II Significant Accounting Policies
1 Basis of preparation:
The Financial Statements have been prepared in accordance with Indian Generally Accepted Accounting
Principles (IGAAP) under historical cost convention on the accrual basis. IGAAP comprises mandatory accounting
standards prescribed by the Companies (Accounting Standards) Rules, 2021.
2 Revenue recognition:
a) Sale of Service
The company derives its revenues primarily from Sale of Visual effects (VFX) Service contracts.
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 in accordance with AS-9, Revenue Recognition. Sales are recognized
on accrual basis, and only after transfer of services to the customer.
Revenue from services provided under fixed price contracts, where the outcome can be estimated reliably, is
recognized following the proportionate completion method, where revenue is recognized in proportion to the
progress of the contract activity. The progress of the contract activity is usually determined as a proportion of
efforts incurred up to the balance sheet date, which bears to the total hours / days estimated for the contract.
Revenue on time-and-material contracts are recognized as the related services are performed and the revenues
from the end of the last billing to the balance sheet date are recognized as unbilled revenues.
b) Other Income
Revenue arising from the use by others of enterprise resources yielding interest, royalties and dividends
should only be recognised when no significant uncertainty as to measurability or collectability exists. These
revenues are recognised on the following bases:
(i) Interest : on a time proportion basis taking into account the amount outstanding and the rate
applicable.
(ii) Royalties : on an accrual basis in accordance with the terms of the relevant agreement.
(iii) Dividends from : when the owner’s right to receive payment is established by investments in shares.
3 Property Plant and Equipment including Intangible assets:
Property Plant and Equipment’s are stated at cost, less accumulated depreciation. Cost includes cost of acquisition
including material cost, freight, installation cost, duties and taxes, and other incidental expenses, incurred up to
the installation stage, related to such acquisition. Property Plant and Equipment’s purchased in India in foreign
currency are recorded in Rupees, converted at the exchange rate prevailed on the date of purchase. Intangible
assets that are acquired by the Company are measured initially at cost. After initial recognition, an intangible
asset is carried at its cost less any accumulated amortisation and any accumulated impairment loss.
4 Depreciation & Amortisation:
The Company has applied the estimated useful lives as specified in Schedule II of the Companies Act 2013 and
calculated the depreciation as per the Written Down Value (WDV) method. Depreciation on new assets acquired
during the year is provided at the rates applicable from the date of acquisition to the end of the financial year. In
respect of the assets sold during the year, depreciation is provided from the beginning of the year till the date of
its disposal.
Intangible assets are amortised on a straight-line basis over the estimated useful life as specified in Schedule
II of the Companies Act 2013. The amortisation expense on intangible assets with finite lives is recognised in
the statement of profit and loss. In respect of the assets sold during the year, amortisation is provided from the
beginning of the year till the date of its disposal.
5 Impairment of assets:
The Management periodically assesses using, external and internal sources, whether there is an indication that
an asset may be impaired. An impairment loss is recognised wherever the carrying value of an asset exceeds
its recoverable amount. The recoverable amount is higher of the asset’s net selling price and value in use, which
means the present value of future cash flows expected to arise from the continuing use of the asset and its
eventual disposal. Reversal of impairment loss is recognised immediately as income in the profit and loss account.
6 Use of estimates:
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles requires
the Management to make estimates and assumptions that affect the reported balances of assets and liabilities
and disclosures relating to contingent assets and liabilities as at the date of the financial statements and the
reported amounts of income and expenses during the year. Examples of such estimates include provisions for
doubtful debts, income taxes, post - sales customer support and the useful lives of Property Plant and Equipment’s
and intangible assets.
7 Foreign currency transactions:
Domestic Operation:
I . Initial recognition :
A foreign currency transaction should be recorded, on initial recognition 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 . Measurement :
Foreign currency monetary items should be reported using the closing rate.
Non-monetary items which are carried in terms of historical cost denominated in a foreign currency should
be reported using the exchange rate at the date of the transaction.
Non-monetary items which are carried at fair value or other similar valuation denominated in a foreign
currency should be reported using the exchange rates that existed when the values were determined.
III . Treatment of Foreign exchange :
Exchange differences arising on settlement/restatement of foreign currency monetary assets and liabilities of
the Company are recognised as income or expenses in the Statement of Profit and Loss.
8 Employee Benefits:
A. Short - term employee benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified as
short-term employee benefits. Benefits such as salaries, wages etc. and the expected cost of ex-gratia are
recognised in the period in which the employee renders the related service. A liability is recognised for the
amount expected to be paid when there is a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably.
Compensated absences
Compensated absences which are expected to occur within twelve months after the end of the period in
which the employee renders the related services are recognised as undiscounted liability at the balance
sheet date. Compensated absences which are not expected to occur within twelve months after the end of
the period in which the employee renders the related services are recognised as an liability at the present
value of the defined benefit obligation at the balance sheet date.
B. Post-Employment benefits:
Defined benefit plan:
Gratuity liability is a defined benefit obligation and is unfunded. The Company accounts for liability for future
gratuity benefits based on the actuarial valuation using Projected Unit Credit Method carried out as at the
end of each financial year.
Defined contribution Plan:
Contributions to defined contribution plans are recognised as expense when employees have rendered
services entitling them to such benefits.The Company provides benefits such as provident fund contribution
to its employees which are treated as defined contribution plans.
9 Taxes on Income:
Income Tax expense is accounted for in accordance with AS-22 “Accounting for Taxes on Income” for both Current
Tax and Deferred Tax stated below:
A. Current Tax:
Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961.
B. Deferred Tax:
Deferred tax is recognised, subject to the consideration of prudence, as the tax effect of timing difference
between accounting income and the corresponding tax bases used in the computation of taxable income for
the current accounting year using the tax rates and tax laws that have been enacted or substantially enacted
by the balance sheet date.
Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty,
except arising from unabsorbed depreciation and carried forward losses, that sufficient future taxable income
will be available against which such deferred tax assets can be realised.Deferred tax assets are recognised
for all deductible temporary differences to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be utilised.
Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable
that taxable profits will be available against which those deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not recognised if the temporarydifference arises from the initial
recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting year and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered. Unrecognised deferred tax assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
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 taxes relate to the same taxable entity and the
same taxation authority.
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