Comprehensive Income.
Goodwill is tested for impairment annually when circumstances indicate that the carrying value may be impaired.
) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instruments and are measured initially at.
a) fair value, in case of financial instruments subsequently carried at fair value through profit or loss (FVTPL);
b) fair value adjusted for transaction costs, in case of all other financial instruments.
Subsequent measurement
Financial instruments at amortized cost â the financial instrument is measured at the amortized cost if both the following conditions are met:
i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (''SPPI'') on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method.
All other debt instruments are measured at fair value through other comprehensive income or FVTPL, based on Company''s business model.
Equity investments - All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are generally classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The classification is made on initial recognition and is irrevocable.
Mutual funds - All mutual funds in scope of Ind-AS 109 are measured at FVTPL.
De-recognition of financial assets
A financial asset is primarily de-recognized when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset.
Financial liabilities
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and transaction cost that is attributable to the acquisition of the financial liabilities is also adjusted. These liabilities are classified as amortized cost.
Subsequent measurement
Subsequent to initial recognition, these liabilities are measured at amortized cost using the EIR method.
De-recognition of financial liabilities
A financial liability is de-recognized when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
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 for financial assets. 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 Company expects to receive. When estimating the cash flows, the Company consider the following -
S All contractual terms of the financial assets (including prepayment and extension) over the expected life of the assets.
S Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
Trade receivables
As a practical expedient the Company has adopted ''simplified approach'' for recognition of lifetime expected loss on trade receivables. The estimate is based on three years average default rates observed over the expected life of the trade receivables and is adjusted for forward-looking estimates. These average default rates are applied on total credit risk exposure on trade receivables at the reporting date to determine lifetime expected credit losses.
Other financial assets
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition and if credit risk has increased significantly, impairment loss is provided.
k) Post-employment, long term and short term employee benefits Defined contribution plans
Provident fund
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has further payment obligation once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognized as employee benefit expense when they are due.
Defined benefit plans
Gratuity
Gratuity is a post-employment benefit and is in the nature of a defined benefit plan. The liability recognized in respect of gratuity is the present value of the defined benefit obligation at the reporting date, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit/obligation is calculated at the reporting date by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in actuarial assumptions are credited or charged to the statement of other comprehensive income in the year in which such gains or losses are determined.
Other employee benefits
Compensated absences
Liability in respect of compensated absences becoming due or expected to be availed within one year from the date is recognized on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more than one year after the Balance Sheet date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in actuarial assumptions are charged to statement of profit and loss in the year in which such gains or losses are determined.
Short term employee benefits
Short-term employee benefits, are current liabilities, measured at the undiscounted amount that the Company expects to pay as a result of the unused entitlement.
l) Share based employee remuneration
The Company operates equity-settled share-based remuneration plans for its employees, where the fair value of employee''s services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions). All share-based remuneration is ultimately recognized as an expense in profit or loss with a corresponding credit to ESOP reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognized in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded as securities premium.
m) Provisions, contingent assets and contingent liabilities
Provisions are recognized only when there is a present obligation, as a result of past events, and when a reliable estimate of the amount of obligation can be made at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Provisions are discounted to their present values, where the time value of money is material.
Contingent liability is disclosed for:
- Possible obligations which will be confirmed only by future events not wholly within the control of the Company or
- 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 disclosed when probable and recognized when realisation of income is virtually certain.
n) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) bythe weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the year is adjusted for the effects of mandatorily convertible instrument in compliance with Ind AS 33.
For the purpose of calculating diluted earnings per share, the net profit or loss 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.
o) Leases
Where the Company is a lessee
Finance leases
Management applies judgment in considering the substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include i) the length of the lease term in relation to the economic life of the asset ii) the present value of the minimum lease payments in relation to the asset''s fair value, and iii) whether the Company obtains ownership of the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair values of the respective lease interest. If the minimum lease payments cannot be allocated reliably between the two components, entire lease is classified as a finance lease, unless it is clear that both elements are operating leases, in which case the entire lease is classified as an operating lease. Each component is then evaluated separately for possible treatment as a finance lease, taking into consideration the fact that land normally has an indefinite economic life.
Refer Note 3(g) for the depreciation methods and useful lives for assets held under finance leases. The interest element of lease payments is charged to profit or loss, as finance costs over the period of the lease.
Operating leases
Where the Company is a lessee, payments on operating lease agreements are recognized as an expense on a straight-line basis over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases. Associated costs, such as maintenance and insurance, are expensed as incurred.
Where the Company is a less or
Operating leases
Lease income from operating leases where the Company is a less or is recognized in income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased assets are included in the Balance Sheet based on their nature.
p) Income taxes
Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method. Deferred tax assets are recognized to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilized against future taxable income. This is assessed based on the Company''s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit.
q) Inventories
Stores and spares are valued at cost on weighted average basis or at net realizable value whichever is lower.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
r) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company is a multi-system operator providing cable television network services and allied services which is considered as the only reportable segment. The Company''s operations are based in India.
s) Significant management judgment in applying accounting policies and estimation uncertainty
These standalone financial statements have been prepared in accordance with generally accepted accounting principles in India which require management to make estimates and assumptions that affect the reported balances of assets, liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of income and expenses during the periods. Although these estimates and assumptions used in accompanying financial statements are based upon management''s evaluation of relevant facts and circumstances as of date of these standalone financial statements which in management''s opinion are prudent and reasonable, actual results may differ from estimates and assumptions used in preparing accompanying financial statements. Any revision to accounting estimates is recognized prospectively from the period in which results are known materialize in accordance with applicable Accounting Standards.
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below.
Significant management judgments
The following are significant management judgments in applying the accounting policies of the Company that have the most significant effect.
Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized is based on the assessment of the probability of the Company''s future taxable income against which the deferred tax assets can be utilized.
Evaluation of indicators for impairment of non-financial assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
Property, plant and equipment - Management assess the remaining useful lives and residual value of property, plant and equipment and believes that the assigned useful lives and residual value are reasonable.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below:
Recoverability of advances/ receivables- The management from time to time reviews the recoverability of advances and receivables. The review is done at least once in a financial year and such assessment requires significant management judgment based on financial position of the counterparties, market information and other relevant factors.
Defined benefit obligation- Management''s estimate of the defined benefit obligation is based on a number of critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may impact the defined benefit obligation amount and the annual defined benefit expenses.
Contingencies- Management judgment is required for estimating the possible outflow of resources, if any, in respect of contingencies, claim, litigations etc against the Company as it is not possible to predict the outcome of pending matters with accuracy.
Fair value measurement
The Company measures certain financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Company uses following measurement techniques:
- The fair value measurement for financial instruments where active market quotes are available is based on the quotes available in the principal market for selling the asset or transferring the liability
- Company uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm''s length transaction at the reporting date.
- The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. Refer Note 37 B for Fair Value Hierarchy.
t) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments maturing within 90 days from the date of acquisition. Cash and cash equivalent are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
u) Equity and reserves
Share capital represents the nominal (par) value of shares that have been issued.
Securities premium includes any premium received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from securities premium, net of any related income tax benefits.
Other components of equity include the following:
Re-measurement of net defined benefit liability-comprises the actuarial losses from changes in demographic and financial assumptions and the return on plan assets (refer note 35)
Retained earnings includes all current and prior period retained profits and share-based employee remuneration (refer note 15) All transactions with owners of the parent are recorded separately within equity.
Recent accounting pronouncements
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ''Statement of cash flows'' and Ind AS 102, ''Share-based payment.'' These amendments are in
accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, Statement of cash flows, and IFRS 2, Share-based payment, respectively. The amendments are applicable to the Company from 1 April 2017.
Amendment to Ind AS 7:
The amendments to Ind AS 7 inter-alia require 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.
The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.
Amendment to Ind AS 102:
The amendments to Ind AS 102 inter-alia provide 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 ''fair values'', 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 includes 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 the impact on the financial statements is being evaluated.
It is not applicable to the Company as it does not have any cash settled awards.
Preference shares
There is no movement in preference share capital.
(B) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of '' 1 per share. Each holder of equity shares is entitled to one vote per share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(D) Shares reserved for issue under options
For details of shares reserved for issue under the employee stock option plan (ESOP) of the Company, refer note 34
(E) Terms of securities convertible into equity shares issued along with earliest date of conversion.
During the year ended March 31, 2016, the Company had issued 142,857,142 warrants on preferential basis upon payment of a consideration of '' 35 per warrant. Each warrant was convertible into one equity share of '' 1 each at a premium of '' 34 per share. Holders of such warrants had an option to convert these warrants into equity shares upon payment of aforesaid consideration on or before eighteen months from the date of allotment of warrants viz February
19, 2016. During the year ended March 31, 2017 and March 31, 2016, at request of holders of such warrants, the Company has converted 57,142,857 and 85,714,285 warrants respectively into equity shares resulting in increase in equity share capital by '' 57.14 million and '' 85.71 million respectively.
(F) No shares were issued pursuant to contract without payment being received in cash, allotted as fully paid up by way of bonus issue or brought back during the current and last five years.
During the year ended March 31, 2016, the Company had issued 51,428,571 Optionally Fully Convertible Debenture (''OFCDs'') on preferential basis upon payment of a consideration of '' 35 per OFCD. Each convertible OFCD was convertible into one equity share of '' 1 each at a premium of '' 34 per share. Holders of such OFCDs had an option to convert these OFCDs into equity shares upon payment of aforesaid consideration on or before eighteen months from the date of allotment of OFCDs, viz. February 19, 2016. During the year ended March 31, 2017 and March 31, 2016, the Company has converted 20,628,571 and 30,800,000 of OFCDs respectively into equity shares pursuant to the exercise of option resulting in increase in equity share capital by Rs, 20.63 and Rs, 30.80 million respectively. This instrument meets the definition of equity, in accordance with Ind AS 32, as there is no obligation to transfer cash or any other financial asset or issue a variable number of shares.
Mar 31, 2016
1. CORPORATE INFORMATION
SITI Cable Network Limited (hereinafter referred to as ''the Company'' or ''SCNL'') was incorporated in the state of Maharashtra, India. The Company is engaged in distribution of television channels through analogue and digital cable distribution network, primary internet and allied services.
2. BASIS OF PREPARATION
The financial statements of the Company have been prepared and presented under the historical cost convention on the accrual basis of accounting following generally accepted accounting principles in India (Indian GAAP) and comply with the Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 (''Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) and the provisions of the Act. The accounting policies have been consistently applied by the Company unless otherwise stated. All assets and liabilities have been classified as current or non-current, wherever applicable as per the operating cycle of the Company as per the guidance as set out in the Schedule III to the Act.
The Company continued to incur losses, during year ended March 31, 2016 but in view of the present positive net worth, expected substantial subscription revenue growth and continued financial support from certain stakeholders of the Company, the financial statements continue to be prepared on a going concern basis.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Use of estimates
In preparing the Company''s financial statements in conformity with accounting principles generally accepted in India, the management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Any revision to accounting estimates is recognized in the period in which the same is determined.
b) Tangible fixed assets
(i) Fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses, if any. The cost comprises of the purchase price (net of Cenvat credit availed), borrowing costs if capitalization criteria are met and any directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
(ii) Subsequent expenditure relating to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
(iii) Gains or losses arising from derecognition of fixed assets 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 derecognized.
(iv) Set top boxes are treated as part of capital work in progress till at the end of the month of activation thereof.
c) Depreciation on tangible fixed assets
(i) Pursuant to the enactment of the Companies Act, 2013 (the ''Act''), the Company has, effective from April 01, 2014, reassessed the useful life of its fixed assets and has computed depreciation and amortization with reference
(ii) Leasehold improvements are amortized over the lease term or estimated useful life; whichever is less.
(iii) Plant and equipment taken over under scheme of arrangement in the earlier years are depreciated over the management''s estimate of remaining useful life, a period of 5 years.
d) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
e) Amortization of intangible assets
(i) Goodwill on acquisition is amortized using the straight-line method over a period of five years.
(ii) Software are amortized over a period of six years on straight-line basis.
(iii) Cost of news/ current affairs/ chat shows/ events including sports events etc. are fully expensed on first telecast.
(iv) Program/ film/ cable rights are amortized on a straight-line basis over the license period or 60 months from the date of purchase, whichever is shorter.
f) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset or the useful life envisaged in Schedule II to the Act, whichever is lower. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset, the lease term or the useful life envisaged in Schedule II to the Act.
Leases, where the less or effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Where the Company is the less or
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases.
Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
g) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
h) Impairment of tangible and intangible 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 amount and the reduction is treated as an impairment loss and the same is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that 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 and the same is accordingly reversed in the statement of profit and loss.
i) Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
Current investments are carried in the financial statements 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 value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
j) Inventories
Stores and spares are valued at cost on weighted average basis or at net realizable value whichever is lower.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
k) 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.
(i) Sale of goods
Revenue from sale of goods is recognized when the significant risks and rewards in respect of ownership of the goods are transferred to the buyer, usually on delivery of the goods and when no uncertainty exists regarding the amount of consideration that will be derived. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.
Revenue from high sea sales are being recognized on transfer of title of goods to the customer.
(ii) Income from services
Subscription income is recognized on completion of services and when no significant uncertainty exists regarding the amount of consideration that will be derived.
Other networking and management income and carriage income are recognized on accrual basis over the terms of related agreements and when no significant uncertainty exists regarding the amount of consideration that will be derived. Carriage revenue recognition is done basis negotiations/formal agreement with broadcasters.
Advertisement income is recognized when the related advertisement gets telecasted and when no significant uncertainty exists regarding the amount of consideration that will be derived. Other advertisement revenue for slot sale is recognized on period basis.
Activation and set top boxes pairing charges are recognized as revenue on pairing and transfer of the related boxes and when no significant uncertainty exists regarding the amount of consideration that will be derived.
The Company collects service tax, VAT and other applicable indirect taxes on behalf of the Government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is excluded from revenue.
(iii) Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss.
l) Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate. Nonmonetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and the non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on reporting such monetary items of the Company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
Exchange difference arising on long-term foreign currency monetary items related to acquisition of fixed assets are capitalized and depreciated over the remaining useful life of assets.
Exchange difference arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Items Translation Difference Account" and amortized over the remaining life of concerned monetary items.
m) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The contributions to the provident fund are charged to the statement of profit and loss for the year when the contributions are due. The Company has no other obligation, other than the contribution payable to the provident fund.
Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.
"Accumulated leave, which is expected to be utilized within next twelve months, is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end"
Actuarial gains / losses are immediately recognized in the statement profit and loss and are not deferred.
n) Income tax
"Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 enacted in India. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years"
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
At each balance sheet date the Company reassesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized.
Minimum Alternate Tax (''MAT'') credit 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. In the year in which MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is recognized by way of a credit to the statement of profit and loss and presented as MAT credit entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay normal income tax during the specified period.
o) Employees stock compensation cost
Measurement and disclosure of the stock option granted under the Company''s employee share-based payment plans is done in accordance with SEBI (Shared Based Employee Benefits) Regulation, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the fair value method. Compensation expense is amortized over the vesting period of the option on a straight line basis.
p) Segment reporting
The Company is a multi system operator providing cable television network services, internet services and allied services which is considered as the only reportable segment. The Company''s operations are based in India.
q) Earnings per share
(i) Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period.
(ii) For the purpose of calculating diluted earnings per share, the net profit or loss 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.
r) Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
s) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably.
t) Cash and cash equivalents
Cash and Cash equivalents in the Cash Flow Statement comprise cash at bank and in hand, cherubs in hand and short term investments with an original maturity of three months or less.
u) Amortization of borrowing cost
Costs incurred in raising funds are amortized equally over the period for which the funds are raised.
Preference shares
There is no movement in preference share capital in current year and previous year.
(b) Terms/ rights attached to equity shares
The Company has only one class of equity shares having par value of ''1 per share. Each holder of equity shares is entitled to one vote per share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(c) Terms/ rights attached to preference shares
"The Company has only one class of 7.25% Non-cumulative redeemable preference shares of '' 1 each. The said preference shares were allotted to Zee Telefilms Limited (now Zee Entertainment Enterprises Limited) on December 29, 2006, pursuant
to the scheme of arrangement for demerger of cable business undertaking of Zee Telefilms Limited approved by the Hon''ble Bombay High Court vide its order dated November 17, 2006. Initially, as per the terms of the issue and allotment, the said preference shares were due for redemption on December 29, 2008. However, with the written consent/approval of Zee Entertainment Enterprises Limited, the terms of the issue of said preference shares was varied by extending the period of redemption by another three years i.e. till December 29, 2011. Later on June 6, 2011 these shares were transferred to Churu Enterprises LLP by Zee Entertainment Enterprises Limited. Period for redemption of preference shares has been extended by another period of five years till December 29, 2016 by Churu Enterprises LLP. The preference shares are redeemable at par. In the event of liquidation of the Company before redemption of preference shares, the holders of preference shares will have priority over equity shares in the payment of dividend and repayment of capital."
(e) Shares reserved for issue under options
For details of shares reserved for issue under the employee stock option plan (ESOP) of the Company, refer note 32
(f) Terms of securities convertible into equity shares issued along with earliest date of conversion.
"During the year ended March 31, 2016, the Company has issued 142,857,142 warrants on preferential basis upon payment of a consideration of Rs, 35 per warrant. Each warrant is convertible into one equity share of Rs, 1 each at a premium of Rs, 34 per share. Holders of such warrants have an option to convert these warrants into equity shares upon payment of aforesaid consideration on or before eighteen months from the date of allotment of warrants viz February 19, 2016. During the year ended March 31, 2016, the Company has converted 85,714,285 warrants into equity shares resulting in increase of Rs, 85.71 million and Rs, 2,914.29 million in equity share capital and securities premium account respectively.
During the year ended March 31, 2016, the Company has issued 51,428,571 Optionally Fully Convertible Debenture (''OFCDs'') on preferential basis upon payment of a consideration of '' 35 per OFCD. Each convertible OFCD is convertible into one equity share of Rs, 1 each at a premium of Rs, 34 per share. Holders of such OFCDs have an option to convert these OFCDs into equity shares upon payment of aforesaid consideration on or before eighteen months from the date of allotment of OFCDs, viz. February 19, 2016. During the year ended March 31, 2016, 30,800,000 of OFCDs have been converted into equity shares pursuant to the exercise of option resulting in increase in equity share capital and securities premium account by Rs, 30.80 million and Rs, 1047.20 million respectively."
During the year ended March 31, 2013, the Company issued 162,000,000 convertible warrants on preferential basis upon payment of a consideration of Rs, 20 per warrant. Each convertible warrant was convertible into one equity share of Rs,1 each at a premium of Rs, 19 per share. Holders of such warrants had the option to convert these warrants into equity shares upon payment of aforesaid consideration on or before eighteen months from the date of allotment of warrants, viz. March 19, 2013. During the year ended March 31, 2014 and March 31, 2015, 68,500,000 and 93,500,000 equity shares respectively had been allotted pursuant to the exercise of option.
(g) No shares were issued pursuant to contract without payment being received in cash, allotted as fully paid up by way of bonus issue or brought back during the last five years.
Details of security
The Company had short term borrowings from banks in the previous year, the detail of securities are as under :
i) Secured by first pari passu charge on the fixed assets and current assets of the Company. The Company is required to maintain debt service reserve account (DSRA) for 2 quarters'' interest. All the loans are further secured by corporate guarantee of an associate to maintain DSRA and carries an interest rate of Base rate 3%.
ii) Secured by first pari passu charge on the future and current assets of the Company with minimum assets cover ratio 1.1 for IVBL facilities. The Company is required to maintain debt service reserve account (DSRA) for 1 quarters'' interest. All the loans are further secured by corporate guarantee of an associate to maintain DSRA and carries an interest rate of Base rate 1.95%.
The Company has short term borrowings from promoter group company (refer note 34(i) the detail is as under :
iii) During the year ended March 31, 2016, the Company has allotted 51,428,571 Optionally Fully Convertible Debentures ("OFCDs") on preferential basis upon payment of a consideration of Rs, 35 per OFCD. Each OFCD is convertible within a period of eighteen months into one equity share of Rs, 1 each at a premium of Rs, 34 per share. Out of these, on exercised of option by OFCDs holder, the Company has converted 30,800,000 OFCDs into equity shares and balance OFCDs are yet to be converted into equity shares. All OFCDs are unsecured and interest free"
-Effect of potential equity shares being anti-dilutive has not been considered while calculating diluted weighted average equity shares and earnings per share.
Mar 31, 2015
A) Use of estimates
In preparing the Company's financial statements in conformity with
accounting principles generally accepted in India, the management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
liabilities on the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognised in the period in which the same is determined.
b) Tangible fixed assets
(i) Fixed assets are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. The cost comprises of the
purchase price (net of Cenvat credit availed), borrowing costs if
capitalisation criteria are met and any directly attributable cost of
bringing the asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
(ii) Subsequent expenditure relating to fixed assets is capitalised
only if such expenditure results in an increase in the future benefits
from such asset beyond its previously assessed standard of performance.
(iii) Gains or losses arising from derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(iv) Set top boxes are treated as part of capital work in progress till
at the end of the month of activation thereof.
c) Depreciation on tangible fixed assets
(i) Pursuant to the enactment of the Companies Act, 2013 (the 'Act'),
the Company has, effective from April 01,2014, reassessed the useful
life of its fixed assets and has computed depreciation and amortisation
with reference to the useful life of assets as recommended in Schedule
II of the Act.
Life (in years)
Building 60
Plant and equipment 8
Furniture and fixtures 10
Studio equipment 13
Computers 3
Vehicles 8
Office equipment 5
Air conditioners 5
Set-top boxes 8
Integrated receiver and 10
decoder (IRD) boxes
(ii) Leasehold improvements are amortised over the lease term or
estimated useful life; which ever is less.
(iii) Plant and equipment taken over under scheme of arrangement in the
earlier years are depreciated over the management's estimate of
remaining useful life, a period of 5 years.
(iv) Assets costing less than RS. 5,000 are fully depreciated in the
year of purchase.
d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any.
e) Amortisation of intangible assets
(i) Goodwill on acquisition is amortised using the straight-line method
over a period of five years.
(ii) Software are amortised over a period of six years on straight-line
basis.
(iii) Cost of news/ current affairs/ chat shows/ events including
sports events etc. are fully expensed on first telecast.
(iv) Program/ film/ cable rights are amortised on a straight-line basis
over the license period or 60 months from the date of purchase,
whichever is shorter.
f) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalised at the lower of the fair value and present value of
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule II to the
Act, whichever is lower. However, if there is no reasonable certainty
that the Company will obtain the ownership by the end of the lease
term, the capitalised asset is depreciated on a straight-line basis
over the shorter of the estimated useful life of the asset, the lease
term or the useful life envisaged in Schedule II to the Act.
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 statement of profit and loss on a straight-line basis over the
lease term.
Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognised in the
statement of profit and loss on a straight-line basis over the lease
term.
Costs, including depreciation, are recognised as an expense in the
statement of profit and loss. Initial direct costs such as legal costs,
brokerage costs, etc. are recognised immediately in the statement of
profit and loss.
g) Borrowing costs
Borrowing cost includes interest, amortisation of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
h) Impairment of tangible and intangible 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
amount and the reduction is treated as an impairment loss and the same
is recognised in the statement of profit and loss. If at the balance
sheet date there is an indication that 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 and the same is accordingly reversed in the
statement of profit and loss.
i) Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements 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 value is made to recognise a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
j) Inventories
Stores and spares are valued at cost on weighted average basis or at
net realisable value whichever is lower.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
k) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
(i) Sale of goods
Revenue from sale of goods is recognised when the significant risks and
rewards in respect of ownership of the goods are transferred to the
buyer, usually on delivery of the goods and when no uncertainty exists
regarding the amount of consideration that will be derived.
The Company collects sales taxes and value added taxes (VAT) on behalf
of the government and, therefore, these are not economic benefits
flowing to the Company. Hence, they are excluded from revenue.
Revenue from high sea sales are being recognised on transfer of title
of goods to the customer.
(ii) Income from services
Subscription income is recognised on completion of services and when no
uncertainty exists regarding the amount of consideration that will be
derived.
Lease rentals charges and carriage income are recognised on accrual
basis over the terms of related agreements and when no uncertainty
exists regarding the amount of consideration that will be derived.
Carriage revenue recognition is done after formal agreement is executed
with broadcasters.
Advertisement income is recognised when the related advertisement
appears before the public and when no uncertainty exists regarding the
amount of consideration that will be derived. Other advertisement
revenue for slot sale is recognised on period basis.
Activation fees on Set top boxes (STB) is recognised as revenue on
activation of the related boxes and when no uncertainty exists
regarding the amount of consideration that will be derived.
The Company collects service tax on behalf of the Government and,
therefore, it is not an economic benefit flowing to the Company.
Hence, it is excluded from revenue.
(iii) Interest
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
l) Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non- monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and the non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting such monetary items of the Company at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
Exchange difference arising on long-term foreign currency monetary
items related to acquisition of a fixed assets are capitalised and
depreciated over the remaining useful life of assets.
Exchange difference arising on other long- term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary
Items Translation Difference Account" and amortised over the remaining
life of concerned monetary items.
m) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The Company has no other obligation, other than
the contribution payable to the provident fund.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Accumulated leave, which is expected to be utilised within next twelve
months, is treated as short term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company treats accumulated
leave expected to be carried forward beyond twelve months, as long-
term employee benefit for measurement purposes. Such long-term
compensated absences are provided for based on the actuarial valuation
using the projected unit credit method at the year-end.
Actuarial gains / losses are immediately recognised in the statement
profit and loss and are not deferred.
n) Income tax
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities
inaccordance with the Income Tax Act, 1961 enacted in India. Deferred
income taxes reflect the impact of timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the reporting date. Deferred tax
liabilities are recognised for all taxable timing differences. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Minimum Alternate Tax ('MAT') credit 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. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
recognised by way of a credit to the statement of profit and loss and
presented as MAT credit entitlement. The Company reviews the same at
each balance sheet date and writes down the carrying amount of MAT
credit entitlement to the extent there is no longer convincing evidence
to the effect that the Company will pay normal income tax during the
specified period.
o) Employees stock compensation cost
Measurement and disclosure of the stock option granted under the
Company's employee share- based payment plans is done in accordance
with SEBI (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999 and the Guidance Note on Accounting for
Employee Share-based Payments, issued by the Institute of Chartered
Accountants of India.The Company measures compensation cost relating to
employee stock options using the fair value method.Compensation expense
is amortised over the vesting period of the option on a straight line
basis.
p) Segment reporting
The Company is a multi system operator providing cable television
network services, internet services and allied services which is
considered as the only reportable segment. The Company's operations are
based in India.
q) Earning per share
(i) Basic earnings per share is calculated by dividing the net profit
or loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period.
(ii) For the purpose of calculating diluted earnings per share, the net
profit or loss 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.
r) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
s) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably.
t) Cash and cash equivalents
Cash and Cash equivalents in the Cash Flow Statement comprise cash at
bank and in hand, cheques in hand and short term investments with an
original maturity of three months or less.
u) Amortisation of borrowing cost
Costs incurred in raising funds are amortised equally over the period
for which the funds are raised. Preliminary expenditure are amortised
in the year when they are incurred.
Mar 31, 2014
1. Corporate information
SITI Cable Network Limited (formerly known as Wire and Wireless (India)
Limited) (hereinafter referred to as Âthe Company'' or ÂSCNL'') was
incorporated in the state of Maharashtra, India. The Company is engaged
in distribution of television channels through analogue and digital
cable distribution network, primary internet and allied services.
2. Basis of preparation
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956 read with the General
Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate
Affairs in respect of section 133 of the Companies Act, 2013. The
financial statements have been prepared on an accrual basis and under
the historical cost convention. The accounting policies have been
consistently applied by the Company unless otherwise stated. All assets
and liabilities have been classified as current or non-current,
wherever applicable as per the operating cycle of the Company as per
the guidance as set out in the Revised Schedule VI to the Companies
Act.
The Company''s accumulated losses aggregate to ` 7,072.91 million as at
March 31, 2014 (Previous year ` 6,049.81 million). In view of the
warrant subscription, mandatory digitization which will yield
substantial subscription revenue, increase in efficiency and assurance
to extend all support in foreseeable future from holder of majority of
equity shares of the Company, these financial statement are prepared on
going concern basis.
3. Summary of significant accounting policies
a) Use of estimates
In preparing the Company''s financial statements in conformity with
accounting principles generally accepted in India, the management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
liabilities on the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognised in the period the same is determined.
b) Tangible fixed assets
(i) Fixed assets are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. The cost comprises of the
purchase price (net of Cenvat credit availed), borrowing costs if
capitalisation criteria are met and any directly attributable cost of
bringing the asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
(ii) Subsequent expenditure relating to fixed assets is capitalised
only if such expenditure results in an increase in the future benefits
from such asset beyond its previously assessed standard of performance.
(iii) Gains or losses arising from derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(iv) Set top boxes are treated as part of capital work in progress till
at the end of the month of activation thereof. Also, set top boxes
intended to be sold are treated as part of inventory.
c) Depreciation on tangible fixed assets
(i) Depreciation on tangible fixed assets is calculated on a
straight-line basis using the rates arrived at based on useful lives
estimated by the management, or those prescribed under the Schedule XIV
to the Companies act, 1956 whichever is higher. The Company has used
the following rates to provide depreciation on its fixed assets:
(ii) Leasehold improvements are amortised over the lease term or
estimated useful life; which ever is less.
(iii) Plant and equipment taken over under scheme of arrangement in the
earlier years are depreciated over the management''s estimate of
remaining useful life, a period of 5 years.
(iv) Assets costing less than ` 5,000 are fully depreciated in the year
of purchase.
d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any.
e) Amortisation of intangible assets
(i) Goodwill on acquisition is amortised using the straight-line method
over a period of five years.
(ii) Computer software are amortised over a period of six years on
straight-line basis.
(iii) Cost of news/ current affairs/ chat shows/ events including
sports events etc. are fully expensed on first telecast.
(iv) Program/ film/ cable rights are amortised on a straight-line basis
over the license period or 60 months from the date of purchase,
whichever is shorter.
f) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalised at the lower of the fair value and present value of
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term, the capitalised asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
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 statement of profit and loss on a straight-line basis over the
lease term.
Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognised in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognised as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognised immediately in the
statement of profit and loss.
g) Borrowing costs
Borrowing cost includes interest, amortisation of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
h) Impairment of tangible and intangible 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
amount and the reduction is treated as an impairment loss and the same
is recognised in the statement of profit and loss. If at the balance
sheet date there is an indication that 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 and the same is accordingly reversed in the
statement of profit and loss.
i) Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements 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 value is made to recognise a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
j) Inventories
Stores and spares are valued at cost on weighted average basis or at
net realisable value whichever is lower.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
k) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
(i) Sale of goods
Revenue from sale of goods is recognised when the significant risks and
rewards in respect of ownership of the goods are transferred to the
buyer, usually on delivery of the goods. The Company collects sales
taxes and value added taxes (VAT) on behalf of the government and,
therefore, these are not economic benefits flowing to the Company.
Hence, they are excluded from revenue.
Revenue from high sea sales are being recognised on transfer of title
of goods to the customer.
(ii) Income from services
Subscription income is recognised on completion of services.
Lease rentals charges and carriage income are recognised on accrual
basis over the terms of related agreements. Carriage revenue
recognition is deferred till formal agreement is executed with
broadcasters.
Advertisement income is recognised when the related advertisement
appears before the public. Other advertisement revenue for slot sale
is recognised on period basis.
Activation fees on Set top boxes (STB) is recognised as revenue on
activation of the related boxes.
The Company collects service tax on behalf of the Government and,
therefore, it is not an economic benefit flowing to the Company.
Hence, it is excluded from revenue.
(iii) Interest
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
l) Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and the non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting such monetary items of the Group at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
Exchange difference arising on long-term foreign currency monetory
items related to acquisition of a fixed assets are capitalised and
depreciated over the remaining useful life of assets.
Exchange difference arising on other long- term foreign currency
monetory items are accumulated in the " Foreign Currancy Monetory Items
Translation Difference Account" and amortised over the remaining life
of concerned monitory items.
m) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The Company has no other obligation, other than
the contribution payable to the provident fund.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year or in case of plans
administrated by insurers, based on contribution determined by the
insurer.
Accumulated leave, which is expected to be utilised within next twelve
months, is treated as short term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company treats accumulated
leave expected to be carried forward beyond twelve months, as long-term
employee benefit for measurement purposes. Such long-term compensated
absences are provided for based on the actuarial valuation using the
projected unit credit method at the year-end.
Actuarial gains / losses are immediately regonised in the statement
profit and loss and are not deferred.
n) Income tax
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961 enacted in India. Deferred
income taxes reflect the impact of timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the reporting date. Deferred tax
liabilities are recognised for all taxable timing differences. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Minimum Alternate Tax (ÂMAT'') credit 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. In the year in which MAT credit becomes eligible
to be recognised as an asset in accordance with the recommendations
contained in guidance note issued by the Institute of Chartered
Accountants of India, the said asset is recognised by way of a credit
to the statement of profit and loss and presented as MAT credit
entitlement. The Company reviews the same at each balance sheet date
and writes down the carrying amount of MAT credit entitlement to the
extent there is no longer convincing evidence to the effect that the
Company will pay normal income tax during the specified period.
o) Employees stock compensation cost
Measurement and disclosure of the stock option granted the Company''s
employee share-based payment plans is done in accordance with SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 and the Guidance Note on Accounting for Employee
Share- based Payments, issued by the Institute of Chartered Accountants
of India. The Company measures compensation cost relating to employee
stock options using the fair value method. Compensation expense is
amortised over the vesting period of the option on a straight line
basis.
p) Segment reporting
The Company is a multi system operator providing cable television
network services, internet services and allied services which is
considered as the only reportable segment. The Company''s operations are
based in India.
q) Earning per share
(i) Basic earnings per share is calculated by dividing the net profit
or loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period.
(ii) For the purpose of calculating diluted earnings per share, the net
profit or loss 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.
r) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
s) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably.
t) Cash and cash equivalents
Cash and Cash equivalents in the Cash Flow Statement comprise cash at
bank and in hand, cheques in hand and short term investments with an
original maturity of three months or less.
u) Amortisation of borrowing cost
Costs incurred in raising funds are amortised equally over the period
for which the funds are raised. Preliminary expenditure are amortised
in the year when they are incurred.
31 In view of the mandatory digital addressable system (ÂDAS'')
regulation announced by the Ministry of Information and Broadcasting,
Government of India, digitization of cable networks has been
implemented in the cities notified for phase 1 and phase 2 effective
November 1, 2012 and April 1, 2013 respectively. Owing to the initial
delays in implementation of DAS in phase 1 and phase 2 cities and
challenges faced by all the Multi-System Operators (MSOs) during
transition from analog business to DAS, the Company is in the process
of executing contracts with the subscribers and implementation of
revenue sharing contracts entered into with the local cable operators
(LCOs). Accordingly, the Company has invoiced and recognized
subscription revenue net of sharing of revenue with the LCOs under the
new DAS regime amounting to ` 1,997.12 million (Previous year ` 212.48
million).
Mar 31, 2013
A) Use of estimates
In preparing the Company''s financial statements in conformity with
accounting principles generally accepted in India, the management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
liabilities on the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognised in the period the same is determined.
b) Tangible fixed assets
(i) Fixed assets are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. The cost comprises of the
purchase price (net of Cenvat credit availed), borrowing costs if
capitalisation criteria are met and any directly attributable cost of
bringing the asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
(ii) Subsequent expenditure relating to fixed assets is capitalised
only if such expenditure results in an increase in the future benefits
from such asset beyond its previously assessed standard of performance.
(iii) Gains or losses arising from derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(iv) Set top boxes intended to be provided to subsidiaries are treated
as part of capital work in progress till at the end of the month of
activation thereof. Also, set top boxes intended to be sold are treated
as part of inventory.
c) Depreciation on tangible fixed assets
(i) Depreciation on tangible fixed assets is calculated on a
straight-line basis using the rates arrived at based on useful lives
estimated by the management, or those prescribed under the Schedule XIV
to the Companies act, 1956 whichever is higher. The Company has used
the following rates to provide depreciation on its fixed assets:
(ii) Leasehold improvements are amortised over the lease term or
estimated useful life; which ever is less.
(in) Plant and equipment taken over under scheme of arrangement in the
earlier years are depreciated over the management''s estimate of
remaining useful life, a period of 5 years.
(iv) Assets costing less than Rs. 5,000 are fully depreciated in the year
of purchase.
d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any.
e) Amortisation of intangible assets
(i) Goodwill on acquisition is amortised using the straight-line method
over a period of five years.
(ii) Computer software are amortised over a period of six years on
straight-line basis.
(iii) Cost of news/ current affairs/ chat shows/ events including
sports events etc. are fully expensed on first telecast.
(iv) Program/ film/ cable rights are amortised on a straight-line basis
over the license period or 60 months from the date of purchase,
whichever is shorter.
f) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalised at the lower of the fair value and present value of
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term, the capitalised asset is depreciated on a
straight- line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
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 statement of profit and loss on a straight-line basis over the
lease term.
Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognised in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognised as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognised immediately in the
statement of profit and loss.
g) Borrowing costs
Borrowing cost includes interest, amortisation of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
h) Impairment of tangible and intangible assets
The Company assesses at each balance sheet date whetherthere 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
amount and the reduction is treated as an impairment loss and the same
is recognised in the statement of profit and loss. If at the balance
sheet date there is an indication that 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 and the same is accordingly reversed in the
statement of profit and loss.
i) Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements 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 value is made to recognise a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
j) Inventories
Stores and spares are valued at cost on first in first out basis or at
net realisable value whichever is lower. Stock in trade including Set
top boxes are valued at cost on weighted average method or at net
realisable value whichever is lower.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
k) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
(i) Sale of goods
Revenue from sale of goods is recognised when the significant risks and
rewards in respect of ownership of the goods are transferred to the
buyer, usually on delivery of the goods. The Company collects sales
taxes and value added taxes IVAT) on behalf of the government and,
therefore, these are not economic benefits flowing to the Company.
Hence, they are excluded from revenue.
Revenue from high sea sales are being recognised on transfer of title
of goods to the customer.
(ii) Income from services
Subscription income is recognised on completion of services.
Lease rentals charges and carriage income are recognised on accrual
basis over the terms of related agreements. Carriage revenue
recognition is deferred tilt formal agreement is executed with
broadcasters.
Advertisement income is recognised when the related advertisement
appears before the public. Other advertisement revenue for slot sale is
recognised on period basis.
Activation fees on Set top boxes (STB) is recognised as revenue on
activation of the related boxes.
The company collects service tax on behalf of the government and,
therefore, it is not an economic benefit flowing to the Company. Hence,
it is excluded from revenue.
(iii) Interest
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
I) Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and the non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting such monetary items of the Group at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
m) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The Company has no other obligation, other than
the contribution payable to the provident fund.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year or in case of plans
administrated by insurers, based on contribution determined by the
insurer.
Accumulated leave, which is expected to be utilised within next twelve
months, is treated as short term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company treats accumulated
leave expected to be carried forward beyond twelve months, as long-term
employee benefit for measurement purposes. Such long-term compensated
absences are provided for based on the actuarial valuation using the
projected unit credit method at the year-end.
Actuarial gains / losses are immediately regonised in the statement
profit and loss and are not deferred.
n) Income tax
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961 enacted in India. Deferred
income taxes reflect the impact of timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the reporting date. Deferred tax
liabilities are recognised for all taxable timing differences. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Minimum Alternate Tax (''MAT'') credit 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. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
recognised by way of a credit to the statement of profit and loss and
presented as MAT credit entitlement. The Company reviews the same at
each balance sheet date and writes down the carrying amount of MAT
credit entitlement to the extent there is no longer convincing evidence
to the effect that the Company will pay normal income tax during the
specified period.
o) Employees stock compensation cost
Measurement and disclosure of the stock option granted the Company''s
employee share-based payment plans is done in accordance with SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme]
Guidelines, 1999 and the Guidance Note on Accounting for Employee
Share-based Payments, issued by the Institute of Chartered Accountants
of India. The Company measures compensation cost relating to employee
stock options using the fair value method. Compensation expense is
amortised over the vesting period of the option on a straight line
basis.
p) Segment reporting
The Company is a multi system operator providing cable television
network services, internet services and allied services which is
considered as the only reportable segment. The Company''s operations are
based in India.
q) Earning per share
(i) Basic earnings per share is calculated by dividing the net profit
or loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes] by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period.
(ii) For the purpose of calculating diluted earnings per share, the net
profit or loss 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
r) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
s) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably.
t) Cash and cash equivalents
Cash and Cash equivalents in the Cash Flow Statement comprise cash at
bank and in hand, cheques in hand and short term investments with an
original maturity of three months or less.
u) Miscellaneous expenditure
Costs incurred in raising funds are amortised equally over the period
for which the funds are raised. Preliminary expenditure are amortised
in the year when they are incurred.
Mar 31, 2012
A) Change in accounting policy Presentation and disclosure of financial
statements
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
b) Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period.
Although these estimates are based on the management's best knowledge
of current events and actions, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets or liabilities in future periods.
c) Tangible Fixed Assets
(i) Fixed assets are stated at cost, net of accumulated depreciation
and accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
(ii) From accounting periods commencing on or after 7 December 2006,
the company adjusts exchange differences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset.
(iii) Subsequent expenditure relating to fixed assets is capitalised
only if such expenditure results in an increase in the future benefits
from such asset beyond its previously assessed standard of performance.
(iv) Gains or losses arising from derecognition of fixed assets 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 derecognized.
(v) Set top boxes intended to be provided on lease are treated as part
of Capital work in progress. These gets capitalized at the end of the
month of activation. Also, set top boxes intended to be sold are
treated as part of inventory.
d) Depreciation on Tangible Fixed Assets
(i) Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
act, 1956 whichever is higher. The Company has used the following rates
to provide depreciation on its fixed assets.
(ii) Leasehold improvements are amortized over the lease term or 10
years; which ever is less.
(iii) Plant and Machinery taken over under scheme of arrangement in the
earlier years are depreciated over the management's estimate of
remaining useful life, a period of 5 years.
(iv) Assets costing less than Rs. 5,000 are fully depreciated in the year
of purchase.
e) Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at c ost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
f) Amortization of Intangible Assets
(i) Goodwill on acquisition is amortized using the straight-line method
over a period of five years
(ii) Computer Software are amortized over a period of six years on
straight line basis.
(iii) Cost of news/ current affairs/ chat shows/ events including
sports events etc. are fully expensed on first telecast.
(iv) Program/ Film/ Cable rights are amortized on a straight-line basis
over the license period or 60 months from the date of purchase,
whichever is shorter.
g) Leases Where the company is the Lessee
Finance leases, which effectively transfers to the Company
substantially all the risks and benefits incidental to ownership of the
leased item, are capitalized at the lower of the fair value and present
value of minimum lease payments at the inception of the lease term and
disclosed as leased assets. Lease payments are apportioned between the
finance charges and reduction of the lease liability based on the
implicit rate of return. Finance charges are charged directly against
income. Lease management fees, legal charges and other initial direct
costs are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
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 recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Where the Company is the lessor
Leases in which the company transfers substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets given under a finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognized as revenue. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss account.
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
h) Borrowing Costs
Borrowing c ost includes interest, amortization ofancillaryc osts
incurred inc onnection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i) Impairment of tangible and intangible assets
(i) The company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. 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 net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
(ii) Impairment losses of continuing operations, including impairment
on inventories, are recognized in the statement of profit and loss,
except for previously revalued tangible fixed assets, where the
revaluation was taken to revaluation reserve. In this case, the
impairment is also recognized in the revaluation reserve up to the
amount of any previous revaluation.
(iii) After impairment, depreciation is provided on the revised
carrying amount of the asset over its remaining useful life.
(iv) An assessment is made at each reporting date as to whether there
is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
company estimates the asset's or cash-generating unit's recoverable
amount. A previously recognized impairment loss is reversed only if
there has been a change in the assumptions used to determine the
asset's recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the
asset does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the statement of profit and loss unless the
asset is carried at a revalued amount, in which case the reversal is
treated as a revaluation increase.
j) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident.
Current investments are carried in the financial statements 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 value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
k) Inventories
Stores and Spares are valued at cost on first in first out basis or at
net realizable value whichever is lower. Stock in trade including Set
Top Boxes are valued at cost on weighted average method or at net
realizable value whichever is lower.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
l) 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.
(i) Sale of Goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the company. Hence, they are
excluded from revenue.
(ii) Income from Services
Subscription revenue and Other Services revenue are recognized on
completion of services.
Lease rentals and Carriage fees are recognized on accrual basis over
the terms of related agreements.
Advertisement revenue is recognized when the related advertisement
appears before the public. Other Advertisement revenue for slot sale is
recognized on period basis.
The company collects service tax on behalf of the government and,
therefore, it is not an economic benefit flowing to the company. Hence,
it is excluded from revenue.
In pursuance of the regulation of Telecom Regulatory Authority of India
(TRAI) the Company has implemented Conditional Access System (CAS) in
the notified areas and accordingly subscription charges have been
accounted in terms of the said regulations.
(iii) Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
m) Foreign Currency Transaction
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and the non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting such monetary items of the Company at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise
n) Retirement and other Employee Benefits
Retirement benefit in the form of provident fund is a defined
contribution scheme. T he contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The company has no other obligation, other than
the contribution payable to the provident fund.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short- term employee benefit. Short term
compensated absences are provided for based on estimates. The Company
treats accumulated leave expected to be carried forward beyond twelve
months, as long-term employee benefit for measurement purposes. Such
long-term compensated absences are provided for based on the actuarial
valuation using the projected unit credit method at the year-end.
Actuarial gains / losses are immediately taken to the profit and loss
account and are not deferred.
o) Income Tax
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961 enacted in India. Deferred
income taxes reflect the impact of timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the reporting date. Deferred tax
assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set-off current tax assets against current
tax liabilities and the deferred tax assets and deferred taxes relate
to the same taxable entity and the same taxation authority. Deferred
tax liabilities are recognized for all taxable timing differences.
Deferred tax assets are recognized only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realized. In
situations where the company has unabsorbed depreciation or carry
forward tax losses, all deferred tax assets are recognized only if
there is virtual certainty supported by convincing evidence that they
can be realized against future taxable profits.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
p) Employees Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the fair value method.
Compensation expense is amortized over the vesting period of the option
on a straight line basis.
q) Segment Reporting
The Company is a Multi System Operator providing Cable Television
Network Services, Internet Services and allied services which is
considered as the only reportable segment. The Company's operations
are based in India.
r) Earning Per Share
(i) Basic earnings per share are calculated by dividing the net profit
or loss for the period attributable to equity shareholders (after
deducting preference dividends andattributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period.
(ii) For the purpose of calculating diluted earnings per share, the net
profit or loss 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
s) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
t) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. T he company does
not recognize a contingent liability but discloses its existence in the
financial statements.
u) Cash and Cash Equivalents
Cash and Cash equivalents in the Cash Flow Statement comprise cash at
bank and in hand, cheques in hand and short term investments with an
original maturity of three months or less.
v) Derivative instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
w) Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortization expense, finance costs and tax expense.
x) Miscellaneous Expenditure
Costs incurred in raising funds are amortized equally over the period
for which the funds are raised. Preliminary Expenditure are amortized
in the year when they are incurred.
Mar 31, 2011
A) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies Accounting
Standard Rules, 2006 as amended and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis. The accounting
policies have been consistently applied by the Company and, are
consistent with those used in the previous year.
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
(i) Fixed Assets are stated at cost less accumulated depreciation if
any. Cost comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use.
(ii) Borrowing costs relating to acquisition of fixed assets which
takes substantial period of time to get ready for its intended use are
also included to the extent they relate to the period till such assets
are ready to be put to use.
d) Intangible Assets
a) Goodwill on acquisition is amortized using the straight-line method
over a period of five years.
b) Softwares are amortized lower of useful life or over a period of six
years on straight line basis.
c) Program/ Film/ Cable rights are stated at net cost (cost less
accumulated amortization/impairment)
(ii) Leasehold improvements are amortized over the lease term, which is
10 years.
(iii) Plant and Machinery taken over under scheme of arrangement in the
earlier years are depreciated over the management's estimate of
remaining useful life, a period of 5 years.
(iv) Cost of news/current affairs/chat shows/events including sports
events etc. are fully expensed on first telecast.
(v) Program/Film/Cable rights are amortized on a straight-line basis
over the license period or 60 months from the date of purchase,
whichever is shorter.
(vi) Assets costing less than Rs. 5,000 are fully depreciated in the
year of purchase.
f) Impairment
(i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset's net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and risks specific to the asset.
(ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
g) Leases
Where the company is the Lessee
Finance leases, which effectively transfers to the Company
substantially all the risks and benefits incidental to ownership of the
leased item, are capitalized at the lower of the fair value and present
value of minimum lease payments at the inception of the lease term and
disclosed as leased assets. Lease payments are apportioned between the
finance charges and reduction of the lease liability based on the
implicit rate of return. Finance charges are charged directly against
income. Lease management fees, legal charges and other initial direct
costs are capitalized.
If there is no reasonable certainty that the company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the assets
or the leased term.
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
Where the Company is the lessor
Assets given under a finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognized as revenue. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the Profit
and Loss Account.
Assets subject to operating leases are included in fixed assets. Lease
income is recognized in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognized
as an expense in the Profit and Loss Account. Initial direct costs such
as legal costs, brokerage costs, etc. are recognized immediately in the
Profit and Loss Account.
h) 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 value is made to recognize a
decline other than temporary in the value of the investments.
i) Inventories
Inventories are valued as follows:
Stores and Spares are valued at cost on first in first out basis or at
net realizable value whichever is lower. Stock-in-trade including Set
Top Boxes are valued at cost on weighted average method or at net
realizable value whichever is lower.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
j) 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.
Income from Services
Subscription revenue and Other Services revenue are recognized on
completion of services.
Lease rentals and Carriage fees are recognized on accrual basis over
the terms of related agreements.
Advertisement revenue is recognized when the related advertisement
appears before the public. Other Advertisement revenue for slot sale is
recognized on period basis.
In pursuance of the regulation of Telecom Regulatory Authority of India
(TRAI) the Company has implemented Conditional Access System (CAS) in
the notified areas and accordingly subscription charges have been
accounted in terms of the said regulations.
Sale of Goods
Revenue is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer. In case of VAT
collected on sales, exclusive method is followed, where sales and
expenditure will not include VAT. VAT collected is disclosed under
current liabilities and not routed through profit and loss account as
mentioned in Guidance Note of State Value Added Tax, issued by The
Institute of Chartered Accountants of India (ICAI).
Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
k) Miscellaneous Expenditure
Costs incurred in raising funds are amortized equally over the period
for which the funds are acquired. Preliminary Expenditure is amortized
equally over a period of 5 years.
l) Foreign Currency Transaction
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and the non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting such monetary items of the Company at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
m) Retirement and other Employee Benefits
Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit &
Loss Account of the year when the contributions to the respective funds
are due. There are no other obligations other than the contribution
payable to the respective trusts.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Short-term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation on projected unit credit method made at the end of each
financial year.
Actuarial gains/losses are immediately taken to the profit and loss
account and are not deferred.
n) Income Tax
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961 enacted in India. Deferred
income taxes reflect the impact of current year timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws. Deferred tax assets are recognized only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realized. In situations where the Company has unabsorbed depreciation
or carry forward tax losses, all deferred tax assets are recognized
only if there is virtual certainty supported by convincing evidence
that they can be realized against future taxable profits.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
o) Employees Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the fair value method.
Compensation expense is amortized over the vesting period of the option
on a straight line basis.
p) Earning Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit or loss for the
year attributable to equity shareholders and the weighted average
number of shares outstanding during the year are adjusted for the
effects of all dilutive potential equity shares.
q) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
r) Cash and Cash Equivalents
Cash and Cash equivalents in the Cash Flow Statement comprise cash at
bank and in hand, cheques in hand and short- term investments with an
original maturity of three months or less.
s) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs
are expensed in the period they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection with the
borrowing of funds.
Mar 31, 2010
A) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies Accounting
Standard Rules, 2006 as amended and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis. The accounting
policies have been consistently applied by the Company and, are
consistent with those used in the previous year.
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon managementÃs best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
(i) Fixed Assets are stated at cost less accumulated depreciation if
any. Cost comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use.
(ii) Borrowing costs relating to acquisition of fixed assets which
takes substantial period of time to get ready for its intended use are
also included to the extent they relate to the period till such assets
are ready to be put to use.
d) Intangible Assets
a) Goodwill on acquisition is amortized using the straight-line method
over a period of five years.
b) Softwares are amortized over a period of six years on straight-line
basis.
c) Program/ Film/ Cable rights are stated at the lower of net cost
(cost less accumulated amortization/ impairment) or realizable value.
f) Impairment
(i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assetÃs net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
(ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
g) Leases
Where the company is the Lessee
Finance leases, which effectively transfers to the Company
substantially all the risks and benefits incidental to ownership of the
leased item, are capitalized at the lower of the fair value and present
value of minimum lease payments at the inception of the lease term and
disclosed as leased assets. Lease payments are apportioned between the
finance charges and reduction of the lease liability based on the
implicit rate of return. Finance charges are charged directly against
income. Lease management fees, legal charges and other initial direct
costs are capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the assets
or the leased term.
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
Where the Company is the lessor
Assets given under a finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognized as revenue. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the Profit
and Loss Account.
Assets subject to operating leases are included in fixed assets. Lease
income is recognized in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognized
as an expense in the Profit and Loss Account. Initial direct costs such
as legal costs, brokerage costs, etc. are recognized immediately in the
Profit and Loss Account.
h) 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 value is made to recognize a
decline other than temporary in the value of the investments.
i) Inventories
Inventories are valued as follows:
Stores and Spares are valued at cost on first-in-first out basis or at
net realizable value whichever is lower. Stock-in-trade including Set
Top Boxes are valued at cost on weighted average method or at net
realizable value whichever is lower.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
j) 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.
Income from Services
Subscription revenue and Other Services revenue are recognized on
completion of services.
Lease rentals and Carriage fees are recognized on accrual basis over
the terms of related agreements.
Advertisement revenue is recognized when the related advertisement
appears before the public. Other Advertisement revenue for slot sale is
recognized on period basis.
In pursuance of the regulation of Telecom Regulatory Authority of India
(TRAI) the Company has implemented Conditional Access System (CAS) in
the notified areas and accordingly subscription charges have been
accounted in terms of the said regulations.
Sale of Goods
Revenue is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer. In case of VAT
collected on sales, exclusive method is followed, where sales and
expenditure will not include VAT. VAT collected is disclosed under
current liabilities and not routed through profit and loss account as
mentioned in Guidance Note of State Value Added Tax, issued by The
Institute of Chartered Accountants of India (ICAI).
Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
k) Miscellaneous Expenditure
Costs incurred in raising funds are amortized equally over the period
for which the funds are acquired. Preliminary Expenditure is amortized
equally over a period of 5 years.
l) Foreign Currency Transaction
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and the non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting such monetary items of the Company at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
m) Retirement and other Employee benefits
Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit &
Loss Account of the year when the contributions to the respective funds
are due. There are no other obligations other than the contribution
payable to the respective trusts.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Short-term compensated absences are provided for based on estimates.
Long-term compensated absences are provided for based on actuarial
valuation on projected unit credit method made at the end of each
financial year.
Actuarial gains/losses are immediately taken to the profit and loss
account and are not deferred.
n) Income tax
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Income Tax Act, 1961 enacted in India. Deferred income taxes reflect
the impact of current year timing differences between taxable income
and accounting income for the year and reversal of timing differences
of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws. Deferred tax assets are recognized only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realized. In situations where the Company has unabsorbed depreciation
or carry forward tax losses, all deferred tax assets are recognized
only if there is virtual certainty supported by convincing evidence
that they can be realized against future taxable profits.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
o) Employees Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the fair value method.
Compensation expense is amortized over the vesting period of the option
on a straight line basis.
p) Earning Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit or loss for the
year attributable to equity shareholders and the weighted average
number of shares outstanding during the year are adjusted for the
effects of all dilutive potential equity shares.
q) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
r) Cash and Cash Equivalents
Cash and cash equivalents in the Cash Flow Statement comprise cash at
bank and in hand, cheques in hand and short-term investments with an
original maturity of three months or less.
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